LONDON -- It's been a tough five years for shares, we hear the doomsters crying -- the FTSE 100 (INDEX: ^FTSE) has gone nowhere, so investing in shares has been a waste of time and money.

But that's only concentrating on the headline share prices, which do not represent what you own, if you've bought any of our top FTSE blue-chip shares. What you have is part of the company itself, and that entitles you to a share of its earnings as paid in the form of dividends.

And if you include dividends in the calculation, especially if you reinvest them in more shares each year, how much difference will that make to the headlines? Wondering that, I took five shares in popular dividend-paying companies, whose share prices have performed variously, and totted up the dividends. I did two calculations -- one assuming you simply kept the cash and one to see what difference reinvesting would make.

Five popular dividends
I've started with share prices on May 1, 2007 and finished on May 1, 2012, and to simplify things, I've assumed that each year's dividends were reinvested at the start of each May. I've also used 2012 dividend estimates in cases where they have not yet been declared.

Here's what I found:

Company Vodafone Unilever GlaxoSmithKline British American Tobacco Centrica
Share Price, 2007 158 pence 1,559 pence 1,310 pence 1,711 pence 383 pence
Share Price, 2012 172 pence 2,102 pence 1,424 pence 3,135 pence 317 pence
Share Price Change 8.9% 35% 8.7% 83% (17%)
Total Dividends 44.25 pence 303 pence 294 pence 442 pence 62.4 pence
Return, Dividends Retained 37% 54% 31% 109% (1%)
Return, Dividends Reinvested 45% 59% 38% 122% 2.3%

Three unexciting shares
Vodafone (Nasdaq: VOD) frequently figures among Fool writers' favorite dividend-paying shares, but the headline share-price rise of 8.9% over five years is really quite pathetic.

But if you'd stashed away the dividends in the piggy bank or spent them, you'd have had a total return of 37% over those five years. And even better, by reinvesting them you'd be up 45%.

It's a similar story with Unilever (NYSE: UL), the manufacturer of so many household brands that it's almost impossible not to be a customer. People want to clean their teeth and disinfect the toilet just as much during hard times, and it shows. Unilever's share price gained 35%, which is better, but still not the thing mansions in the sun are bought on. But a 54% return including dividends, rising to 59% if they were reinvested, is bang in line for helping acquire that retirement cottage a few years earlier.

I chose GlaxoSmithKline (NYSE: GSK) because it's had a bit of a volatile ride, and some may be wary of its dependence on new developments within its labs. Accumulating dividends this time turned a poor 8.7% return into 31%, while reinvesting the cash bumped it up to 38%.

A highflier and a faller
British American Tobacco (AMEX: BTI) has turned in one of the best FTSE share-price performances over the period, putting on an impressive 83%. But it has done much better than the charts say, because dividends bumped that up to 109%, and reinvestment boosted it to a massive 121% return.

Centrica is something an income-seeker might choose, but a chart-watcher might turn his or her nose up at after seeing its share price fall by 17% over the five-year period. Now that's bad news. But at least your dividends would have compensated, turning that 17% loss into just a 1% loss overall and even creeping into positive territory with a 2.3% gain if the cash was reinvested. Of course, for income-seekers, the Centrica five-year share price probably won't matter much, and the dividend has risen every year, despite the share price falling. The forecast 2012 figure represents a 4.4% payout over the original 2007 share price, or 5.2% over the May 2012 price, so the cash is still coming in.

And the conclusion is...
The evidence seems clear to me: Dividends make up the bulk of portfolio gains in the long term, and reinvesting our payouts can boost the gains further.

And this is all over a five-year period that started in 2007 -- almost at the peak of the credit boom -- and then went through one of the worst slumps we've seen in recent decades. So just wait and see what the next bull run brings!

Finally, I confess I was at first a little disappointed to see that reinvesting dividends had only made a small difference in most cases, but then I reminded myself that in the early days, you really are setting yourself up for the long term; by May 2012, for example, you'd still only have about 1.3 shares for every Vodafone share you started out with. So I extrapolated Vodafone forward, assuming a 4% rise in the dividend each year, which I think is a modest projection and easily achievable. And to be pessimistic, I assumed no share-price rise. After 10 years? Well, keeping and spending the dividends would see a total return of 85%, but if you reinvested all the way, you'd end up with a 120% gain -- and that really is quite a difference!

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