市场见解

Why do ASX dividend shares underperform the market?

ASX investors love a good dividend share. But many actually underperform over time. Here’s why, and some proof to back it up
The post Why do ASX dividend shares underperform the market? appeared first on The Motley Fool Australia. –

investor scratching head as if trying to decide whether to sell asx share price

ASX dividend shares are popular in Australia. The S&P/ASX 200 Index (ASX: XJO) has long been known for its hefty dividend potential, and ASX blue chips that pay out dividends traditionally have a role in most retail investors’ portfolios.

But the evidence is starting to build up that many of the ASX shares that have the largest reputation for being the biggest dividend payers are not market-beating stocks. Let’s take a look at a couple of examples. 西太银行 (ASX: WBC) is one of ASX’s most popular shares as one of the big four banks. Before the coronavirus pandemic, Westpac shareholders were used to an annual fully franked dividend yield of between 5-8%.

Yet Westpac shares, at their current pricing, have literally gone nowhere for over a decade. You could have bought Westpac shares at the same price as is available at the time of writing, back in March of 2007. Between late May 2008 and today, 力拓集团 (ASX: RIO) shares are up 3.75%. Not a great capital return for 23 years of waiting. 银行及金融 - 澳洲联邦银行 (ASX: CBA) shares were higher in 2015 than they are today. And investors who bought 能源 - 伍塞德石油 (ASX: WPL) shares back in June 2008 are still down around 60% on their money. And AGL Energy Limited (ASX: AGL) shares are today trading at a level we last saw in 2004.

All of these ASX shares are known as dividend heavyweights. And all have been mediocre long-term performers in terms of share price growth.

Do higher dividends equal lower returns?

Let’s take a look at two ASX exchange-traded funds (ETFs) to see this pattern in action. The Vanguard Australian Shares Index ETF (ASX: VAS) tracks the largest 300 companies on the ASX. It is a simple index fund, holding dividend payers and non-dividend payers alike, going only on market capitalisation.

In contrast, the Vanguard Australian Shares High Yield ETF (ASX: VHY) holds a smaller basket of shares, only holding companies “that have higher forecast dividends relative to other ASX-listed companies”. As you would expect, the VHY fund offers a far higher trailing dividend distribution yield at 3.57%, compared to the broader ASX 300 ETF’s 2.61%.

However, that higher yield does not translate into better overall returns. The ASX 300 ETF has returned an average of 10.25% per annum over the past 5 years. The dividend-focused VHY ETF has returned an average of only 8.99% per annum over the same period.

So why do many ASX dividend shares underperform? Well, that’s a complicated question. But it might have something to do with the fact that paying out dividends weakens a business. A business that shovels most of its earnings out the door has less left to invest in itself, to grow and expand. That might be why some of the companies mentioned above have had their share prices stuck in the proverbial mud for more than a decade.

So if you love a good dividend (and who doesn’t?), keep in mind that you might be sacrificing your overall return if you chase the highest yields possible.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia’s Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a ‘must consider’ for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don’t miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Click Here For Your Free Stock Report

Returns As of 15th February 2021

More reading

Motley Fool contributor Sebastian Bowen owns shares of Vanguard Australian Shares High Yield Etf. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why do ASX dividend shares underperform the market? appeared first on The Motley Fool Australia.

随时随地,交易世界!

移动APP平台,拥有 12 个市场的 50,000 多种全球上市证券(全球市值超过 70%),直接在您的 Android 或 iOS 设备上即可操作。

与独有的交易理念和投资分析工具相结合,帮助您在我们 12 个全球市场中的几乎所有金融工具上找到可操作的见解,从而帮助您优化交易策略。

推荐给您的朋友

向您的朋友推荐Monex并赠予他们免费使用我们交易工具的机会

我们尊重您的隐私,只会向您的朋友发送一封邮件 

与您的朋友分享

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!