💸 The Truth About Market Corrections
Data from 60 market corrections going back to 1928
Today is Dividend Day.
In this series, I will teach you 5 things about dividend investing in less than 5 minutes.
1️⃣ Dividends During Recessions
We know that dividend-paying companies tend to hold up better than average in down markets.
But dividend investing isn’t just about grabbing the biggest payout. There are three main types of dividend strategies, and understanding them could mean the difference between steady gains and painful losses.
The image below shows the performance of three types of dividend funds during previous recessions:
High-Yield Funds – These chase the fattest dividends but tend to be riskier, often loaded with volatile energy and utility stocks
Growth & Income Funds – A balance between dividend quality and potential growth - these funds screen for financially strong companies that can sustain their payouts
Dividend-Growth Funds – The tortoises of the race that focus on companies with a history of increasing dividends, they often start with lower yields, but tend to produce the best long-term results with less risk
The data is clear: In tough markets, quality matters more than yield.
2️⃣ The Truth on Market Corrections
Since 1928, the S&P 500 has seen 59 corrections. Now, we’re in number 60.
Here’s what history tells us:
About 71% of corrections stop between -10% and -20%
Only 28% turn into full-blown bear markets
And nearly 17% barely crack -10.5% before bouncing back
Corrections feel scary. But most don’t lead to disaster. The real question: Is this just another bump - or the start of something worse?
3️⃣ An Investing Quote
Peter Lynch is one of the greatest investors of all time.
He didn’t panic during market corrections - he got excited.
Why? Because that’s when great companies go on sale.
“A correction is a wonderful opportunity to buy your favorite companies at a bargain price.” - Peter Lynch
Smart investors don’t run from corrections. They take advantage of them.
4️⃣ Aristocrats on Sale
I’ve already shown you that companies that grow their dividends hold up best in down markets, and Peter Lynch has told you that corrections offer bargains.
Dividend Aristocrats have grown their dividends for at least 25 years in a row.
Here’s a spreadsheet of all the Aristocrats and how close they are to their 52 week low prices.
Click the image to go to the spreadsheet.
5️⃣ Example of a Dividend Stock
PPG is an Aristocrat close to its 52 week low, let’s take a look at it.
PPG Industries produces paints, coatings, and specialty materials for various industries, including automotive and construction.
Profit Margin: 7.0%
Forward PE: 14.0x
Dividend Yield: 2.4%
Payout Ratio: 46.3%
That’s it for today!
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Finchat: Financial data