Reinvesting Dividends Can Yield Excellent Returns

One of the dilemmas often faced by investors with regard to dividend-paying stocks is if they should reinvest the dividends or not. Reinvesting dividends received from equity investments on a periodic basis such as monthly, quarterly, bi-annually or even annually can substantially boost the total returns earned, especially in the long term due to the effect of compounding. The following chart shows the performance of the FTSE All-Share Index of U.K. with and without dividends reinvested over the past 10 years: image. Source: Trustnet.com. Note: The blue line shows the total return. The returns shown are in British currency terms. From the Trustnet.com article: Investors who had simply put their money in the FTSE All Share would have seen their money grow by 81 percent over the last decade, according to data from FE Analytics, but those who had reinvested their dividends over that period would... Read more