"That was pretty much how I thought of it before OntFA's post." Since OntFA's post was wrong about that, as well as about the 60% of total return, you have been led down the path.
That's a rather hostile response, don't you think?
Back on topic: The precise number is a moving target. But if I'm wrong about the basic idea that dividends are a big component of total returns, then you're smarter than Standard and Poors. Look, it's just a calculation. It's not a wild theory. And sure you could spin the stats but I've seen this calculation from various sources on both the TSX and the S&P and the numbers are slightly different but the overall conclusion is the same.
Standard & Poors in [url=http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500dividend/2 said:
Historical Total Return
From January 1926 through March 2009 the annualized total return for the S&P 500 was 9.51% per year vs. 9.69% for December 2008. The dividend component consists of 44.00% of the return vs. 43.27% for December 2008. The annualized return consists of both capital appreciation and dividends reinvested.
Leslie, you quote a number of 97% (i.e. that some claim dividends account for 97% of returns), I have never seen that in anything I've read on the topic. The highest I've seen is about 67% and I've seen numbers somewhat lower. And, as mentioned, the figure will fluctuate. But your argument that this ignored capital gains is valid, but it doesn't form part of the index data as a separate component. In other words, the price index and dividends are listed as separate items and the dividends are not included in the price index.
Realized capital gains only happen when selling. While indexes are reconstituted, there is not "cost base" or capital gain calculated at the index level that I've ever seen. So the "capital gains" appear to be embedded into the price level of the index. Are you saying that this is not the case? If so, that is news to me.
Alliance Berstein published an article a few years back that not only looked at the general significance of dividends but also the pure capital appreciation of dividend payers vs non dividend payers and other related issues. It's not that dividends are superiod to capital gains, in theory, but that dividends signal greater financial strength and, because of that, share prices tend to respond better.