In 1993, SPDRs (AMEX:SPY) was launched as an exchange-traded fund that tracked the S&P 500. In the 13 years since then, an investment in SPDRs would have nearly quadrupled your money. That's not bad.

But not all of that return came from a rise in the stocks of the S&P 500. No, quite a bit of it was the product of boring old dividends. In fact, on a $1,000 investment that turned into $3,960, $822 came from dividends. That's nearly 30% of the total spoils.

And 30% is not an aberration. It's actually low. Historically, a full 40% of the market's return was from dividends. So as easy as it may be to ignore those payments in the short term when doing stock research, know that they add up over time to big returns.

It gets better
Of course, hardly anyone invests simply for the dividends. Yet literally hundreds of companies are known for delivering great payments, year after year. If you actively seek them out, you can see a tremendous difference between the money you simply get from capital gains and your total return, which includes that extra cash.

Take a look at the returns from these dividend dynamos, over the same 13-plus years.


Gain Only
(No Dividends)

Total Return
(With Dividends)

Dividend Difference
on $1,000 Investment

ConAgra Foods (NYSE:CAG)




Chubb (NYSE:CB)




Emerson Electric (NYSE:EMR)




Freddie Mac (NYSE:FRE)








Washington Mutual (NYSE:WM)




Average Dividend Difference:




In fewer than 14 years, the difference between capital gain and total return is staggering. On average, in these dividend-friendly companies, you would have gotten your initial investment back and then some, just thanks to the dividends. Imagine taking that gap and expanding it over your entire investing career. If it's that large now, imagine it after 30, 40, even 50 years.

A lifetime strategy
Yes, that 50-year look forward is appropriate to dividend-focused investors who expect to still be around then. It's even appropriate for those who don't but would like to leave a substantial legacy to their families. After all, dividends most often come in the form of convenient, easy-to-spend cash. During your working years, you can reinvest those payments to help boost your total returns. Once you're retired, you can simply start taking those dividends as cash. Presto! You've got an instantly built-in cash flow machine to help you meet your retirement lifestyle needs.

If you're serious about making money from your investing, then you need to pay attention to your dividends. Over time, those little payments certainly add up to create great wealth. At Motley Fool Income Investor, lead advisor James Early understands just how powerful those seemingly tiny distributions can be. That's why every month, he picks two companies that look best suited to deliver decent dividends to their shareholders. Join us now for a free 30-day trial to start benefiting from all of the rewards the stock market has to offer.

At the time of publication, Fool contributor Chuck Saletta did not own shares of any of the companies mentioned in this article. Washington Mutual is an Income Investor selection. The Fool has a disclosure policy.