US small-cap stocks with a track record of strong dividend growth had higher returns and less volatility versus the broad universe of US small-caps in 2018, in line with a similar trend demonstrated over the last decade. And, notably, this outperformance accelerated in fourth quarter during a particularly volatile period for US equities in general and US small-caps in particular.
According to Harnessing the long-term potential of dividend growth, a new report from FTSE Russell, the Russell 2000 Dividend Growth Index had an annualized return of 11.8% from June 1998 through December 2018, versus 7.6% for the Russell 2000® Index. And these returns were achieved amid a respective annualized volatility of 15.1% and 19.6% for the same period. More return for less risk resulted in a significantly higher return/risk ratio of 0.78 for the Russell 2000 Dividend Growth Index.
And, in the fourth quarter of 2018, when the Russell 2000 Index lost 20.2% the Russell 2000 Dividend Growth Index was down just 8%.
Rolf Agather, managing director, North America Applied Research, FTSE Russell:
“FTSE Russell launched the FTSE Dividend Growth Index Series in 2014 as a means for investors to measure the long-term performance of companies that consistently grow their dividends. The indexes target US companies that have successfully raised their dividend payments over 10 years or more while meeting certain liquidity and industry diversification requirements. These indexes have outperformed their parent indexes over time owing to two factors; low volatility and high quality.”
Kieran Kirwan, senior investment strategist, ProShare Advisors, LLC:
“Periods of higher market volatility tend to reinforce the value of finding higher quality companies that continually grow their dividends, particularly in the US small cap asset class as they tend to perform better in times of stress. These companies tend to have stronger balance sheets, more consistent earnings, and resilient business models.”
For more information on the FTSE Dividend Growth Indexes, read the new FTSE Russell research report or visit FTSE Russell.
© 2019 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “The Yield Book®”, and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE Canada, Mergent, FTSE FI, YB. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided “as is” without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the FTSE Russell Indexes for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell Indexes is provided for information purposes only and is not a reliable indicator of future performance.
Views expressed by Rolf Agather of FTSE Russell and Kieran Kirwan of ProShares are as of January 15th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.
No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this document or accessible through FTSE Russell Indexes, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.
This publication may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB and/or their respective licensors.