Reinvested Dividends Comprised 41% of the Stock Market’s Total Returns

Every once in a while I run across some research that speaks to the power of dividend reinvesting. I have a whole series of posts, available in my sidebar about what I call The Dividend Key. I recently saw a document from the folks over at Legg Mason (pdf) that provide us with more research on the topic. In this article, they state that dividends have been an important component of total return – to the tune of 41%.

Below is a chart they presented, which shows the dividend contribution to total return:

Click to Enlarge

The interesting thing is that from 2000 – 2006 the market showed a negative market return, yet with reinvested dividends the total return ended up in positive territory. I think that is pretty good evidence that dividend reinvestment is a very positive action to take within a portfolio.

• Day 2: The Dividend Key – Real Return Comes from Dividends
• Day 1: The Dividend Key – Reinvested Dividends
• The Dividend Guy Investment Process Part 3: My Asset Allocation
• Day 3: The Dividend Key – High Dividend Stocks
• The Dividend Guy’s August Dividend Portfolio Review