This study shows that dividends have played a significant role in the returns that investors have achieved in the last 50 years.
Since 1960, 84% of the total return on the S&P 500 index can be attributed to reinvested dividends and the capitalization power of income.
Between 1930 and 2021, the contribution of dividend yields to the total returns of the S&P 500 Index stood at 40%.
The performance of the S&P 500 shows how much the contribution of dividends has varied from decade to decade.
Dividends played an important role in terms of their contribution to total returns during the 1940s, 1960s and 1970s, decades in which total returns were less than 10%.
In contrast, dividends played a smaller role during the 1950s, 1980s, 1990s and 2010s, when the average annual total returns for the decade exceeded double digits.
Median dividend yield for the whole period was 2.90%, with yields peaking in the 1980s and falling in the 2000s.
A study by Wellington Management found that stocks offering the highest level of dividends have not performed as high as those that pay high, but not the highest levels of dividends.
Stocks in the second quintile outscored the S&P 500 index in seven of the 10 time periods (1930-2021), or 77.8% of the time, while first- and third-quintile stocks tied for second, beating the index 66.7% of the time.
Stocks in the fourth and fifth quintile fell behind by a significant margin.
A study by Ned Davis Research found that companies that initiated or increased dividends recorded the highest returns compared to other stocks since 1973 – and with significantly less volatility.
The trends that bode well for dividend paying stocks are historically high levels of liquidity in companies, historically low bond yields, and demand for income by Baby Boomers throughout their retirement.
In the U.S., since 2008, institutional investors have increased their capital invested in dividend stock investment funds by nearly $88 billion, while individual investors have disinvested nearly $99 billion at the same time.