The Power of Dividends: Preferred Stock

Similar to fixed income securities, the U.S. Preferred Stock market has started 2014 with positive performance. The S&P U.S. Preferred Stock Index  (Total Return) ended January 2014 up 2.68% .  A good start given the S&P 500 Index (Total Return) was down 3.46%.  As a fixed income comparison the S&P/BGCantor U.S. Treasury Bond  7-10 Year  Index was up 2.98% for the month.

Looking back over a longer period the price return (excluding dividends) of the index declined 5.42% for the twelve months ending January 31st.  The dividend yield of the S&P U.S. Preferred  Stock Index ended January at slightly over 6.9%.   The net result was a positive return of 1.23% during that twelve month period.  Simply put, the dividend income helped keep the returns in positive territory.

The 12 month total returns of both indices are charted below.

12 Month Returns Ending January 2013: S&P U.S. Preferred Index & S&P 500 (Total Return)

12 Month Returns Ending January 2014: S&P U.S. Preferred Index & S&P 500 (Total Return).  Data as of January 31, 2014. Source: S&P Dow Jones Indices.

Over the five year period ending January 31, 2014, the S&P U.S. Preferred Stock Index had a five year annualized return of over 17.6% while the S&P 500 returned over 19.1%.  The five year total return values for both indices are charted below.

Five Year Returns Ending January 2014 of the S&P U.S. Preferred Stock Index and the S&P 500 Index (Total Returns)

Five Year Returns Ending January 2014 of the S&P U.S. Preferred Stock Index and the S&P 500 Index (Total Returns).  Data as of January 31, 2014.  Source: S&P Dow Jones Indices.

The posts on this blog are opinions, not advice. Please read our disclaimers.

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