[long_equity_returns] [original_papers] [investment_analyst] [TIA_Jul_1984] [dividend_growth_old]

During the 1980s, and earlier, it was quite common to assume that half of the overall return on equities would be accounted for by growth. Although I have seen that “justified” by yield comparisons, it wasn't convincing. Instead, one can look at how much of the total return was generated by income. For UK equities, over periods of 15 years falling between 1962 and 2012 (not 2018), the income component averaged 39%, with a standard deviation of 11%. While the old 50% assumption may be less than used to be commonly thought, the equities DVR is actually not that sensitive to growth. It was common for the calculations to be based upon the assumption that capital would grow at the same rate as dividends but I have seen different approaches used. This is updated here.