10 Things Every Dividend Investor Should Know

7. Dividend Stocks Can Provide Downside Protection During Market Downturns:

Dividend-paying stocks can provide some downside protection during market downturns, but, as mentioned before, they are not immune to market volatility. According to a report by Morningstar, dividend stocks performed well during periods of economic slowdowns that started in July 1981, March 2001, and December 2007. The report also mentioned that dividend-growth strategies also fared well during recessionary periods. In trailing five years through July 2022, dividend growth equities delivered an annual average return of 9.93%, compared with a 7.56% return of income strategies.

Capital Group cited data from Fama and French and revealed that high-dividend stocks have shown a more attractive 30-year downside capture ratio of 76%, compared with a 124% of non-dividend stocks.