Dividend makes up 45% of average annual total returns
If we take the full time frame of 1871 to 2009, the difference with or without dividends is startling. Not taking into consideration dividends re-invested grossly undervalues stock performance.
In Credit Suisse Global Investment Returns Yearbook 2011, it again illustrates almost > 40% of total returns are directly impacted by dividends. The outperformance becomes more steep as time passes.
Dividend stocks and Dividend growth stocks outperforms others (1973-2010)
In a study of annual returns from 1973 to 2010 of equal weighted portfolios of the S&P500 stocks broken down into
- Stocks that grow dividends
- Stocks that pay dividends but do not grow their dividends
- Stocks that pays no dividends
- Stocks that cut their dividends
The outperformance of stocks paying and not paying dividends show a big difference, big enough to offset the tax disadvantages of dividends (most country levied taxes on dividends)
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