High Dividend Stocks versus 2.5% Yields

I found these statistics from InsiderMonkey.com and thought them quite interesting …

Did you know that between 1938 and 1950 the 10-year interest rates in the United States were below 2.5%, and during those 13 years high dividend stocks returned an average of 18.1%? We are talking about the top 20 dividend yielding stocks among the largest 200 stocks each year.

These high dividend stocks outperformed the market by 5.4 percentage points per year and had higher returns in 11 of the 13 years. They beat the stock market in all down years. They provided protection when the market was down. They also did better than the stock market when it increased by more than 20%.

If the stocks repeat the same pattern in subsequent years, investors in large cap high dividend stocks might beat both the bond and stock markets by a large margin. However, in our take the likely time for commencing this strategy is a key factor when you are in the midst of a recession.