Research > ETFs > ETF / ETP Commentary > 

Dividends Are Going to Be Vital Going Forward

As seasoned equity income investors know, dividends are vital drivers of long-term returns. By some estimates, reinvested dividends account for roughly a third or more of total returns over lengthy holding periods.With that in mind, investors might want to take a look at recent commentary from Bank of America strategist Savita Subramanian, who says that dividends may be the only game in town when it comes to generating equity upside over the next decade. Pointing to frothy valuations, Subramanian notes that double-digit annual performances will be hard to come by for the S&P 500 and that reinvesting payouts will pay off for investors over the long haul.“The simple act of reinvesting dividends could yield a total return equivalent to the S&P 500 at 6,000 in 2031, assuming long-term average growth and payouts,” Subramanian said in a recent note to clients.Of course, dividend investing is a long-term strategy, and it’s one made easier with quality strategies that emphasize payout growth. That speaks to the reinvesting dividends concept that Bank of America’s Subramanian discusses above.“While BofA’s outlook is much bleaker than recent history, it would continue a decades-long trend of dividends driving much of the stock market’s return. Since 1970, 84% of the total return of the S&P 500 can be attributed to reinvested dividends, according to data from Morningstar and Hartford Funds,” according to Business Insider.Fortunately for investors worried about using dividends as primary drivers of returns over the next decade, dividend growth has recently been robust in the U.S. and is on a blistering pace that’s carried S&P 500 payouts close to highs last seen prior to the coronavirus pandemic.“Dividends are back as record earnings, sales, and margins have permitted companies to return to the business of returning shareholder wealth,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “Larger dividend increases and a lack of cuts produced a record payment to S&P 500 shareholders in Q3 2021. Based on current indicated dividend rates and schedules, Q4 2021 appears set to replace both that quarterly record and set a new annual record for payments in 2021.”Investors that don’t want to stock pick among dividend names can consider an array of exchange traded funds, include the SmartETFs Dividend Builder ETF (DIVS). DIVS is a potentially rewarding idea for long-term dividend investors because it focuses on quality companies with strong balance sheets and low debt burdens. Plus, it’s actively managed, meaning that it can better avoid dividend offenders than some index funds.For more news, information, and strategy, visit the Dividend Channel.

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.