Investing is all about the dividends. Most of the long-term investment return comes from dividends. Dividends provide cash income. Increases in dividends drive long-term share price increases. Decreases in dividends result in long-term share price falls.
Most investors want their investments to grow so they can finance their desired lifestyle. Which line on the chart would you like your investments to follow?
Did you choose the solid line? It looks a lot more successful than the dotted line.
The graph shows the results of two different investing strategies on the Australian stock market, from June 2000 to June 2013:
- The solid line shows the value of an investment in the dividend-paying companies of the ASX200 index. The portfolio of the dividend paying companies tripled in value over the 13 years.
- The dotted line shows the result of investing in ASX200 companies which did not pay dividends. The portfolio of non-dividend companies fell 30% over the same period.
This research demonstrated the importance of dividends for successful investing, and led to the creation of the King Indices.
The Dividend Man will provide information from ongoing research, as well as updates on dividends being paid by Australian companies.