The Long-Term Power of Dividends

The Federal Reserve Bank of St. Louis is a great resource for economic data. They just added some indexes for the Wilshire 5000 which is the broadest stock market index of all.

I took the Wilshire 5000 Total Return index date, which includes dividends, and divided it by the normal Wilshire 5000. What’s left is the return generated solely by dividends. The chart is below. (To make it clearer, I set the starting number to 100.)

I think too many investors ignore how important dividends are to total returns. After a while, those dividend checks really add up.

Since the beginning of 1980, the Wilshire 5000 has gained more than 1,150%, but the total return index has gained over 2,750%.

The return generated by dividends is 126.02%. That’s a tiny amount each day but it’s one you should never ignore.

Posted by Eddy Elfenbein on February 8th, 2011 at 11:07 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.