February 09, 2023
Total return for a portfolio is comprised of the dividends paid plus the appreciation of the share price. The old phrase living off the dividends hasn’t been realistic for decades.
According to Capital Group’s 2023 Outlook, while dividends have not added much to total return in the last couple of decades, the trend seems to be changing.
Diana Wagner, an equity portfolio manager with Washington Mutual Investors FundSM said, “When you expect growth in the single digits, dividends can give you a head start. They may also offer a measure of downside protection when volatility rises…”
As part of creating portfolios, buying funds that utilize dividends as a criterion is part of the diversification process.