Sure Dividend

Updated on August 28th, 2018

The S&P 500 is widely-known as the best broad gauge of performance for large-capitalization U.S. equities. Containing the 500 largest companies by market capitalization (that also meet other criteria), the S&P 500 is a fantastic place to look for investment opportunities.

The spreadsheet available for download above contains numerous important investing metrics, including:

• Dividend yield
• Price-to-earnings ratio
• Market Capitalization

You can view a preview of the spreadsheet below:

Table of Contents

While we advise reading this article in its entirety, you can skip to any particular section using the table of contents below:

• How To Use The S&P 500 Stocks List To Find Investment Ideas
• Video: Why the S&P 500 is the Best Benchmark for Large Cap U.S. Equities
• Index Methodology
• S&P 500 Components by Weight
• The Historical Performance of the S&P 500
• Index Composition & Characteristics
• How To Use The S&P 500 As A Benchmark

How To Use The S&P 500 Stocks List To Find Investment Ideas

Having an Excel document containing the financial metrics of every stock within the S&P 500 is very powerful.

This document becomes even more useful when combined with a working knowledge of Microsoft Excel.

With that in mind, this section will provide a tutorial of how to implement two useful financial screens to the S&P 500 Stocks List. The first screen we’ll implement is for stocks with price-to-earnings ratios below 15 and price-to-book ratios below 2.

Screen 1: Value Stocks

Step 1: Download the S&P 500 Stocks List at the link above.

Step 2: Click on the filter icon at the top of the price-to-earnings ratio column, as shown below.

Step 3: Change the filter setting to ‘Less Than’ and enter ’15’ into the field beside it, as shown below.

Step 4: Close out of the filter window (by clicking the exit button, not by clicking the “Clear Filter” button in the bottom right). Then, click on the filter icon at the top of the price-to-book column, as shown below.

Step 5: Change the filter setting to “Less Than” and enter 2 into the field beside it, as shown below.

The remaining stocks in this spreadsheet are S&P 500 stocks with price-to-earnings ratios below 15 and price-to-book ratios below 2.

The next filter that we’ll implement is for stocks with dividend yields between 2% and 3% and returns on equity exceeding 15%.  For reference, the dividend yield of the S&P 500 is currently below 2%.

Screen 2: Moderate Dividend Yields and Above-Average Returns on Equity

Step 1: Download the S&P 500 Stocks List at the link above.

Step 2: Click on the filter icon at the top of the dividend yield column, as shown below.

Step 3: Change the filter setting to “Greater Than” and enter 0.02 into the field beside it. We must enter 0.02 and not 2% because dividend yield is measured in percentage points expressed as a decimal equivalent of percentage.

Step 4: Change the secondary filter setting to “Less Than” and enter 0.03 into the field beside it, as shown below.

Step 5: Exit the filter window (by clicking the exit button, not the “Clear Filter” button in the bottom right). Then, click on the filter icon at the top of the return on equity column, as shown below.

Step 6: Change the filter to “Greater Than” and enter 0.15 into the field beside it, as shown below.

The remaining stocks in this Excel spreadsheet are S&P 500 stocks with dividend yields between 2% and 3% that also have returns on equity exceeding 15% over the trailing twelve-month period.

You now have a solid fundamental understanding of how to use the S&P 500 Stocks List to find compelling investment ideas.

If you are looking for other investment ideas from the S&P 500 components, take a look at the following 2 articles:

• Ranking The 10 Largest S&P 500 Dividend Payers by Expected Total Returns
• The Top 10 Highest Yielding S&P 500 Stocks

The remainder of this article will explain how to use the S&P 500 Index as a benchmark for investment performance before directing you to other useful investing resources.

Video: Why the S&P 500 is the Best Benchmark for Large Cap U.S. Equities

In the following video, we discuss why the S&P 500 is our favorite benchmark for large cap U.S. equities.

Index Methodology

The S&P 500 is most well-known for containing the 500 largest companies in the United States when measured by market capitalization.

The Index also has other criteria, including:

• Universe: All constituents must be U.S. companies.
• Eligibility Market Cap: Companies with a market capitalization of US$6.1 billion or greater.
• Public Float: At least 50% of shares outstanding must be available for trading.
• Financial Viability: Companies must have positive as-reported earnings over the most recent quarter, as well as over the most recent four quarters (summed together).
• Adequate Liquidity and Reasonable Price: Consists of highly tradable common stocks, with active and deep markets.

S&P 500 Components by Weight

The S&P 500 constituent companies are listed below, along with their component weights in the Index. Data is as of June 17th, 2018:

Return to the Table of Contents

The Historical Performance of the S&P 500

The S&P 500’s historical performance over the long-term is often cited as anywhere between 7% and 10% on an annualized basis.  The S&P 500’s Sharpe ratio has averaged around 0.33 over the long run.  You can see the Sharpe ratios of individual S&P 500 components here.

We have excellent data for the S&P 500’s performance going back to 1988. In this passage, we will provide data-driven insights into the actual performance of the index (including reinvested dividends) during this time period. More specifically, we will present data on rolling 1-, 3-, 5-, and 10-year total returns.

1-Year Rolling Total Returns

Rolling 1-year total returns for the S&P 500 between June 1st, 1988 and December 31, 2017 are shown below:

Source: YCharts

The S&P 500’s average 1-year return during this time period was 11.5%. The maximum value of this time series is 72.0% and the minimum value is -47.4%.

3-Year Rolling Total Returns

Rolling 3-year total returns for the S&P 500 between June 1st, 1988 and December 31, 2017 are shown below:

Source: YCharts

The S&P 500’s average 3-year annualized return during this time period was 10.5%. The maximum value of this time series is 33.1% and the minimum value is -17.4%.

5-Year Rolling Total Returns

Rolling 5-year total returns for the S&P 500 between June 1st, 1988 and December 31, 2017 are shown below:

Source: YCharts

The S&P 500’s average 5-year annualized return during this time period was 9.9%. The maximum value of this time series is 28.7% and the minimum value is -8.2%.

10-Year Rolling Total Returns

Rolling 10-year total returns for the S&P 500 between June 1st, 1988 and December 31, 2017 are shown below:

Source: YCharts

The S&P 500’s average 5-year annualized return during this time period was 8.5%. The maximum value of this time series is 19.9% and the minimum value is -4.1%.

Index Composition & Characteristics

Understanding the characteristics of the S&P 500 is useful because it allows investors to know the traits of the “average” large capitalization company in the United States. According to the index provider (Standard & Poor’s), the S&P 500 currently has the following characteristics:

•  Number of constituents: 505
• Mean total market cap: $46.8 billion
• Largest total market cap: $838.5 billion
• Smallest total market cap: $3.2 billion
• Median total market cap: $20.9 billion
• Weight of top 10 constituents: 20.5%

The top 10 S&P 500 Index constituents by index weight are shown below.

Source: Standard & Poor’s

A sector breakdown of the S&P 500 Index is shown below.

Source: Standard & Poor’s

How To Use The S&P 500 As A Benchmark

Investors can gain passive access to a broad basket of S&P 500 stocks by investing in index ETFs that track the benchmark. Accordingly, it is useful to ensure that your portfolio’s performance is comparable to the S&P 500, especially on a risk-adjusted basis.

The easiest way to measure the performance of the S&P 500 Index is by using a free financial tool like Google Finance or Yahoo! Finance. Download historical data of S&P 500 Index levels from these resources, and compare its performance to the performance of your portfolio. If it turns out that the index is trouncing your performance over long periods of time, then changing to a passive investment strategy might be a wise decision.

Final Thoughts

The S&P 500 Stocks List is an excellent place to look for high-quality investment ideas. With that said, it is not the only resource that investors should be using.

If you’re looking for dividend stocks with long histories of steadily increasing dividend payments, the following databases contain some of the most high-quality dividend stocks around:

• The Dividend Aristocrats: dividend stocks with 25+ years of consecutive dividend increases
• The Dividend Achievers: dividend stocks with 10+ years of consecutive dividend increases
• The Dividend Kings: considered the “best-of-the-best” when it comes to dividend growth, the exclusive Dividend Kings list contains stocks that have 50+ years of consecutive dividend increases

Alternatively, you might be looking to invest in blue-chip stocks with above-average dividend yields and long histories of successful business operations. If that is indeed the case, the following database will be useful:

• The Blue Chip Stocks List: stocks with 3%+ dividend yields and 100+ year operating histories

Another way to find investment opportunities is by looking through specific sectors of the stock market. With that in mind, the following databases will prove useful

• The Complete List Of All REITs
• The Complete List Of All MLPs
• The Complete List Of Dividend-Paying Financial Sector Stocks
• The Complete List Of Dividend-Paying Utility Sector Stocks
• The Complete List Of Dividend-Paying Healthcare Stocks
• The Complete List Of Dividend-Paying Consumer Staples Stocks
• The Complete List Of Dividend-Paying Energy Stocks
• The Complete List Of Dividend-Paying Consumer Cyclical Stocks
• The Complete List Of Dividend-Paying Technology Stocks
• The Complete List Of Dividend-Paying Industrial Stocks
• The Complete List Of Dividend-Paying Materials Stocks
• The Complete List Of Dividend-Paying Telecommunication Stocks

A last method for finding high-quality investment opportunities is by looking inside the portfolios of the world’s best investors. Warren Buffett is likely the best investor of our time, and we provide detailed analysis on his portfolio which you can access below:

• Warren Buffett’s Top 20 Highest Conviction Stock Picks