The orange line in the chart below is the standard S&P 500 price chart that everyone uses when tracking the index’s day-to-day, month-to-month and year-to-year performance. You can see the recent break-out above last year’s highs all the way to the right of the chart.
If you want to see how important dividends are to equity market performance, look no further than the S&P 500 total return index, which factors in the index’s dividends and re-invests them. Going back to 1990, the S&P 500 price index is up 517%. The S&P 500 total return index is up just about double that at 989%, and it has exploded higher over the last four years. This should be exhibit A when explaining the importance of dividend yields as well as long-term buy and hold. If you’re going to try and jump in and jump out of the market over a long period of time and you want to beat a typical broad-based buy and hold strategy, you better be darn good!