Dividends are just the icing on the cake in good stock market years, but they cannot save you in bad ones: Are dividends really so unimportant for investment performance? An analysis by Pascal Kielkopf comes to a different conclusion.
HQ Trust’s capital markets analyst has split the annual returns of the MSCI ACWI equity index into two parts: Pascal Kielkopf determined the annual share of price changes and dividends in the annual performance of the global equity barometer for the period from 1970 to September 2024. He then calculated the performance contribution of dividends.
- “Over the past 55 years, dividends have contributed around a quarter of investors’ investment success”.
- “Since 1969, dividends have contributed an average of 23% to the performance of the MSCI ACWI.”
- “The tech rally has diminished the importance of dividends less than many might think: Over the past decade, the dividend component has averaged 19.5%.”
- “Dividends have managed to turn investment returns positive four times: 1976, 1978, 1992 and 2007.”
- “In these four years, the performance portion of the payout averaged 76.5%.”
What investors can learn:
- “Investors should not underestimate dividends. Although the focus is often on capital gains, dividends also make a significant contribution to the long-term performance of equity indices.”
- “In turbulent markets, dividends can provide more stability: there have been years when dividends have largely or even completely offset losses from price falls.”
- “To take full advantage of dividends, a long-term investment strategy with continuous reinvestment of dividends is advantageous.”
- “Due to the compounding effect, dividends can grow into a substantial asset over time.”
Dividends
