February 3, 2014

Dividend focused investors stood by in horror today as they watched the S&P 500® drop 40.7 points or 2.28%. The entire estimated dividend payment for the year 2014 of $38.57 evaporated in a single trading session. According to Market Watch, the drop in the equity markets is likely the result of a disappointing ISM number released earlier today. However, what fundamentally transpired with the underlying S&P 500 companies was something far less exciting. Not one single company cut their dividend today.

Days where the stock price eliminated an entire year’s dividend are not uncommon. In the last five years there have been 58 days where the S&P 500 dropped over 2% in a single trading session. Even with the stellar performance we saw over the last twelve months, the equity investor suffered five days of losses greater than 2% and four gut wrenching draw-downs lasting several days. Over that same time period the underlying fundamental cash dividend steadily grew from $31/share to over $35/share (over 15%) with almost no downside volatility.

Unfortunately investing in dividend growth equities is no simple task. The fundamental equity market investor must walk an emotional tightrope to achieve any semblance of success in in investing.

One Day Down, a Whole Year Gone
January 2, 2014, through February 3, 2014. Past performance does not guarantee future results. Source: FactSet, Reality Shares Research

S&P 500: A broad stock market index based on the market capitalization of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 was developed and continues to be maintained by Standard & Poor’s Financial Services LLC, and is considered to be a bellwether for the US economy. ISM = Institute for Supply Management. LTM = Last 12 Months.

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