It is often claimed that dividend stocks provide downside protection. For example, the article, now that I've looked at it, quotes a Morningstar portfolio analyst as saying "they tend to hold up a bit better than average during times of market turbulence."
I'm going to ask a simple question: how did they perform compared to an S&P 500 index fund and a total market index fund during 2020. I'm going to use PortfolioVisualizer's calculations of maximum drawdown.
[Added] For example, here is my source for FDVV, QDF, SDY, and VFIAX
Ignoring duplicates (Mutual fund and ETF pairs), here are the 2020 drawdowns for Morningstar's thirteen "Top Dividend-Stock Funds," plus an S&P 500 fund; all adjective such as "better" refer to "drawdown during 2020."
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FDVV -28.35% Fidelity High Dividend ETF
QDF -25.21% FlexShares Quality Dividend ETF
SDY -25.08% SPDR S&P Dividend ETF
MADVX -24.33% BlackRock Equity Dividend Instl
LVHD -24.32% Legg Mason Low Volatility High Div ETF
VHYAX -23.94% Vanguard High Dividend Yield Index Adm
DLN -23.03% WisdomTree US LargeCap Dividend ETF
SOPYX -21.85% ClearBridge Dividend Strategy I
SCHD -21.54% Schwab US Dividend Equity ETF
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VTSAX -20.87% Vanguard Total Stock Market Index Fund Admiral
VFIAX -19.61% Vanguard 500 Index Admiral
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LBSAX -19.45% Columbia Dividend Income A
PRDGX -18.79% T. Rowe Price Dividend Growth
VDIGX -17.48% Vanguard Dividend Growth Inv
VDADX -17.24% Vanguard Dividend Appreciation Index Adm
2) Nine of the dividend funds plunged deeper than Total Market and S&P 500. Only four of them did better.
3) In hindsight, the very best of them plunged -17.24%, compared to -19.61% for the S&P 500 fund. That is, the best of them fell 88% of the distance that the stock market fell. So even the four of them did not provide much "downside protection."
What I find interesting is something I've seen before in articles on dividend stocks, is that an article will make a "downside protection" claim--in this case a very guarded one, "they tend to hold up a bit better than average"--even when the statement did not hold for the actual funds named in the article.