The Influence of Dividends

Borrowed the chart below from this article. The graph suggests the dominant influence of dividends on stock performance over time.

Since 1871, dividends account for more than half the nominal gains in the S&P 500 Index. Today many folks shun dividends in search of capital gains. Over time, however, capital gains have accounted for less than 2% of the 8.8% annual return.

Parenthetically, note that there was no inflation prior to the mid 1910's. The Federal Reserve Act was passed in 1913.

Before running out and loading up on dividend paying stocks right here, keep in mind that average dividend yields rest at the low end of historical benchmarks. Current yield on the SPX is about 2%. Historical buying opportunities in stocks have typically corresponded to aggregate yields in the 5-6% range or higher.

While there may be special situations here or there that are paying outsized dividends, I'm trying to remain patient for much higher dividend yields in aggregate before 'buying the list.'

position in SPX