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January 5 2016

Investing in U.S. stock markets during 2015 was a bit like riding a mechanical bull. Markets jolted up and down but, once the year ended, investors were almost where they had started.

The Standard & Poor’s 500 Index (S&P 500) entered 2015 at about 2,058. It rose as high as 2,130 during May and fell to about 1,867 in August. As the year ended, the index was almost at 2,044. It would have finished in negative territory if it weren’t for dividends. With dividends included, the S&P 500 was up 1.4 percent for the year, according to Barron’s. Without dividends, it was down 0.7 percent.

Market performance left plenty of room for speculation about what the future may hold. Barron’s explained:

“The problem isn’t just that the S&P 500 finished flat but that it finished trendless… So, as 2016 begins, it’s very easy to impose whatever narratives we want on the market. For the bears, the fact that the market hasn’t been able to hit a new high, and that small caps have underperformed large, is a sign that the market is peaking… Still, there’s enough good news to keep the bulls heartened… The price of oil, which pulled down S&P 500 earnings in 2015, might be stabilizing… And, remember, Congress just passed a spending bill that could pick up the stimulus baton from the Federal Reserve.”

Regardless of whether you lean toward bullishness or bearishness, the performance of the S&P 500 during 2015 reinforced the value of dividends. When it comes to investing in stocks, there are basically two ways to make money. First, the value of a company can increase and investors can earn capital gains. Second, investors may receive dividends, which are a portion of a company’s earnings its board of directors chooses to distribute to shareholders.

During the past several years, as interest rates have remained persistently low, dividends have become important to many investors as a source of income. They also are a critical component of total return. From 1926 through 2014, dividends accounted for more than 40 percent of the total returns generated by the S&P 500.

Sources:
https://beta.finance.yahoo.com/quote/^GSPC/history?period1=1420178400&period2=1451673633&interval=1d
http://blogs.barrons.com/stockstowatchtoday/2015/12/31/running-to-stand-still-stocks-rise-stocks-fall-go-nowhere/?mod=BOL_hp_blog_stw
http://www.investopedia.com/terms/d/dividend.asp
https://www.oppenheimerfunds.com/investors/doc/The_Growth_and_Income_Potential_of_Dividends.pdf
http://www.kiplinger.com/slideshow/taxes/T054-S001-valuable-tax-breaks-brought-back-to-life/index.html
http://www.onbeing.org/program/wild-love-world/feature/widening-circles/1444

  • Data as of 12/31/151-WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)-0.008-0.007-0.0070.1280.1020.049
  • Dow Jones Global ex-U.S.-0.5-6.6-6.60-10.4
  • 10-year Treasury Note (Yield Only)2.3NA2.21.83.34.4
  • Gold (per ounce)-0.9-11.4-11.4-13.9-5.57.2
  • Bloomberg Commodity Index0.1-24.7-24.7-17.3-13.5-7.5
  • DJ Equity All REIT Total Return Index0.22.82.810.611.77.1

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of the bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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