Major international equity aggregates, as compared to those in the U.S., tend to be larger by count with a greater relative composition of stocks with (high) dividend yields. E.g., 35% of the S&P 500 ETF either did not pay a dividend or had a dividend yield below 1%. Only 1:4 companies had a dividend yield > 3%. Compared to the international segment of the MSCI ACWI ETF, 96% had a dividend yield of 1%+ and over half had a dividend yield of 3%+.
Source: UBS HOLT as of 6/25/25
Not only do international markets tend to have higher numbers of dividend paying stocks, but the stocks with the highest yields are also often rewarded with the greatest price performance, as evidenced in the first chart below. The dark blue line shows the cumulative market cap weighted performance of the top 20% of stocks with the highest dividend yields (Q1) which has consistently outperformed the 20% of stocks with the lowest dividend yields (Q5) and the market since 2010.
In the U.S., there has been minimal performance dispersion between the top and bottom dividend yield quintiles. Instead, as evidenced by the green line on the second chart, U.S. market performance was dominated by stocks that do NOT pay a dividend.
Cumulative growth shown indexed to 100 from 12/31/10 to 8/31/25. World ex-U.S. market is the Bloomberg World ex-U.S. Large and Mid Cap Total Return Index. U.S. market is the Bloomberg U.S. Top 1000 Total Return Index. Q1 and Q5 portfolios are market cap weighted, rebalanced monthly, and composed of stocks in the respective benchmarks that rank within the highest (Q1) and lowest (Q5) quintiles of dividend yield. Source: Bloomberg. Past performance is no guarantee of future results. An index is unmanaged and unavailable for direct investment.
The fundamental law of active management states that increasing the number of investment opportunities should increase market outperformance assuming all else stays constant. However, we have shown that major U.S. equity markets are dominated by non-dividend payers which limits the already constrained investment universe for active U.S. dividend managers. Put simply, having more investment options should lead an active manager to outperform another with fewer options.
Based on the fundamental law, we would then expect global dividend managers in aggregate to outperform a global benchmark more than U.S. dividend managers vs. a U.S. benchmark, and, in fact, that has consistently been the case over the past 15 years.
The below histograms show the distributions of U.S. and global dividend strategy excess returns vs. their respective regional benchmarks over all labeled trailing periods for nearly 15 years. Shaded regions to the right of the red dashed line represent strategies that outperformed, and regions to the left are the strategies that underperformed. Across the 1-, 3-, 5-, and 10-year periods, global strategies had consistently greater levels of relative excess returns than comparable U.S. strategies.
Source: eVestment. Past performance is no guarantee of future results. U.S. dividend managers are compared to the SPDR S&P 500 Trust ETF (SPY ETF). Global managers are compared to the iShares MSCI ACWI ETF (ACWI ETF).
Index and ETF Definitions:
Past performance does not guarantee future results. Investing in securities involves risk, including the possibility of the loss of principal.
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