But make no mistake: There is no lock-step relationship between Fed policy and investor returns from dividend paying stocks.
From January 1926 to December 2007, the monthly return from dividends exceeded the monthly return from price appreciation in two of every five months.
In 27, or 16%, of these companies stockholders realized negative rates of return from dividends plus capital losses.
But now is a good time to really implement that since you can get a good current return from dividends.
True, looking only at Dow 40,000 ignores the return from dividends and their reinvestment, with the total return on the index over the last ninety years standing at a much higher 9.8% per annum.
This will sweeten the net returns from such dividends, making them more attractive for such accounts.
In all 3 scenarios, your portfolio delivered the 10% expected return, either from dividends (as in Scenario #1), or from stock price appreciation (as in Scenario #2), or from a combination of both dividends and stock price appreciation (as in Scenario #3).
For investors who want to stick with stocks, Ned Notzon, a comanager of several T. Rowe Price funds, suggests equity income funds, which invest in stocks where a high proportion of the total return comes from dividends, rather than capital appreciation.
The Prime's returns came mainly from dividends, while those of the Scores were generated solely by gains in the underlying stock -- although if the stock did not rise, the Score unit was worthless.
Total return includes earnings from dividends as well as changes in the value of the stock.
The excess returns from equities come from dividend growth.
