Forget Stock Prices—This Factor Drove Most Market Gains

When investors track market performance, they often focus on rising stock prices. But something else has been powering most stock market gains for decades—and it’s not what many younger investors might expect.

Reinvested dividends have accounted for 85% of the S&P 500’s SPY total return since 1960, according to an analysis by Hartford Funds.

According to a CNBC Make It analysis of FactSet and NYU Stern School of Business data, a $10,000 investment in the S&P 500 in 1960 would have grown to roughly $982,000 by 2024 based solely on price appreciation. However, with reinvested dividends, that same $10,000 would have ballooned to $6.42 million—more than six times as much.

Don't Miss:

BlackRock is calling 2025 the year of alternative assets. One firm from NYC has quietly built a group of 60,000+ investors who have all joined in on an alt asset class previously exclusive to billionaires like Bezos and Gates.
Dogecoin millionaires are increasing – investors with $1M+ in DOGE revealed!

“There’s some comfort you can get by homing in on those dividend-paying companies,” Brian Bollinger, founder of Simply Safe Dividends, said to CNBC. For younger investors, he suggests creating “a really long-term focused dividend growth portfolio that’s optimized more for long-term capital appreciation.”

Most investors who own broad market index funds already benefit from dividends. The S&P 500 currently offers a yield of 1.26%, meaning for every $1,000 invested, shareholders receive roughly $13 annually that can be reinvested.

Trending: Are you rich? Here’s what Americans think you need to be considered wealthy.

For those looking to increase their dividend exposure, CNBC identified two main types of funds—dividend growth funds target companies with consistent histories of increasing payouts. These types of funds typically include “high-quality” stocks with stable balance sheets, CNBC noted.

Some track indices like the S&P 500 Dividend Aristocrats, which only includes companies that have raised dividends for at least 25 consecutive years.

“It’s not guaranteed,” Todd Rosenbluth, head of research at TMX VettaFi, told CNBC regarding future dividend increases. “But they’re more likely to do so because it’s part of their ethos.”

Equity income funds prioritize stocks with high current yields. These funds often yield more than the broader market—funds tracking the FTSE High Dividend Yield Index yield about 2.6%, double the S&P 500’s rate, CNBC said. They tend to concentrate in slower-growing defensive sectors like consumer staples, utilities and financials.

When choosing between approaches, Rosenbluth advises investors to consider their primary goal. “Investors need to decide whether they want dividend income to add to capital appreciation for total return, or are they looking for dividends to be more of an income generator where capital appreciation is less meaningful?”

Read Next: