While Marilyn Monroe clearly states that ‘Diamonds are a girl’s best friend’, John Boyle in his highly praised book ‘The Little Book of Common Sense Investing’ makes clear that ‘Dividends are the Investors best Friend’. He details the importance of investors focusing on dividends rather than volatility of stock price fluctuations.

A dividend is a cash distribution by a company to its shareholders and is pivotal to the long-term returns generated by the stock market. In fact, when we look at the figures, we can see firsthand the impact dividends make to stock market returns (2):

Without Dividends: An initial investment of $10,000 in the S&P 500 on January 1 1926 would have grown to more than $1.7 million as 2017 began.

With Dividends Reinvested: The initial investment of $10,000 in the S&P 500 on January 1926 would have grown to $59.1 million as 2017 began.

With dividends reinvested they are able to be put to good use by the long term benefits of compounding interest. Further reflected in the above figures is the relative stability of corporate dividend payouts that over this 90 year time span have been impacted by only three significant drops:

1. A 55% decline during the first years of the Great Depression 1929 – 1933
2. A 36% decline in the Depression’s aftermath in 1938
3. A 21% decline during the global financial crisis of 2008-2009

And while the 500 Index fell from $28.39 in 2008 to $22.41 in 2009, it reached a new high of $45.70 in 2016, 60% above the earlier peak of 2008!(2)

When providing advice to both new and existing clients over the last 34 years, the above figures continue to inform and reinforce the Income Solutions proven investment philosophy.
(1) https://www.investopedia.com/articles/fundamental/03/102903.asp
(2) The Little Book of Common Sense Investing, John C Bogle