Does the S&P 500 Pay Dividends? | Titan (2024)

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Why do companies pay dividends?

Falling dividend yields from S&P 500 companies

Dividend aristocrats

S&P 500 investments

The bottom line


Does the S&P 500 Pay Dividends?

Feb 1, 2024


7 min read

The S&P 500 Index tracks 500 of the largest companies that trade on major US stock exchanges. More than 80% of these companies pay dividends.

Does the S&P 500 Pay Dividends? | Titan (1)


play a key role in determining the returns equity investors receive. Investors who buy funds that track the Index can rely on dividends to augment the index’s price performance. Of the 500 large-cap companies in the index, more than 80% pay dividends.

Dividends from companies in the S&P 500 have contributed about 32% of the index’s total return since 1926. Capital appreciation has accounted for the remaining 68%, according to S&P Dow Jones Indices, which administers the S&P 500 and hundreds of other indexes.

But it’s important to note that the S&P 500 index itself does not pay dividends—the companies in the index do. An investor has to buy shares of the companies themselves or of index funds in order to receive dividends.

“The S&P itself does not pay a dividend,” explains Titan investment manager Christopher Seifel. “But the companies held in an ETF, they do flow through the dividends. So you receive a dividend on a pro-rata basis based on the construction of the index, the weights, and the companies that do pay dividends.”

Why do companies pay dividends?

Companies pay dividends to reward stockholders by sharing profits. Stable and increasing dividends signal that a corporation has confidence in its prospects. Investors see dividends as a sign that a company is on solid financial footing and expects a promising future.

Individuals often consider a company’s dividend yield as an incentive for investing. Yield is simply a measure of a company’s annual dividend expressed as a percentage of its current share price. Yields fluctuate as the stock price rises and falls, but in all cases the higher the yield, the better in terms of investment returns. As the yield falls, the investor gets less for their money.

The dividend yield for the S&P 500 Index is calculated by taking the weighted average of each member company’s full-year dividend and dividing it by the index’s current share price.

Falling dividend yields from S&P 500 companies

The S&P 500 Index dividend yield has fallen well below its average historical level in the past few years. The overarching reason for this decline is the impact the Covid-19 pandemic has had on companies and consumers. The index itself notched its biggest one-day decline since the Black Monday crash of 1987 when it tumbled 12% on March 16, 2020. At the same time, the dividend payments companies were making to shareholders also fell. Out of almost 400 dividend-paying corporations in the US, 213 cut dividends and 93 omitted payments altogether in the second quarter of 2020, according to a paper published by the U.S. National Library of Medicine.

S&P 500 stalwart Disney was among the companies that suspended their dividends in 2020. The overall proportion of dividend cuts and omissions was three to five times higher than in any quarter since 2015, the study found. As the pandemic has eased in 2021, the S&P 500 Index has skyrocketed to record highs. But yields have remained below average.

Ironically, the lingering yield doldrums may be an unintended consequence of a soaring stock market. That’s because yields are calculated by dividing the diminished annual dividend payments by ever-rising share prices. The S&P 500 had gained about 25% in 2021 as of mid-November.

As of November 2021, the S&P’s dividend yield was about 1.3%, compared to an average yield of 4.29%. Even so, that yield is up slightly from the all-time low of 1.11% in August 2000. The record high was a whopping 13.84% in June 1932, when the US stock market was near its all-time low during the Great Depression.

Pandemic aside, only a handful of companies in the S&P 500 are generally considered star dividend performers. The average yield of member companies is usually about 1% to 2%. Some companies pay no dividends at all. Heavyweights such as Amazon, Alphabet, and Berkshire Hathaway’s Class B shares are in the no-dividend club. These companies are among the S&P 500’s top 10 holdings by weight.

At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.

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Dividend aristocrats

Dividend standouts do exist. Oil giant ExxonMobil, tobacco seller Altria, and cybersecurity company Iron Mountain all were delivering yields above 5% as of November 2021.

However, yield isn’t everything when it comes to dividend stocks. Investors also want to know that the company delivering the high dividend payments is likely to continue doing so.

To track the index’s most consistent dividend payers, S&P Dow Jones Indices established the S&P 500 Dividend Aristocrats. This index tracked 65 companies in 11 industry sectors as of November 2021.

The aristocrats don’t necessarily flaunt the highest yields. Instead they have followed a policy of increasing dividends for at least 25 consecutive years. Unlike the components of the S&P 500, these companies all carry equal weight in their index. And they can’t represent more than 30% of any given industry sector.

Consumer products behemoth Procter & Gamble has increased its dividend for 65 straight years. Its dividend yield was 2.4% as of mid-November 2021. P&G shares the longest streak with comparatively little-known Dover Corporation and Genuine Parts Company. Dover, which makes industrial products, posted a dividend yield of 1.13% in November 2021. Genuine Parts, a distributor of auto and other parts, had a yield of 2.38%.

Overall, the dividend aristocrats have rewarded investors with higher returns and lower volatility than the S&P 500 Index over all time periods, the S&P Dow Jones Indices report found.

S&P 500 investments

Because one cannot invest directly in the S&P 500 itself, investors who are interested in reaping the returns of the S&P 500 turn to either index mutual funds or index exchange traded funds (ETFs).

These funds offer income to investors by owning dividend-paying stocks. The funds collect regular dividend payments and distribute them to holders in two ways: cash paid directly to investors or reinvestments into the fund’s underlying stocks.

The SPDR S&P 500 ETF, which trades under the ticker SPY, is the oldest and biggest ETF to track the S&P 500, with about $425 billion in assets under management. It’s administered by State Street Global Advisors. It pays a dividend quarterly and had a yield of about 1.3% as of November 2021.

This ETF pays dividends in cash each quarter, though it holds them in a non-interest-bearing account before making the payment. Dividends are distributed to investors based on their holdings.

Other ETFs may temporarily revinest the dividends back into the holdings of the fund until it comes time to make a cash payment. Investors themselves may also have the option to reinvest all of the dividends back into the fund.

Mutual funds are legally required to distribute the dividends they’ve accumulated at least once a year. Some do so quarterly or even monthly, and others pay semiannually or wait out the full year. Fund investors may also opt to reinvest their dividends rather than receiving a direct payment. They can accomplish this through a dividend reinvestment plan, or a DRIP.

It’s important to note that some funds may display a distribution yield. This is not the same as the dividend yield. The distribution yield represents all of the distributions a fund paid in the past 12 months, divided by the current price of the fund. It includes both dividends and capital gains, which are the result of selling some of the fund’s assets at a profit. The dividend yield considers only dividends.

It’s also important to understand that while a majority of the companies in the S&P 500 pay cash dividends to investors, the value of the index does not include gains from these dividends. Investors can factor those payments into their returns.

The bottom line

The S&P 500 Index tracks 500 of the largest companies that trade on major US stock exchanges. More than 80% of these companies pay dividends. Investors in S&P 500 index mutual funds and ETFs can take advantage of the dividends, either through direct cash payments or reinvestment of the dividend amounts back into the funds. They can gauge the desirability of dividends by their yields, or the annual dividend payment divided by the stock price. The higher the yield, the more the investor is getting for their money.


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Does the S&P 500 Pay Dividends? | Titan (2024)


Does the S&P 500 Pay Dividends? | Titan? ›

The S&P 500 is an index, so it does not pay dividends; however, there are mutual funds and exchange-traded funds (ETFs) that track the index, which you can invest in. If the companies in these funds pay dividends, you'll receive yours based on how many shares of the funds you hold.

How much does the S&P 500 pay in dividends? ›

S&P 500 Fundamentals
S&P 500 Dividend Yield1.35%
S&P 500 Earnings Yield4.03%
S&P 500 Market Cap44.08T USD
S&P 500 P/E Ratio24.79

What is the highest dividend paying stock? ›

20 high-dividend stocks
CompanyDividend Yield
Evolution Petroleum Corporation (EPM)8.39%
Eagle Bancorp Inc (MD) (EGBN)8.18%
CVR Energy Inc (CVI)8.13%
First Of Long Island Corp. (FLIC)7.87%
17 more rows
Apr 24, 2024

How often does Vanguard S&P 500 pay dividends? ›

Vanguard S&P 500 UCITS ETF pays quarterly dividends. This is paid in the months of June, September, December, March. When is the next dividend from Vanguard S&P 500 UCITS ETF?

What is the average annual return of the S&P 500 with dividends? ›

The historical average yearly return of the S&P 500 is 9.88% over the last 20 years, as of the end of April 2024. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 7.13%.

What is the best dividend stock of all time? ›

Some of the best dividend stocks include Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and AbbVie Inc (NYSE:ABBV) with impressive track records of dividend growth and strong balance sheets.

What stock pays the highest monthly dividend? ›

Top 10 Highest-Yielding Monthly Dividend Stocks in 2022
  • What dividends and REITs are.
  • ARMOUR Residential REIT – 20.7%
  • Orchid Island Capital – 17.8%
  • AGNC Investment – 14.8%
  • Oxford Square Capital – 13.7%
  • Ellington Residential Mortgage REIT – 13.2%
  • SLR Investment – 11.5%
  • PennantPark Floating Rate Capital – 10%

What is the safest dividend stock? ›

Top 25 High Dividend Stocks
TickerNameDividend Safety
EPDEnterprise Products PartnersSafe
TAT&TBorderline Safe
6 more rows
May 10, 2024

What are the three dividend stocks to buy and hold forever? ›

Here are three high-yield dividend stocks I'm buying hand over fist.
  • Enterprise Products Partners LP. Enterprise Products Partners LP (EPD 0.32%) is a leading U.S. midstream energy company. ...
  • Pfizer. Pfizer (PFE -0.38%) ranks as one of the world's biggest biopharmaceutical companies. ...
  • Verizon Communications.
1 day ago

Is Coca-Cola a dividend stock? ›

The company's CFO John Murphy talked about Coca Cola's plans to support its dividends during Q1'2024 earnings call: "We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years.

Is Vanguard S&P 500 a good investment? ›

The Vanguard S&P 500 ETF (VOO 0.10%) is one of the best ways to invest in the S&P 500, which has been a pretty smart strategy over the long term. Since 1965, the S&P 500 has produced a total return of 10.2% annualized. The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains.

What is a good dividend yield? ›

What Is a Good Dividend Yield? Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.

What is the monthly return of the S&P 500 with dividends? ›

S&P 500 Monthly Total Return is at -4.08%, compared to 3.22% last month and 1.56% last year. This is lower than the long term average of 0.70%. The S&P 500 Monthly Total Return is the investment return received each month, including dividends, when holding the S&P 500 index.

Which index fund pays the highest dividends? ›

Top 100 Highest Dividend Yield ETFs
SymbolNameDividend Yield
NVDQT-Rex 2X Inverse NVIDIA Daily Target ETF54.49%
TILLTeucrium Agricultural Strategy No K-1 ETF52.33%
NVDYYieldMax NVDA Option Income Strategy ETF51.24%
KMETKraneShares Electrification Metals Strategy ETF50.21%
93 more rows

What is the 10 year total return on the S&P 500? ›

S&P 500 10 Year Return is at 167.3%, compared to 180.6% last month and 161.0% last year.

What company pays the highest dividends? ›

10 Best Dividend Stocks to Buy
  • Verizon Communications VZ.
  • Johnson & Johnson JNJ.
  • Altria Group MO.
  • Comcast CMCSA.
  • Medtronic MDT.
  • Duke Energy DUK.
  • PNC Financial Services PNC.
  • Kinder Morgan KMI.
May 3, 2024

What is the S&P 500 monthly return with dividends? ›

S&P 500 Monthly Total Return is at -4.08%, compared to 3.22% last month and 1.56% last year. This is lower than the long term average of 0.70%. The S&P 500 Monthly Total Return is the investment return received each month, including dividends, when holding the S&P 500 index.

Does S&P 500 Spy pay dividends? ›

SPY Dividend Information

SPY has a dividend yield of 1.27% and paid $6.72 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 15, 2024.

How does the S&P 500 treat dividends? ›

They do not account for dividends. The headline S&P 500, which is frequently referred to in financial media, is a price return index.


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