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Finding Reliable Income from Shares Even In the Worst Of Times

A few days back, I came across a remarkable tweet (shown below) from investment manager and financial blogger Ben Carlson:

(Note: the S&P 500 is a broad market index in the U.S.)

The 1929-1932 stock market crash was part of the Great Depression, a truly awful time for the economies of the U.S. and other parts of the world. But remarkably, as Carlson’s tweet showed, the incomes that corporate America had distributed to its owners were only marginally affected.

This got me thinking: If an investor had sought purely income from his shares and did not care about capital growth, he might not even have noticed the market crash given that his dividends were barely dinged, as demonstrated by the tweet above.

Other prominent market crashes, such as the 1973-1974 U.S. bear market, had also showed the same dynamic in terms of price declines and dividend changes. This is seen from another tweet from Carlson:

In Singapore, the Great Financial Crisis of 2007-09 caused the Straits Times Index (SGX: ^ST) to fall by more than two-thirds from peak-to-trough. But when it comes to the dividends the current index constituents were dishing out, the decline was far less severe (as seen in the table below). Some of the blue chips, such as Oversea-Chinese Banking Corp. Limited (SGX: O39), Jardine Cycle & Carriage Limited (SGX: C07), and Hongkong Land Holdings Limited (SGX: H78), managed to maintain or even grow their dividends throughout that episode.

Share Change in dividend from
Financial Year 2007 to FY2009
DBS Group Holdings Ltd -17.6%
United Overseas Bank Limited -18.6%
Sembcorp Industries Ltd 0.0%
Keppel Corporation Limited -40.6%
Oversea-Chinese Banking Corporation Limited 0.0%
SIA Engineering Company Limited 33.3%
Singapore Exchange Limited -27.8%
Singapore Telecommunications Limited -39.0%
Singapore Press Holdings Limited -3.8%
Wilmar International Limited 215.0%
Sembcorp Marine Ltd 71.8%
Ascendas Real Estate Investment Trust 19.1%
StarHub Ltd. 18.8%
Singapore Airlines Limited -60.0%
ComfortDelGro Corporation Limited -41.7%
Singapore Technologies Engineering Ltd -21.3%
Golden Agri-Resources Ltd -29.6%
Noble Group Limited 75.2%
CapitaMall Trust -33.7%
Olam International Limited 0.0%
Jardine Strategic Holdings Limited 11.1%
City Developments Limited -73.3%
CapitaLand Limited -30.0%
Hongkong Land Holdings Limited 23.1%
Jardine Matheson Holdings Limited 38.5%
Thai Beverage Public Company Limited 13.8%
Jardine Cycle & Carriage Limited 34.9%
Average 4.3%

Source: S&P Capital IQ

Stock market declines might be very scary events for investors who are concerned about preserving the size of their portfolio (like most investors do, including me). But when it comes to investors who depend only on the dividends from shares, market crashes might barely even be noticeable. That makes for some food for thought, doesn’t it? Let me know what you think about this in the comments section below.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any companies mentioned.