Quote Originally Posted by winner69 View Post
Somebody mentioned compounding the eighth wonder of the world ...and reinvesting divies boosts returns heaps

Lets say our $1,00m worth of shares grow consistently at 10% pa and we collect a 5% divie along the way and we reinvest that divie into our holding. Essentially assumes earnings will grow at 10% and the divie increases as earnings grow.


At the end of the 10 years we will have about $4.0m (assuming we didn’t spend the divies)

If we had not reinvested our divies we would have $3.4m

Reinvesting the divies gives returns a decent boost eh

No gurantee numbers are right ...indicative only

Also highlights why the NZX50 outperforms the world with divies counted and reinvested
There's a well written article on the contribution of dividends to total return here: https://www.gurufocus.com/news/40253...y-surprise-you

Short version: in general, dividends' contribution to total return increases over longer time periods but there is considerable variation around this for individual stocks (which should not come as a surprise). See figure 3.

I haven't read a study focused on NZ (or Australian) stocks but would expect dividends to make up an even higher percentage of total return given our higher dividend yields.