Dividends account for a substantial portion of the long-term total returns. This is especially true in countries or regions where the dividend culture exists. For instance, the S&P 500 dividend yield is currently just 1.55%. Most European countries on the other hand have dividend yields of 3% or more. The FTSE 100 for example has a dividend yield of 3.69%. Higher dividend yields means larger total returns when many years or even decades are considered due to the effect of compounding.

According to a research report by Yoichiro Kai at T.Rowe Price, dividends accounted for 46% of the total returns in Europe from 1999 to Jan, 2023 as shown in the chart below:

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Past performance is not a reliable indicator of future performance.
As of January 27, 2023.
Source: T. Rowe Price analysis using data from Bloomberg Finance L.P. (see Additional Disclosures).

Source: Tapping the Power of Global Equity Dividends, T.Rowe Price

The key takeaway is that dividends are important and investors should not focus on just growth-oriented stocks for price appreciation to earn higher long-term total returns.