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.