Several investment instruments can bring in steady returns for both young and old.

@ AsiaOne Seeking the Holy Grail of passive income Several investment instruments can bring in steady returns for both young and old. -ST  Aaron Low Tue, Oct 23, 2012 The Straits Times It is the Holy Grail of investing for many of us: Build a big enough nest egg, generate passive income from it and retire comfortably on the steady stream of dividends. Well, it is not just the Holy Grail for retirees these days; now investors young and old want the reassurance of a steady income after the battering our portfolios have taken in recent years. The benchmark Straits Times Index may be up 17 per cent since the start of the year, but not before a roller-coaster ride over the past 12 months that left many of us battered and bruised. Analysts warn that the road ahead looks bumpy, with market movements still likely to be influenced by events and news rather than financial fundamentals. Mr Kelvin Tay, regional chief investment officer at UBS Wealth Management, says many investors want the safe haven of stable returns in an uncertain market. "With interest rates so low, much more attention is being paid to what kinds of steady returns they can get in a market like this," he says. Ms Jane Leung, head of Asia-Pacific at iShares, a subsidiary of asset management firm BlackRock, says that fixed income assets form a valuable core component of diversified portfolios. "They're favoured for moderate volatility, low correlations with other asset classes and stable cash flows." These days investors are spoilt for choice when it comes to investing in income assets. Bonds Probably the simplest of all income instruments is the humble bond. In its most basic form, the bond is essentially a loan made by a lender to a borrower. The borrower pays a lender an interest rate and promises to pay back the money to the lender in full, after an agreed period of time. Bonds can be issued by companies or governments. For instance, you can buy Singapore government bonds or trade in bonds issued by the Land Transport Authority and the Housing and Development Board on the Singapore Exchange (SGX). Mr Brian Tan, director of wealth management at financial advisory firm Financial Alliance, says that if people want safety and a steady income stream, look no further than a bond. The problem is that most bond issues typically come in tranches of $250,000, which put them out of reach for most retail investors. Similar instruments that are listed on the Singapore Exchange include securities such as perpetual securities and preference shares. They also pay a fixed coupon rate every year but differ from bonds in that they have different company rights from bondholders. Companies such as Hyflux and the local banks have issued preference shares through the SGX that pay between 3.9 per cent and 6 per cent a year. Fixed income funds A big disadvantage of buying individual bonds is that the investor is exposed to the risk of the company failing. If the firm goes bankrupt, the investor could potentially lose all the money invested in its bonds. Buying fixed income mutual funds can help get around this problem. These funds are typically managed by fund managers, who use their expertise to select a basket of bonds that generate yield. For instance, JP Morgan's Emerging Market Local Currency Debt Fund invests in debt instruments of various emerging market governments, such as Poland, Turkey and Brazil. Its annualised yield is 7.27 per cent. Mr Tan believes that for retail investors, getting into a fund is probably the best way of getting exposure to bonds. "Most investors don't have $100,000 or $250,000 sitting around to invest in the bonds of just one company," he says. "So funds are a good way of getting exposure." But mutual funds are not perfect. They do suffer from underperformance, depending on the skill of the manager. The other issue is that they charge relatively high management costs, ranging between 0.5 per cent and 1.5 per cent a year, depending on the asset class and the type of fund. A fairly recent type of fund, however, drastically lowers the costs of investing with the fund and mostly eliminates underperformance. Called exchange-traded funds (ETFs), they track indexes, both equities and fixed income, directly. This means that ETFs do not underperform the overall market, but neither do they overperform. Last year, iShares listed four new fixed income ETFs on the SGX which directly tap the Asian fixed income market. One is the iShares Barclays Capital USD Asia High Yield Bond Index. Its yield is 7.55 per cent and it charges a management fee of 0.5 per cent. It has returned 17.02 per cent since last December. Mr Gary Dugan, private bank Coutts' chief investment officer for Asia and the Middle East, says that ETFs should be seriously looked at as an alternative to pure bonds as they are both low-cost and easy to access. But Financial Alliance's Mr Tan notes that fixed income ETFs are subject to the vagaries of the market as they can be traded freely like stocks and shares. Asset management firm Franklin Templeton's director of retail sales for Singapore and South-east Asia, Mr William Tan, says that index products lose the ability to benefit from an additional source of returns through currency management. "In an actively managed fund, portfolio managers are more nimble and able to react to changing market conditions and they can adjust the duration of a bond fund as necessary," he says. High dividend stocks While income tends to be associated with bonds and fixed income instruments, experts also point out that high-quality dividend stocks can also form part of an income portfolio. Mr Dugan says that stocks should form part of any portfolio, even if it is income-focused. This is because some stocks pay higher dividends than bonds, while allowing for potential capital gains. One such hot type of stock is real estate investment trusts (Reits), which have soared roughly 30 per cent since the start of the year. Singapore Reits typically pay anywhere between 5 per cent and 8 per cent in distributions a year. Analysts are mixed on whether Reits are still good buys. Mr Dugan and Financial Alliance's Mr Tan believe they are fairly priced, given the rally over the past 10 months, and they are cautious about buying them. But UBS' Mr Tay says that one should buy Reits based on what they offer and not so much whether prices have risen. "It's really about quality rather than how much prices have run up by," he says. Outside of Reits, JP Morgan Asset Management's global strategist Geoff Lewis says that it is a good time to diversify into solid dividend-paying stocks. "We don't think it's too late in the day to get into the theme of income investing. In the current environment of low interest rates, high yields have thrived even while default rates remain low," he says. "We like firms that can pay a good starting dividend but with the potential to grow both their business and ability to pay good dividends." aaronl@sph.com.sg Get a copy of The Straits Times or go to straitstimes.com for more stories.

How to Choose Dividend Stocks - Morningstar Video

Four Signs of Dividend Safety (Morningstar)

Dividend Policy

Dividends and Total Returns

During the bull market, the pursuit of rapidly growing businesses
obscured the real nature of equity returns. But growth isn't all there
is to successful investing; it's just one piece of a larger puzzle.
Total return includes not only price appreciation, but income as well.


And what causes price appreciation? In strictly theoretical terms,
there's only one answer: anticipated dividends. Earnings are just a
proxy for dividend-paying power. And dividend potential is not solely
driven by growth of the underlying business--in fact, rapid growth in
certain capital-intensive businesses can actually be a drag on
dividend prospects.

Investors who focus only on sales or earnings growth--or even just
the appreciation of the stock price--stand to miss the big picture. In
fact, a company that isn't paying a healthy dividend may be setting
its shareholders up for an unfortunate fate.

In Jeremy Siegel's The Future for Investors, the market's top
professor analyzed the returns of the original S&P 500 companies
from the formation of the index in 1957 through the end of 2003.

What was the best-performing stock? Was it in color televisions
(remember Zenith)? Telecommunications (AT&T T)? Groundbreaking
pharmaceuticals (Syntex/Roche)? Surely, it must have been a
computer stock (IBM IBM)?

None of the above. The best of the best hails not from a hot, rapidly
growing industry, but instead from a field that was actually
surrendering customers the entire time: cigarette maker Philip
Morris, now known as Altria Group MO. Over Siegel's 46-year time
frame, Philip Morris posted total returns of an incredible 19.75% per
year.

What was the secret? Credit a one-two punch of high dividends and
profitable, moat-protected growth. Philip Morris made some
acquisitions over the years, which were generally successful--but the
overwhelming majority of its free cash flow was paid out as
dividends or used to repurchase shares. As Marlboro gained market
share and raised prices, Philip Morris grew the core business at a
decent (if uninspiring) rate over the years. But what if the company-
-listening to the fans of growth and the foes of taxes--attempted to
grow the entire business at 19.75% per year? At that rate it would
have subsumed the entire U.S. economy by now.

The lesson is that no business can grow faster than the economy
indefinitely, but that lack of growth doesn't cap investor returns.
Amazingly, by maximizing boring old dividends and share buybacks, a
low-growth business can turn out to be the highest total return
investment of all time. As Siegel makes abundantly clear, "growth
does not equal return." Only profitable growth--in businesses
protected by an economic moat--can do that.


http://news.morningstar.com/classroom2/course.asp?docId=145248&page=3&CN=COM

Corporate Finance - Dividend Payment Procedures

Dividend payouts follow a set procedure as follows:

Declaration date
Ex-dividend date
Holder-of-record date
Payment date

1.Declaration DateDeclaration dateis the announcement that the company's board of directors approved the payment of the dividend.

2.Ex-Dividend DateThe ex-dividend date is the date on which investors are cut off from receiving a dividend. If for example, an investor purchases a stock on the ex-dividend date, that investor will not receive the dividend. This date is two business days before the holder-of-record date. 

The ex-dividend date is important as, from this date and forward, new stockholders will not receive the dividend. As a result, the stock price of the company will be reflective of this. For example, on and after the ex-dividend date, a stock most likely trades at lower price, as the stock price is adjusted for the dividend that the new holder will not receive.

3. Holder-of-Record DateThe holder-of-record (owner-of-record) date is the date on which the stockholders who are to receive the dividend are recognized.

Look Out!
Remember that stock transactions typically settle in three business days.



Understanding the dates of the dividend payout process can be tricky. We clear up the confusion in the following article:

- Declaration, Ex-Dividend and Record Date Defined

4.Payment dateLast is the payment date, the date on which the actual dividend is paid out to the stockholders of record.

Example: dividend paymentSuppose Newco would like to pay a dividend to its shareholders. The company would proceed as follows:

1.On Jan 28, the company declares it will pay its regular dividend of $0.30 per share to holders of record on Feb 27, with payment on Mar 17.
2.The ex-dividend date for the dividend is Feb 23 (usually four days before of the holder-of-record date). On Feb 23 new buyers do not have a right to the dividend.
3.At the close of business on Feb 27, all holders of Newco's stock are recorded, and those holders will receive the dividend.
4.On Mar 17, the payment date, Newco mails the dividend checks to the holders of record.

Read more: http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/dividend-payment-procedures.asp#ixzz1yhItvcPN

Corporate Finance - Dividend Growth Rate and the Effect of Changing Dividend Policy

Signaling An Earning's Forecast Through Changes in Dividend PolicyMuch like a company can signal the state of its operations through its use of capital-financing projects, management can also signal its company's earnings forecast through changes in its dividend policy. 

Dividends are paid out when a company satisfies its internal needs for cash. If a company cuts its dividends, stockholders may become worried that the company is not generating enough earnings to satisfy its internal needs for cash as well as pay out its current dividend. A stock may decline in this instance. 

Suppose for example Newco decides to cuts its dividend to $0.25 per share from its initial value of $0.50 per share. How would this be perceived by investors?

Most likely the cut in dividend by Newco would be perceived negatively by investors. Investors would assume that the company is beginning to go through some tough times and the company is trying to preserve cash. This would indicate that the business may be slowing or earnings are not growing at the rate it once had. 

To learn more about dividends, please read: The Importance of Dividends

The Clientele Effect.A company's change in dividend policy may impact in the company's stock price given changes in the "clientele" interested in owning the company's stock. Depending on their personal tax situation, some stockholders may prefer capital gains over dividends and vice versa as capital gains are taxed at a lower rate than dividends. The clientele effect is simply different stockholders' preference on receiving dividends compared to capital gains.

For example, a stockholder in a high tax bracket may favor stocks with low dividend payouts compared to a stockholder in a low tax-bracket who may favor stocks with higher dividend payouts.

Read more: http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/dividend-growth-changing-dividend-policy-effects.asp#ixzz1yf633Zet

Corporate Finance - Dividend Theories

Dividend Irrelevance TheoryMuch like their work on the capital-structure irrelevance proposition, Modigliani and Miller also theorized that, with no taxes or bankruptcy costs, dividend policy is also irrelevant. This is known as the "dividend-irrelevance theory", indicating that there is no effect from dividends on a company's capital structure or stock price. 

MM's dividend-irrelevance theory says that investors can affect their return on a stock regardless of the stock's dividend. For example, suppose, from an investor's perspective, that a company's dividend is too big. That investor could then buy more stock with the dividend that is over the investor's expectations. Likewise, if, from an investor's perspective, a company's dividend is too small, an investor could sell some of the company's stock to replicate the cash flow he or she expected. As such, the dividend is irrelevant to investors, meaning investors care little about a company's dividend policy since they can simulate their own.

Bird-in-the-Hand TheoryThe bird-in-the-hand theory, however, states that dividends are relevant. Remember that total return (k) is equal to dividend yield plus capital gains. Myron Gordon and John Lintner (Gordon/Litner) took this equation and assumed that k would decrease as a company's payout increased. As such, as a company increases its payout ratio, investors become concerned that the company's future capital gains will dissipate since the retained earnings that the company reinvests into the business will be less. 

Gordon and Lintner argued that investors value dividends more than capital gains when making decisions related to stocks. The bird-in-the-hand may sound familiar as it is taken from an old saying: "a bird in the hand is worth two in the bush." In this theory "the bird in the hand' is referring to dividends and "the bush" is referring to capital gains.

Tax-Preference TheoryTaxes are important considerations for investors. Remember capital gains are taxed at a lower rate than dividends. As such, investors may prefer capital gains to dividends. This is known as the "tax Preference theory". 

Additionally, capital gains are not paid until an investment is actually sold. Investors can control when capital gains are realized, but, they can't control dividend payments, over which the related company has control. 

Capital gains are also not realized in an estate situation. For example, suppose an investor purchased a stock in a company 50 years ago. The investor held the stock until his or her death, when it is passed on to an heir. That heir does not have to pay taxes on that stock's appreciation. 

The Dividend-Irrelevance Theory and Company ValuationIn the determination of the value of a company, dividends are often used. However, MM's dividend-irrelevance theory indicates that there is no effect from dividends on a company's capital structure or stock price. 

MM's dividend-irrelevance theory says that investors can affect their return on a stock regardless of the stock's dividend. 

For example, suppose, from an investor's perspective, that a company's dividend is too big. That investor could then buy more stock with the dividend that is over his or her expectations. Likewise, if, from an investor's perspective, a company's dividend is too small, an investor could sell some of the company's stock to replicate the cash flow he or she expected. As such, the dividend is irrelevant to investors, meaning investors care little about a company's dividend policy since they can simulate their own. 

The Principal Conclusion for Dividend Policy

The dividend-irrelevance theory, recall, with no taxes or bankruptcy costs, assumes that a company's dividend policy is irrelevant. The dividend-irrelevance theory indicates that there is no effect from dividends on a company's capital structure or stock price. 

MM's dividend-irrelevance theory assumes that investors can affect their return on a stock regardless of the stock's dividend. As such, the dividend is irrelevant to an investor, meaning investors care little about a company's dividend policy when making their purchasing decision since they can simulate their own dividend policy.

How Any Shareholder Can Construct His or Her Own Dividend Policy.

Recall that the MM's dividend-irrelevance theory says that investors can affect their return on a stock regardless of the stock's dividend. As a result, a stockholder can construct his or her own dividend policy. 

• Suppose, from an investor's perspective, that a company's dividend is too big. That investor could then buy more stock with the dividend that is over the investor's expectations.
• Likewise, if, from an investor's perspective, a company's dividend is too small, an investor can sell some of the company's stock to replicate the cash flow the investor expected.

As such, the dividend is irrelevant to an investor, meaning investors care little about a company's dividend policy since they can simulate their own.

Read more: http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/dividend-theories.asp#ixzz1yf1Ugmp6

The Impact of Reinvesting Dividends

The chart shows the value over time of a $100 investment made in the S&P 500 in 1925 with dividends reinvested vs. dividends not reinvested.  It appears in the book pretty much as shown below.

It makes the difference between reinvesting dividends (the top line) and not reinvesting dividends (the bottom line) look pretty impresive, but it also makes it look like there isn't much difference until 50 years or so after the initial investment.  That's because the vertical scale is linear.

A more typical way to show compound growth such as this would be to use a semi-log chart, as shown next.  (A somewhat less serious problem with the chart above is that the horizontal scale distorts the amount of time at the beginning and end of the data.)

1. All that's really going on here is the difference between about 10.5% compound annualized growth (dividends reinvested, on the top line) and 5.7% compound annualized growth (dividends not reinvested, on the bottom line). 
 
2. The semi-log chart (with time properly represented on the horizontal scale) makes it clear that there is constant percentage growth in the value of the investment regardless of whether or not dividends are reinvested.  That's because the lines are straight (remember that straight lines on the semi-log chart indicate consistent compound growth).         
3. It also shows more clearly that reinvestment of dividends 

• affects the investment value right from the beginning and
  •  
• provides a consistently increasing benefit as more and more time passes.

Why should I invest?

Why should I invest?


One of the most compelling reasons for you to invest is the prospect of not having to work your entire life! Bottom line, there are only two ways to make money: by working and/or by having your assets work for you. 

If you keep your money in your back pocket instead of investing it, your money doesn't work for you and you will never have more money than what you save. By investing your money, you are getting your money to generate more money by earning interest on what you put away or by buying and selling assets that increase in value. 

It really doesn't matter how you do it. Whether you invest in stocks, bonds, mutual funds, options and futures, precious metals, real estate, your own small business, or any combination thereof, the objective is the same: to make investments that will generate more cash for you in the future. As they say, "Money isn't everything, but happiness alone can't keep out the rain." 

Whether your goal is to send your kids to college or to retire on a yacht in the Mediterranean, investing is essential to getting you where you want to be. 

Read more: http://www.investopedia.com/ask/answers/153.asp?ad=feat_invest101#ixzz1xvOolCKE


How does a person gain from an investment?
There are two main ways in which a person gains from an investment. The first is by capital gains, the difference between the purchase price and the sale price of an investment. The second is investment income, the money paid to the holder of the investment by the issuer of the investment. Depending on the type of investment, the source or mix of the total gain will differ. And in some cases, these different sources are taxed at different rates, so it is important to be aware of each. 

All stocks can generate a capital gain as the price of a stock is constantly changing in the market. This allows you to potentially sell for a higher price than what you bought the stock for originally. Some stocks also generate income gain through the payment of dividends paid out by a company from its earnings. For example, say that you bought a stock for $10 and the company pays off an annual dividend of $.50, and after two years of holding the stock you sell it for $15. Your capital gain is 50% ($5/$10) and your income gain is 10% ($1/$10) for a total gain of 60% ($6/$10).

Read more: http://www.investopedia.com/ask/answers/06/investmentgains.asp?ad=feat_invest101#ixzz1xvSiTT3n

Dividend Decision

Dividend Decisions

View more PowerPoint from Dayasagar S

Dividend Policy - What is it?

Dividend policy

View more PowerPoint from saravanan

Dividend Policy - Don't Piss Off your Shareholders

View more PowerPoint from Amit Dodwani

Should Berkshire Pay a Dividend?

Buffett authors weigh in on the possibility and wisdom of Berkshire Hathaway returning capital to shareholders.

http://www.morningstar.com/cover/videocenter.aspx?id=547398

Dividend Growth Investing for Beginners

Dividend Growth Investing for Beginners

Written by Tyler

When you, as an investor, are looking at income earning opportunities, you should definitely mull over the option of dividend growth investing. Dividends allow you to enjoy your share in the profit of a company on a quarterly basis. Dividends are the total amount of money that a particular company pays out to its shareholders. The amount of dividend depends upon the performance of the company and dividend growth requires that a company have a sustainable growth model. Remember, however, that dividend payments are not set in stone. It entirely depends upon the prerogative of the company to offer dividends to its shareholders, or not.

Dividend growth investing is an excellent strategy that you can use to maximize your cash income generated from your equity investments. In fact, if you can put in place a smart and consistent dividend growth strategy, you can replace the income from your regular job. Or, if you are in debt, you can utilize the dividend proceeds to become debt free.

However, to design a successful dividend growth investing strategy, you must have good knowledge of the dividend growth companies on the market. To find dividend growth stocks, you can check out the historical dividend performance of various companies on the Dividend Achievers andDividend Aristocrats lists.

Of course, past good performance does not ensure robust future performance. Rather, you have to select stocks which are fundamentally strong and which are undervalued at the current time to frame out a successful dividend investing strategy. Here are few tips so that you can find out successful dividend investing strategy.

Dividends are not rights but privileges

It is to be kept in mind that dividends are not guaranteed, rather they are more like privileges enjoyed by the shareholders. It depends entirely upon the discretion of the board of directors of a company to issue dividends to the shareholders, given the condition that the company has scripted a solid financial performance. Paying dividends to the shareholders shows the financial strength of a company and it also attracts income-minded investors to the company’s fold. Again, when a company cuts back the dividend amount, it shows that the company is not doing well.

Be skeptical about very high dividend yields

Do not expect to earn huge money with super-yield dividends. In fact as a general rule, any dividend yield which is over two and a half times the broader market, should be viewed skeptically. It has been seen time and again that many stocks fared exceedingly well and fetched super returns and dividends to the shareholders during the bull phase but plummeted appreciably during the bear phase, offering no dividends at all to the shareholders. This has been the case with many real estate investment trust (REITs), with their stock prices receiving a serious drubbing during the bear phase.

Analyze the cash flow statement

To find a high-dividend stock, it is important to analyze the cash-flow statement of a company. Check whether the company has the required cash to pay out the dividends or it is resorting to debt or selling stock to finance the dividend payment. If the company is selling stocks or resorting to debt to pay out the dividends to the shareholders, it can’t be a sustainable.

Follow the above mentioned tips to find out successful dividend investing strategy and to earn a lot of money.

This guest post is written by I Davis. She is the Community Member ofhttp://www.creditmagic.org/ and has been contributing her suggestions to the Community. She is quite knowledgeable of various financial matters like tracking down identity theft, money investment tips, credit card debt, credit card fraud and has a unique approach to analyze them. Check out her articles on various financial topics with special emphasis on ‘Credit’ related issues.

http://dividendmoney.com/dividend-growth-investing-for-beginners/

What is a dividend yield?

Calculating Dividends

For example:


PBB
Par Value $1
Tax rate 25%


Company declared dividends per share of:


2nd Interim Franked Cash Dividend 25% Less Tax & 8% Single Tier Cash Dividend




What is the amount of dividend per share you should receive?


Answer:


[(25% x Par Value) x (1-Tax rate)] + 8% x Par Value
= (25% x $1) x (1 - 25%)] + 8% x $ 1
= ($ 0.25 x 75%) + $ 0.08
= $ 0.1875 + $ 0.08
= $ 0.2675


Therefore, you should receive $ 267.50 per 1000 shares (= $ 0.2675 x 1000 ).

The Great Investing Wisdom Wall Street Forgot

By Matt Koppenheffer
October 22, 2010

When you hear the phrase "value investing," Warren Buffett most likely comes to mind. But hopefully, you also think of Ben Graham -- the father of value investing. Considering that some of the world's most successful investors carry Graham's flag, there's good reason for Fools like us to be obsessed with the concept.

Graham had a plan
But with thousands of stocks out there, how do we separate the value plays from the throwaways? In The Intelligent Investor, Graham lays out a basic framework for winnowing through the sea of stocks to get to the good stuff.

1. Financial stability. Graham wanted investors to be sure they weren't investing in castles made of sand, so he put requirements on prospective investments' balance sheet strength and record of past earnings.

2. Growth. You wouldn't have caught Graham dead chasing the high-flying stocks of the day, but he did want to see that over the long haul, earnings were at least moving in the right direction.

3. Valuation. This, of course, is what Graham is probably best known for -- requiring that a stock be selling for less than it's really worth. While a simple valuation ratio can't tell you the whole story, it may signal a stock that's definitely not a deal.

4. A dividend.

Did you catch that last part?
That wasn't a typo; whether you are a defensive or enterprising investor, Graham thought it necessary that you stick to companies that pay a dividend.

Dividends have largely been relegated to a dark corner on Wall Street, but Graham didn't equivocate. The safest stocks would have "uninterrupted payments for at least the past 20 years," but every investment should have "some current dividend."

When you think about it, this makes perfect sense. Graham's whole approach to investing in stocks revolves around thinking and acting like a businessperson, and treating your stock holdings as ownership shares in a business, not gambling slips. When businesspeople buy a piece of a business, they expect to know how much profit will be sent back their way.


http://www.fool.com/investing/general/2010/10/22/the-great-investing-wisdom-wall-street-forgot.aspx

Rights Issue increases Shareholder Equity and dilutes NAV per share and Dividend per share.

Earnings, Dividends and Payout Ratio: Earnings don’t grow at a constant rate. Dividends are more stable than earnings. Payout ratio varies over time.

Dividends are more stable than earnings, so the payout ratio certainly varies over time. Additionally, corporations have shown less willingness to pay dividends, and investors have shown less inclination to demand dividends, to the payout ratio today is roughly half of what it was in the early 60s.

Earnings don’t grow at a constant rate, either. Over the last 53 years, earnings have grown at a 6.7% rate, but that has included times of shrinkage, and boom times as well.




http://alephblog.com/2007/07/09/the-fed-model/

The Importance of Dividends

Although many investors consider the current 2% yield offered by the S&P 500 to be trivial, it would be a huge mistake to dismiss dividends. In fact, a look back at statistical data over the past 75 years shows that nearly half of the market's total returns have come in the form of dividends. Between 1926 and 2004, dividends represented approximately 42% of the total return delivered by the S&P 500. Over that same span, it's been calculated that $1,000 invested in the S&P would have grown to $2.3 million if reinvested dividends are included, but only $90,000 without the dividends.

If history is any guide, then dividend-paying stocks should also perform better than their non-paying counterparts over the long haul. Contrary to conventional wisdom, studies have shown that dividend payers handily outperformed non-payers from 1970 to 2000. At the same time, those same dividend-paying stocks experienced far less volatility. They could also be counted on to deliver stronger relative returns in difficult market environments. What's more, according to the latest data from Standard & Poor's, dividend-payers are still outpacing non-payers in today’s volatile marketplace.




An example of looking at dividend (above graph)
Dividend growth has been steady but not spectacular.

http://web.streetauthority.com/cmnts/pt/2006/02-15.asp