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Opinion

Dividends matter

Dividends matter
March 26, 2015
Dividends matter

If you'd put £1,000 into the All-Share index in January 1986 and spent the dividends, you'd now have just under £2,000, adjusting for inflation but ignoring tax. If, however, you had reinvested the dividends you would now have £5,787. Dividends, therefore, have accounted for four-fifths of the total returns on equities since the mid-80s.

Even if you'd bought the index at its low-point in February 2009 and so enjoyed a big price rise, dividends would still have contributed a lot to returns. A £1,000 investment in the All-Share index back then would have grown to £1,905 now with dividends reinvested but to £1,553 if they had been spent. Even in a period of unusually big price gains, therefore, dividends still have contributed almost two-fifths of total returns.

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