In the middle of the 20th century, it was possible to see a respectable nominal return from equity dividends, as measured by the aggregate market total return from dividends. In the chart below, we show the annual dividend-only return for the S&P 500 by decade. Our data starts in March of 1936 and ends last week, so the first and last segments are snapshots as opposed to a full decade. As shown in the chart, prior to the 1990s, dividend returns were regularly above 4%, with the 1960s the only decade with a 3% return from dividends. Since the 1990s, though, dividend returns have been much lower: 2.48%, 1.82%, and 1.80%. Of course, interest rates overall have fallen dramatically since the 1980s, and that’s a factor here, but more broadly return of capital has become much more common via buybacks than dividends. Share buybacks are a much tax friendlier return of cash to shareholders than dividends, which is a big reason for their increased popularity in recent decades.  It’s also worth keeping the much lower dividend disbursal picture in mind when considering the sustainability of market buybacks as it mostly reflects a shift in how companies return capital to shareholders.


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