From Dec. 31, 1999, to June 30, 2019, the S&P High Yield Dividend Aristocrats® generated a total return of 590.3%. Of the contribution, about 57% was from dividend income, while 43% came from price appreciation. In this blog, we will look at the risk/return characteristics in detail.
Favorable Risk-Adjusted Returns
The S&P High Yield Dividend Aristocrats delivered significant outperformance against its benchmark, the S&P Composite 1500®, over the long-term horizon. Rebasing both indices to 100 on Dec. 31, 1999, the S&P High Yield Dividend Aristocrats reached 690.30 on June 30, 2019, whereas the S&P Composite 1500 reached 315.15 over the same period, as shown in Exhibit 1.
Exhibit 2 shows the detailed risk/return profile of the S&P High Yield Dividend Aristocrats versus the S&P Composite 1500. Over the studied period, the S&P High Yield Dividend Aristocrats outperformed the S&P Composite 1500 by 4.3% on an annualized return basis. The reduced volatility helped the strategy deliver a much better risk-adjusted return (0.75) than the S&P Composite 1500 (0.41). Furthermore, the S&P High Yield Dividend Aristocrats also had superior risk-adjusted returns over the 5-, 10-, and 15-year periods.
The S&P High Yield Dividend Aristocrats demonstrated defensive features during the down markets of the studied period, with the strategy having a smaller maximum drawdown, less loss, and a lower beta than the S&P Composite 1500, as shown in Exhibit 3.
Upside Participation and Downside Protection
Another defensive feature of the S&P High Yield Dividend Aristocrats was that it participated in the upside when the market was up and provided downside protection when the market was down. As illustrated in Exhibit 4, the S&P High Yield Dividend Aristocrats, on average, participated in 88.2% of market returns during the up months. On the other hand, it experienced only 59% of market drops during the down months. Overall, the strategy tended to outperform, with a persistent hit ratio of 75.9% in down markets and 37.8% in up markets.
In the next blog, we will discuss the performance attributions of the S&P High Yield Dividend Aristocrats.
For more information, please see the first part of this blog series here.
 The market is defined as the monthly performance of the S&P Composite 1500 from Dec. 31, 1999, to June 30, 2019.
 The persistent hit ratio is defined as the total number of periods when the strategy outperforms the benchmark and is expressed as a percentage.The posts on this blog are opinions, not advice. Please read our Disclaimers.