Profits are a matter of opinion, dividends are a matter of fact

From “Why Dividends Matter.” by Guinness Atkinson Funds

… fund managers Dr. Ian Mortimer and Matthew Page provide even more reasons why dividends are crucial to investors:

• Market outperformance – Between 1972 and 2010, dividend growers returned 9.6% on average compared to the S&P 500’s 7.3%. Non-payers underperformed, returning 7.4%.

• Boosting total returns – If you invested $100 in the S&P 500 in 1940, you’d end up with $12,000 in 2011 from price appreciation alone. But if you had reinvested dividends, you’d have $174,000.

• Growth in bear markets – In periods of low economic growth, dividends have accounted for 75% of total returns.

• Low volatility – During recessions, earnings per share of the S&P 500 can drop as much as 42%. But dividends per share only drop 8% on average. This provides investors with a “cushion” during recessions.

• Inflation hedging – Dividend income usually grows in line with or faster than the rate of inflation.”


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