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13 Best S&P 500 Dividend Stocks To Buy

Vardah Gill
9 min read

In This Article:

In this article, we discuss 13 best S&P 500 dividend stocks to buy. You can skip our detailed analysis of dividend stocks and their performance over the years, and go directly to read 5 Best S&P 500 Dividend Stocks To Buy. 

In the market conditions of 2022, when the S&P 500 Index dropped by over 18%, stocks that paid dividends showed they could give investors some protection on the downside. For instance, among the stocks in the S&P 500, those paying dividends in 2022 decreased by 11.1%, whereas the ones that didn't pay dividends experienced a larger loss of 38.7%. There was a shift in this pattern in 2023, with dividend stocks falling behind the broader market performance.

Also read: 12 Best Performing S&P 500 Stocks in the Last 10 Years

That said, looking at the track record of dividend stocks, it's evident that regardless of market conditions, dividends have consistently offered a secure place for investors. To begin with, dividends have been a crucial factor in total market returns over the last 50 years. Looking back to 1960, approximately 69% of the overall return of the S&P 500 Index can be traced back to dividends that were reinvested, harnessing the strength of compounding. As mentioned above, dividend growers are more popular among investors because of their ability to provide regular and growing cash. According to a report by Hartford Funds, companies that either started paying dividends or increased their dividends have seen the most substantial returns compared to other stocks since 1973. Importantly, these stocks have shown considerably less fluctuation and volatility in their performance. The report highlighted that dividend growers and initiators delivered a 10.24% return from 1973 to 2022, compared with a 3.95% return for non-dividend payers.

Analysts often view inflationary periods as a crucial test of stocks' ability to maintain stability in their performance. During times of inflation, the value of money decreases, leading to rising prices for goods and services. In such periods, stocks that can sustain their performance despite these economic challenges are considered more stable. Fortunately, dividend stocks have demonstrated robust performance in past periods marked by inflation. The S&P U.S. Dividend Growers Index and S&P Global ex-U.S. Dividend Growers Index include companies that have raised dividends for 10 and 7 years respectively. According to a report by S&P Dow Jones Indices, these indices outperformed their usual benchmarks when the annual inflation rate stayed above 3% for six months straight. They also performed exceptionally well during the most severe inflationary times since 2006.

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