In 2011, the dividend growth strategy ruled the stock market, as conservative investors were seeking yield and relative safety. The S&P 500 was mostly flat for the year, while focused exchange traded funds such as the Vanguard Dividend Growth Strategy (NYSEArca: VIG) gained nearly 10%. Can the rally sustain into 2012?

“There’s a real possibility that dividend stocks could trail this year, but long term, dividends have accounted for nearly half of the S&P 500 investors’ total return,” Jack Ablin, chief investment officer of Harris Private Bank, said on Financial Post. [Dividend ETF Can Anchor a Portfolio]

In 2012, there is more potential that capital appreciation could dominate big stock indices if the economy can regain growth. Much of this depends on the fate of the Eurozone and how the rest of the globe can deal with the overseas debt crisis, reports John Wasik for Financial Post. [U.S. ETFs See more Inflows]

In 2011, dividends accounted for about 2% of the S&P 500’s total return. Investors flocked to dividend stocks and ETFs because of their income stream and possible growth potential. The stocks that paid the best dividends last year were the companies that were cash-rich and those that could hold up in times of economic malaise, such as utility companies and telecom. Those sectors may not be able to follow up as strongly in 2012.

Sector rotation is another factor to consider. Most institutional investors favor different industries or sectors from one year to another. In a new growth environment, a hot sector could be anywhere such as materials, technology or consumer staples. [Can Dividend ETFs Outperform Again After Stellar 2011?]