Investing for Dividends

If you bought shares in a stock, index fund or exchange traded fund specifically because it regularly pays out dividends, how much money could you expect to earn in dividends each year from your investment?

That’s the problem we’re taking on with our latest tool, which you’ll find below – if you’re accessing this article on a site that republishes our RSS news feed, please click here to access a working version of the tool on our site. For dividend and stock price data, we’ll point you to Dividend.com, where if you enter the ticker symbol, company name or fund name into that site’s search function, you can quickly get the data our tool needs to do its math.

Got all that? Ready… set… go!

Now, here’s an interesting question: if you are counting upon making money from owning dividend paying stocks, can you afford the situation where your dividend payments might be slashed?

That’s a real question to consider. For the S&P 500, the annual payout of dividends during the Great Recession peaked at $28.85 per share in September 2008, before proceeding to fall by 24% all the way to $21.90 per share during the next six months to $21.90 per share in March 2009.

Trailing twelve month dividends payouts from the S&P 500 didn’t rise back above $28.85 per share mark for another three and a half years, when they finally surpassed that level in September 2012. [If you want to pull the historical data for the S&P 500, please check out our tool that puts the S&P 500 At Your Fingertips!]

If you want to weather that kind of storm, you might consider adopting a personal finance strategy where you only count on 65% to 75% of your annual dividend payments, which would pretty much see you through the worst that the U.S. stock market has ever put investors through.

Otherwise, when Mr. Market takes a hard turn south, you could very well find yourself in for a very hard ride if you were counting on getting a fixed amount of dividends.