Recently I came across the following research paper on the importance of dividends published by Dow Jones back in 2004.

ABSTRACT
“Numerous trends are examined that suggest recent increased interest in dividend income from equities is likely to continue and perhaps increase further well into the future. Existing equity indexes are found to measure a capital-gains-oriented investment strategy and not income oriented equity investment strategies. New design principles are described that are aimed at measuring the segment of the equity market that is income oriented. The resulting Dow Jones Select Dividend Index is backtested to 1991 and found to have outperformed many benchmark indexes.* Comparisons with other equity indexes find that it has also performed consistently with or better than indexes measuring conservative capital gains-oriented investment strategies.”

SUMMARY
Disenchantment with the recent bear market and the substantial reduction in federal taxes on corporate dividends in 2003 have sparked renewed interest among investors and money managers in dividend payouts. But a survey of the indexing field found no indexes available that measure the performance of companies that consistently pay dividends to their shareholders. Dow Jones Indexes took steps to fill that gap.”

To read more click Dividend Matter.

Source: Dow Jones