How Dividends Change the Game for JPMorgan Chase Shareholders

The wealth-building power of compound interest will never cease to amaze me. It's a story of patience and attention to detail, where small, short-term differences add up to massive divergence over decades. And in the end, the biggest winners don't always deliver the fattest share-price returns.

Today, I'll take a closer look at one of the banks deemed "too big to fail": Dow Jones (DJINDICES: ^DJI  ) component JPMorgan Chase (NYSE: JPM  ) .

The financial crisis of 2008 took a huge bite out of JPMorgan's dividend payouts. The formerly generous yields -- often hovering in the 3% range or higher -- briefly spiked as share prices plunged, but that jump was only theoretical. The real-world annual dividend yield stayed below 1% until JPMorgan was allowed to boost its payout policy again.

JPMorgan has gone from strength to strength, and recently boosted its quarterly dividend payouts to $0.38 per share -- the exact level that shareholders enjoyed before the crash.

JPM Dividend Chart

JPM Dividend data by YCharts.

The yield currently sits at a respectable 2.8%, just above the Dow's average yield of 2.7% and far above fellow Dow bank Bank of America (NYSE: BAC  ) and its forgettable 0.3% yield. Bank of America could arguably have asked the SEC for permission to raise its payouts after acing this spring's financial stress tests, but it chose to double down on share buybacks instead. So for the time being, JPMorgan continues to dominate B of A as far as income investors are concerned.

How much should investors care about JPMorgan's dividends? Well, despite its ups and downs in the last five years, the dividend has made the difference between outperforming and underperforming its Dow peers over the last decade.

JPM Chart

JPM data by YCharts.

In fact, dividends have nearly doubled the returns on JPMorgan stock in this time period. Put another way, the payouts helped as much as JPMorgan's rising share prices. That's a game-changer for JPMorgan shareholders.

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