Investing in equities rest on the simple assumption that as you put your capital to work, you expect to obtain a return on your money in the future. The two main ways to do that are through dividends and through a sale at a (hopefully) higher price, which have occurred because the stock has either earned more money or there is an expectation to earn more money in the future. Companies that pay dividends, and particularly those that pay increasing ones, have been a great way to obtain good ROIs. In the chart below, you can see that on a 20 year rolling basis, since 1927, the top 20% dividend paying companies have, for the most part, outperformed the ones that do not pay dividends at all. Since the 2000’s, however, no dividend companies have massively outperformed. Probably caused for a bias towards growth over the last couple of decades, the line on the chart has crossed to the other side with a strength not seen in almost 100 years. Is that sustainable or should we see a reversal to the mean and a dividend paying reign come back?
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