AssetBuilder Inc. Registered Investment Advisor - Simple Investing. Smart Future.

Advise from a financial planner close friend,  (fee based only business)  advised my investments (which I showed him) are to consverative with fixed income and will be eaten by inflation over time.  Two years from retirement at 65.  Have 1.2 million in  mutual funds, CD's,, I Bonds, etc.   He gave me the bool "Simple Wealth, Inevitable Wealth, by Nick Murray to read.  The book was published in 2000.  One of the  fundamental basics of his arguement for almost total investment in equities vs  fixed incomes is the return of equites - in large part based on dividends.    What I  notice is that his dividend income charts stop at 1998.       I suspect that in the current corporate setting,   the need to have stock value increase more than pay dividends, short term thinking, etc.,  that I have read about in recent years, that the dividend payments of S & P companies  and of the Total Market  do not match those of the past.   How do dividend payments  of the S & P,  and Total Market, compare  1997 thru 2007   to the previous  market history? 

By 1997 the S&P 500 had climbed so much that it's dividend yield was not far from where it is today, about 2.1 percent--- both are much lower than earlier periods. According to Ibbotson Associates, for instance, dividends accounted for 5.9 percent of the 7.3 percent total return of common stocks from 1825 to 1926. From 1926 through 2006 dividends accounted for 4.2 percent of the 10.4 percent compound rate of return, or about 40 percent.

Some of this decline in dividend yield can be accounted for by the modern practice of buying in shares rather than paying out dividends. But still more of it can be accounted for by the higher valuation of common stocks.

That's one of the reasons some analysts are suggesting that future equity returns may be lower than historical equity returns.

Scott