Episode 546:

Cameron 34:40

Dave: “question for the show. I just noticed that large proportion dividends contribute to total return, around 60% for the dummy portfolio. For me it’s higher, nearly 80%. This surprised me as I’d always assumed capital returns would do the heavy lifting. I’d love to know TK’s longer-term proportion. Do capital gains eventually make the bigger impact over a longer period, or should we be placing a heavier emphasis on dividend payers? Dave.”

Tony  36:23

So, if we look at the portfolio now, Dave’s correct about dividends being better big contributors. But our portfolio has come off since about September last year, since the iron ore price decreased, so they’re having their day at the moment. But my experience is that they generally sit at about a quarter of the benefit of the performance of the portfolio. And that could be just for me, because it’d be different for a buy and hold investor, but I do tend to turn my portfolio over every one or two years. So, generally, the dividend component of the portfolio, or contribution to the portfolio, is about the yield, which is going to be around sort of 3 or 4% on average. That might raise a little bit if I hold on to a stock for a couple of years. As the stock goes up the dividends will too, but not much more than that. So, it’s just a situation that we’re dealing with a three- or four-year-old portfolio in the dummy portfolio, and the last six to twelve months the capital return has come down, so dividends are shining at the moment. But over the longer term, most of the uplift comes from the capital gain.