Welcome back, today’s post is going to be directed at our fellow dividend investors! If you’re either currently a dividend investor or thinking about starting your journey, today’s post may help you make this decision.
What we’re going to do is take a look at the S&P 500 as most investors seem to refer to this as “the market” so it’s a nice easy to understand list of companies to use. (For anyone who is unaware, the S&P 500 is simply the 500 largest US companies.)
https://www.youtube.com/watch?v=5nYMKQpb4HI
Before we get into the numbers, a big shout out to Joseph Carlson on youtube as this chart was brought to our attention on Ep.37 of his channel.
So, what we’re looking at above is simply a list of the major recessions that have hit the US dating back to 1946. What you’ll see comparing the two columns is what drives most people to investing in dividends in the first place – and that is that even when you’re taking a hit on your capital value in your brokerage account, these hits aren’t being seen in your income (at least not nearly as heavily).
Taking a look at these 11 instances of stock market recessions we can only really pinpoint one example where we would be feeling unease, or where our lifestyle may see a change due to the markets and that example is the 2008-2009 collapse which brought with it a -23.1% change to dividends paid. The other 10 drops all saw dividends remain almost unchanged and in 3 of those cases dividends actually increased on average!
While we need to remember that past performance doesn’t equal future performance, seeing a decent sample size of previous events does help give clues as to what we may encounter in the future. We feel that so long as we are diligent with our investment choices and stick to large, reputable companies with strong fundamentals and who prioritize their dividends paid to shareholders we can limit most any downside risk to our investment income in our FIRE account.
To find these great companies to invest in start by looking up things like US Dividend Aristocrats/Champions/Kings, Canadian Dividend Aristocrats, and also check in to blogs like our own for more dividend stock ideas!
As always, if you’ve got any questions about investing, retirement, debt or anything related to personal finance feel free to leave them below or over on our Instagram page: FindependenceCanada and we’ll be sure to get back to you.
Thanks,
FIC.