It's probably fair to say that dividend investing isn't the hottest trend on the share market right now.
Sure, there will always be dividend-loving investors. But lately, it's been lithium stocks, semiconductor companies, and artificial intelligence shares, amongst others, that seem to be hogging the financial headlines. And dividend favourites like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) are far from their all-time highs.
Plus, dividends are no longer one of the only ways to get a good yield on your cash. Back in 2021, it seemed the only way you could get a decent return on your money was to invest in dividend stocks. But today, with interest rates at decade-highs, you can get a 5% yield on a term deposit if you're so inclined.
So is dividend investing still worth it?
Well, I would argue that it is. In fact, here on the ASX, dividends remain an essential part of successful investing.
To illustrate, let's look at where the returns that ASX shares and the S&P/ASX 200 Index (ASX: XJO) have actually come from over the past two decades. The SPDR S&P/ASX 200 ETF (ASX: STW) is an index fund that tracks the ASX 200 Index. It basically reflects the overall returns of the broad ASX share market.
Since its inception in 2001, this index fund has returned an average of 7.87% to investors per annum. But only 3.19% per year came from capital growth. The remaining 4.68% is attributed to dividend payments (and the assumption they were reinvested).
Almost every mature company on the ASX, certainly every blue-chip share, pays out regular dividends here in Australia. So treating them properly is of the utmost importance to an investor's overall returns.
Additionally, dividends have other values too. If a company can afford to pay a stable and growing dividend, it says something about its financial strength and its respect for shareholders.
So, yes, dividend investing is certainly still worthwhile. In fact, this data shows that it is a major reason why ASX shares outperform other asset classes, like cash, over long periods of time.
As such, all ASX investors should show their dividends the reverence they deserve. So, don't go out and spend your dividend cash. If you respect your dividends by reinvesting them back into shares, they will return the favour many times over.
