1
$\begingroup$

Several sources suggest 70% or so of Stock Market (S&P 500) gains are from Dividend payments (according to several sources, below) But dividend payments average for the S&P 500 have been about 1.9 to 3% for the last 30 years. But total return is around 9.5%. That suggests that Dividends are about 1/3 of gains.

Background info

Kevin O'leary (of Shark Tank fame) claims that 70% of stock market gains are from Dividends (in this https://youtu.be/IJXt0GX6QjM?t=95) The article from Seeking Alpha supports this.

BUT... the historic return on the S&P500 is about 9%. And Dividends tend to be about 2% (average for the S&P500). That would be 2/9th or <20% of S&P500 gains.

I'm trying to verify that.

enter image description here

During the 90 years between 1871 and 1960, the S&P 500 annual dividend yield never fell below 3%. In fact, annual dividends reached above 5% during 45 separate years over the period. Of the 30 years after 1960, only five saw yields below 3%. The sharp change in S&P 500 dividend yield traces back to the early to mid-1990s. For example, the average dividend yield between 1970 and 1990 was 4.03%. It declined to 1.90% between 1991 and 2007. After a brief climb to 3.11% during the peak of the Great Recession of 2008, the annual S&P 500 dividend yield averaged just 1.97% between 2009 and 2019.

Improve this question
$\endgroup$
4
  • 3
    $\begingroup$ How do you plan to handle the re-investment of dividends in your calculation? Probably that is where most of the discrepancy between your 2 estimates comes from. $\endgroup$
    – nbbo2
    Mar 31, 2021 at 15:56
  • 2
    $\begingroup$ I would start by looking at the high-level differences between the S&P 500 Total Return, S&P 500 with adjusted closes, and S&P 500 with unadjusted closes. $\endgroup$
    – amdopt
    Mar 31, 2021 at 16:36
  • 2
    $\begingroup$ Imagine 3 people: Mr. A, B, C invested 1000 USD in SP500 X years ago. Mr. A throws away the dividends when he receives them (or they are seized by the govt through a 100% dividend tax). Mr. B puts the dividends in a lockbox where they earn no return, today he has the original (appreciated) shares that A also has, plus a lockbox full of cash. Finally Mr. C reinvests the dividends in additional shares (which rise in value and even generate additional divs), he earns the Total Return and is wealthier at the end than B or A. Usual comparision is between A and C's ending wealth. $\endgroup$
    – nbbo2
    Mar 31, 2021 at 18:17
  • 1
    $\begingroup$ You could try the Shiller data - econ.yale.edu/~shiller/data.htm $\endgroup$
    – user42108
    Mar 31, 2021 at 18:53

0

Reset to default

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Browse other questions tagged or ask your own question.