70% of All Stock Market Gains Come From This

Are you getting paid?
For much of the 20th century, investors bought stocks for one reason:
dividends. In fact, before the SEC act of 1934 was passed, dividends
were THE ONLY reason you'd buy a stock.
Prior to this, there was no such thing as accounting standards or SEC
filings AT ALL. You literally had no idea if a company even MADE
money. So the only reason you'd even consider putting your money into
the stock market was because a company paid out a dividend (you got
some kind of return).
Dividend or income investing continued to dominate the investment
landscape after the SEC Act of 1934 was implemented. In fact, many of
the most popular valuation methods used for valuing stocks involved
dividends (stock dividends vs. yield on Treasuries, Price to Dividend,
etc.). And it wasn't until investors became "growth" obsessed in the
last 30 years (thanks to the mega-bull market from 1982-2001) that
Earnings superseded Dividends in terms of importance.
Which is a HUGE mistake.
It's common knowledge that stocks return an average of 6% a year (at
least going back to 1900). However, Elroy Dimson, Paul Marsh and Mike
Staunton from the London Business School recently revealed that when
you remove dividends, stocks' gains drop to a mere 1.7% a year (even
lower than the return from long-term Treasury bonds over the same
period).
Put another way, dividends account for 70% of the average US stock
returns since 1900. When you remove dividends, stocks actually offer
LESS reward and MORE risk than bonds. If you'd invested $1 in stocks
in 1900, you'd have made $582 with reinvested dividends adjusted for
inflation vs. a mere $6 from price appreciation.
Like I said before, dividends are and should be one of the most
important components of any investment strategy. The benefits are
numerous (as if the fact they've produced MOST stock market gains over
the last 100 years isn't reason enough).
For starters, collecting a dividend insures you get paid for investing
in a company. The world of investing today is largely one of
uncertainty. Dividends offer a degree of certainty in the sense that
you're definitely getting something for putting your money to work.
Dividends also act as a cushion against market drops. If a company's
share price falls 10% and pays out 5% in dividends, you've actually
only wiped out 5% of your capital instead of the full 10% you'd have
lost WITHOUT a dividend.
Dividends also limit the amount of stupidity a company's CEO or
management can achieve when it comes to mergers and acquisitions. It's
no coincidence that worldwide merger and acquisition (M&A) volume
hit a record $4.8 trillion dollars the same year (2007) that cash pay-
outs to shareholders as a percentage of profits hit an all-time low of
31% (companies were spending their earnings on dumb deals instead of
increasing shareholder returns).
Dividends insure that at least SOME of the profits go to shareholders.
Ideally a company should have some kind of legal requirement to
distribute profits (like REITs, or MLPs) thus insuring its management
won't blow profits on dumb deals. Which means more money going into
your account, and less money going to Wall Street to broker deals that
offer no benefit to anyone other than investment bankers.
Make no mistake, dividends are crucial in any investment environment
(especially today's volatile market). I'll detail the most critical
issue currently facing dividend investing in tomorrow's essay. Make
sure you check in as this information could very well SAVE your
portfolio from unpleasant surprises when it comes to collecting cash
payouts in 2009.
I've put together a FREE Special Report on one of the biggest dividend
payouts in the market today. Run by one of the richest men in the
world, this investment is legally obligated to pay out 90% of its
earnings to shareholders.
The guy who runs it literally has half of his entire fortune in this
one investment, so he's doing everything he can to make the pay-outs
even larger! The Special Report is called The Billionaire's CD: Where
the Super-Rich Park Their Cash and Collect an 8% Yield. Swing by
www.gainspainscapital.com today to pick up a FREE copy today.
Good Investing! Graham Summers

Trading Secrets Turn $10,000 Into 2 Million Dollars Within 18 Months:
http://www.ndshtrading.tk/
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