Podcast Episode 22 – How Dividends Increased A Portfolio by $100,000 Over 15 Years

Dividends historically have accounted for nearly 40% of a portfolio value’s growth.

Even with the low dividend yields today, dividends still play a HUGE role in growing the net worth for investors.

In this video I show you exactly how dividends improved the performance of the Vanguard S&P 500 fund (VFINX) by 50% from 2003 until March 2018.

I compare the PRICE ONLY performance of the VFINX to the price + dividend performance.

Price only performance increased an initial $100k investment to $297k. Yet, dividend reinvestment increased that $100k to $406k at then end of those 15 years time.

Don’t forget this is in a low dividend yield environment too. In fact, after 2008 many of the higher dividend paying companies, banks come to mind, STOPPED even paying dividends.

Yet, the numbers speak for themselves; Dividends added 50% more growth than just price.

The interesting thing is that if you look at index annuities, they don’t use dividends in the returns investors get! Add on the hefty fees and it’s next to impossible for an investor to get anywhere near a market like return. Just can’t happen.

No dividends PLUS high fees = VAST under performance. Which is why I recommend staying away from these types of “investments”.

If you want “safety” there are better alternatives.

If you want “growth” there are better alternatives.

If you want a combination of some safety and some growth there are better alternatives. In future video’s I’ll discuss the alternatives.

But for now, just watch this video and allow me to show you EXACTLY how dividends are just so important to your financial well-being.

I’ve been a big proponent of dividends since I first read Jeremy Siegal’s book Stocks For The Long Run

when it was first published in 1994. Dividends have represented about 40% of total US stock returns historically.

So, how excited was I to find my own notes from October 2002 in the back of my autographed copy of John Bogle’s “Common Sense On Mutual Funds”, in which I stated my thesis that for the markets to grow there needed to be tax reform of dividends.

Back then a 5 year CD was paying 4.5%. Bonds had just had a 3 year run averaging over 10%. We were in the midst of one of the greatest sell-offs of all time and yet prices still weren’t cheap and companies still weren’t hugely profitable.

My argument was the double taxation of dividends was depressing share prices and that if Congress didn’t change it was going to be hard to justify stock growth over 6-7%. (2% dividends, 4-5% earnings growth.)

Take a step back in time with me and listen to what I wrote back then.

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