The Dividend Difference

Here is another example of the difference that dividends make when searching for the best total return on investments.

In 1993, SPDRs(AMEX: SPY) was launched as an exchange-traded fund that tracked the S&P 500. In the 13 years since then, an investment in SPDRs would have nearly quadrupled your money. That’s not bad.

But not all of that return came from a rise in the stocks of the S&P 500. No, quite a bit of it was the product of boring old dividends. In fact, on a $1,000 investment that turned into $3,960, $822 came from dividends. That’s nearly 30% of the total spoils.

And 30% is not an aberration. It’s actually low. Historically, a full 40% of the market’s return was from dividends. So as easy as it may be to ignore those payments in the short term when doing stock research, know that they add up over time to big returns.

It gets better
Of course, hardly anyone invests simply for the dividends. Yet literally hundreds of companies are known for delivering great payments, year after year. If you actively seek them out, you can see a tremendous difference between the money you simply get from capital gains and your total return, which includes that extra cash.

You can read more on this subject from this article at Motley Fool.

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