Investors selecting funds based on dividend yield should be aware that high yield is no assurance of higher expected return. Plotting 10-year annualized returns versus average dividend yield for US large cap equity funds shows no meaningful relation between the two. Many of the best-performing funds in the category had below average yields. And funds specifically targeting high yield can be found on both ends of the return spectrum.
A stock's total return comprises both capital appreciation and dividends. Emphasizing only one component may reduce diversification and, as the data show, may not increase your expected return.
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Disclosures
All expressions of opinion are subject to change. This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. Diversification neither assures a profit nor guarantees against loss in a declining market.