Dividend Growth Investing vs The Market

Does dividend growth investing really keep up when “the market” rips higher? We stack Dividend Growth Investing (DGI) against broad indexing across four distinct periods. You’ll hear where DGI shines and where indexing wins.

Most importantly, you’ll leave with a simple decision framework: choose the approach that lets you invest with conviction and reach your goals—consistently.

Download the Dividend Rock Star List!

You’ll Learn

What we compared (methodology and why it matters):

U.S. head-to-head: Vanguard Dividend Growth (VDIGX) vs S&P 500 (SPY) so we can isolate “dividend growth strategy” vs “own the market.”
Canada head-to-head: iShares S&P/TSX Canadian Dividend Aristocrats (CDZ.TO) vs TSX-60 (XIU) to avoid currency noise and keep sector mix comparable.
Periods chosen to stress test behavior in different regimes: the 1990s–2025 long view, the 2000–2010 “lost decade,” the 2008–2020 recovery cycle, and 2020–2025 (AI + concentration). Dividends assumed reinvested to reflect realistic compounding.

Since inception (U.S., 1993–2025): why indexing wins long run—yet feels bumpier:

The S&P 500 outperformed VDIGX largely because of non-dividend mega caps compounding for years (e.g., Apple pre-dividend) and the recent Magnificent Seven surge. DGI’s quality tilt dampened volatility but didn’t fully capture parabolic upswings from a handful of tech leaders.

Takeaway: over very long arcs, broad beta plus winner-take-most effects can dominate.

Canada since 2010: why DGI edged the TSX:

CDZ maintained a steadier climb than XIU as the Canadian benchmark’s resource/bank concentration created long soft patches (especially pre-2020 for energy/materials). A broader roster of dividend growers smoothed the ride and nudged returns ahead.

Takeaway: in concentrated markets, a quality-dividend screen can act as a diversification upgrade.

The “lost decade” (2000–2010): DGI’s downside math advantage:

Two crashes (dot-com & financial crisis) left the S&P roughly flat/negative, while dividend growers preserved and compounded. Mechanically: (1) smaller drawdowns mean less to earn back; (2) ongoing dividends are reinvested at lower prices; (3) quality screens avoid the most fragile names.

Takeaway: in prolonged bear regimes, defense plus compounding matters more than max upside.

2008–2020: from crisis lows to expansion—sequence risk and retirees:

Starting in a hole, DGI fell less and recovered sooner, which is critical if you’re drawing income. Pairing dividend growers with a cash wedge lets you fund withdrawals without forced selling during bad years.

Takeaway: for retirement math, path of returns > average return.

2020–2025: concentrated leadership favors the index:

AI enthusiasm, retail flows, and narrow market breadth rewarded broad indexing. Many dividend franchises underperformed the leaders despite solid fundamentals. Takeaway: when returns are hyper-concentrated, a cap-weighted index often wins the sprint.

Process over performance-chasing: why choose DGI anyway?

DGI enables conviction (you know the businesses), control (sector caps, position sizing, sell rules), and a rising income glidepath that can anchor behavior in volatility.

If you don’t want the homework, an all-in-one ETF is perfectly valid—just commit and ignore the noise.

Who benefits from each approach:

Indexing: minimal time/interest, tolerance for volatility, desire for one-line simplicity.
DGI: investors who value lower volatility, business understanding, and income growth, and who will actually follow a process through full cycles.