Over the past couple of weeks, the stock market has recovered some of the ground it lost when the seriousness of the COVID-19 crisis became clear. We don’t know where the markets will go from here, but one thing investors have always been able to count on is dividend income.

With so much attention focused on fluctuations in the stock market, it’s easy to overlook just how important dividends are to your total equity returns. In fact, dividends accounted for 40% of the total return of the S&P 500 index of U.S. stocks since 1926.

These days some investors are wondering how reliable their dividend income will be in the recession we are now experiencing. While we won’t know precisely until after the recession is over, we can look to history as a guide.

An investor in an index fund earns the aggregate per-share dividends of all the underlying companies in the index. In a recession, some companies will reduce or eliminate their dividends to conserve cash. We’ve already seen that happening this time as the COVID-19-linked economic lockdown forces companies in a wide variety of sectors to cut their dividends.

That’s obviously not good news for investors. However, it turns out that even in a recession, the stream of dividends has historically remained quite steady.

We looked at data on S&P 500 per-share dividends during recessions since the Second World War. The accompanying table shows that in seven out of 11 recessions, dividends have actually increased or remained steady during recessions.

Table 1: Change in Dividend Around Post-War Recession Period

Beginning of Recession End of Recession Change in Dividend per Share Around Recession Period
November 1948 October 1949


July 1953 May 1954


August 1957 April 1958


April 1960 February 1961


December 1969 November 1970


November 1973 March 1975


January 1980 July 1980


July 1981 November 1982


July 1990 March 1991


March 2001 November 2001


December 2007 June 2009


Source: National Bureau of Economic Research, Robert Shiller Website

The deepest decline, by far, occurred during the financial crisis of 2008-09 when S&P 500 per-share dividends fell by 24%. That’s serious, but you can look at it in another way: Even during the worst post-war recession, you would have still earned three-quarters of your dividends. With the S&P 500 currently yielding a little more than 2%, you would be left with 1.5% after a similar decline.

What’s more, during three of the four recessions where dividend income dropped, the total return from the S&P 500 was actually positive from the peak to trough period in dividend income. This is because the stock market tends to move up strongly before the end of a recession in anticipation of the coming recovery.

Table 2- S&P 500 Total Return During Periods of Declining Dividend

Recession Date Dividend per share Change S&P500 Total Return













Source: Morningstar, Robert Shiller

We are living in extraordinary times and it is possible dividend cuts will be worse this time than in 2008-09. However, you can rest assured substantial dividend income will continue to flow while you wait for stock prices to recover.

And if you need added motivation to stay invested, remind yourself that a powerful recovery in share prices normally comes before the recession ends.