The power of dividends
Always a winning strategy
Dividend income has always benefited investors by providing both reliability and growth over time. In fact,
dividend-paying stocks have helped investors grow their portfolios by leading market returns over the long
term. While market volatility continues to leave many investors feeling uneasy about investing in equities,
many companies have been able to grow their earnings and have rewarded investors by increasing their
dividends and share prices. Investors still waiting for the right time to get back into equities should look to
the stability and long-term performance of dividend-paying stocks to help grow their income and portfolio.
Dividends play a key role
in long-term returns
The power of dividends
Dividend-paying companies represent a significant portion
of the Canadian equity market and are typically established,
well managed companies with stable businesses. Dividends
are also an important part of a stock’s total return (total
return = change in share price + dividends) and are typically
paid in all market environments. is income helps to
offset the impact of market declines, and boosts portfolio
returns when markets are rising.
As the chart below illustrates, the shares of companies
that pay dividends have outperformed the index
historically. Whether you are a conservative or growth
investor, recognizing this pattern can help you make better
investment decisions.
COMPOUND ANNUAL TOTAL RETURNS
DECEMBER 2000-DECEMBER 2010
Better performance over time
GROWTH OF $10,000 INVESTED IN S&P/TSX COMPOSITE INDEX
Dividends lead to higher overall returns
S&P/TSX Composite Total Return
S&P/TSX Composite Price Appreciation
12.9%
12%
8.9%
$64,124
8%
$55,000
4.7%
4%
$40,000
$25,000
$40,177
$10,000
1990
1995
2000
2005
Source: RBC Global Asset Management – August 1990 to December 2010.
2010
0%
Non-Dividend
Payers
Index
Dividend
Payers
Source: RBC Capital Markets Quantitative Research, data is calculated on an
equal weight basis, S&P/TSX Composite Total Return Index.
2 The power of dividends
Get a head start with dividends
Over the past 20 years, dividends have contributed an
average of 2.5% per year to the S&P/TSX Composite Total
Return Index, representing approximately one-third of the
average annual total return.
Today, the yield remains at its historical average – a solid
2.5%. Clean balance sheets, strong earnings growth and
investor-friendly corporate dividend payout policies all
continue to paint a bright picture for the future of
dividend-paying equities.
While no one knows exactly when markets will move up
or down, dividend income can give your portfolio a head
start by delivering consistent cash flow and providing
exposure to the compelling growth opportunities that are
emerging amid improving corporate earnings and global
economic recovery.
S&P/TSX COMPOSITE INDEX YIELDS AND CAPITAL APPRECIATION
Dividends give your portfolio
a head start
Current Yield
AS AT
DEC. 31, 2010
Dividends 2.5%
Index Return
ANNUAL AVERAGE
1990–2010
Dividends 2.5% + Capital Appreciation 5.6%
Source: TSX. Note: The capital appreciation and total return for 2010 are still unknown,
but the actual unweighted dividend yield on the S&P/TSX Composite Total Return Index
is 2.5% as of December 31, 2010.
Make the choice that's right for you. Talk to your advisor today about
dividend-paying opportunities and how to incorporate these into your
portfolio. At RBC Global Asset Management, you can choose from a number
of solid, standalone, dividend-focused solutions, as well as portfolio solutions
that provide the appropriate level of exposure to dividend-paying and
dividend-growth opportunities.
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Management Inc. (RBC GAM), its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no
responsibility for any errors or omissions. All opinions and estimates contained in this report constitute RBC GAM’s judgment as of the date of this
report, are subject to change without notice and are provided in good faith but without legal responsibility. RBC Funds and PH&N Funds are offered
by RBC GAM and distributed through authorized dealers. RBC GAM is an indirect wholly-owned subsidiary of Royal Bank of Canada.
This document may contain forward-looking statements about general economic factors which are not guarantees of future performance. Forwardlooking statements involve inherent risk and uncertainties, so it is possible that predictions, forecasts, projections and other forward-looking
statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause
actual events or results to differ materially from those expressed or implied in any forward-looking statement. All opinions in forward-looking
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© RBC Global Asset Management Inc. 2011.
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