Replies to post #34981 on A.I.M. Users Bulletin Board (AIMUSERS)

[PraveenP]

I think part of it is a function of the market cycle. Historically, dividends were a big component in the total return of stocks.

In the 1990's, they became only a small component of the total return, and dividends were out of favor. We were in a raging bull market, and companies were pressured to favor growth over dividends.

Investors were hypnotized by the bubble and said: why should they give out dividends (which were fully taxed) rather than invest that money in growing their market share, buying back stock, or buying the stock of other high-flying companies?

Then, the crash happened, Bush cut the dividend tax in half, and investors pressured companies to pay out dividends.

Since the market has been choppy for the last decade, dividends have returned to their historical place as a big part of investors' total return.