Starting in 1979, the index with no dividends has increased from 500 to 5588 (11.6 times), while the accumulation index has risen from 1000 to 48685 (48.6 times). The treatment of franking credits is ignored in the accumulation index, so for an average investor, where franking washes out with the tax payable, you can almost treat this like a post tax number.
Wow! That means 77% of the gain has been from dividends and only 23% from capital growth.
Not quite. If a dividend is 5%, then it only accounts for 5% of the growth. I'm going to steal a part of
an amazing post by waltworks a few months ago. Think of it this way:
-If I have a stock that I hold for 100 years that appreciates 1% per year and pays no dividends, after 100 years, I've got $270.
-If I have a stock that I hold for 100 years that appreciates zero, and pays 1% dividends (which I reinvest) and we assume no taxation on those dividends, I also have $270.
-If my stock both appreciates 1% and pays 1% (reinvested) dividends, I have $724.
Now, in that scenario, I would never say that *either* the capital gains or the dividend is mostly responsible for the extra gains, right? In fact, a rational person would say that both are responsible for 50% of the gains.
Let's look at another scenario.
-Capital gains @6% and no dividends. My $100 is now $33,930.
-Dividends @4% and no capital gains. My $100 is $5,050.
-Both added together (as the Bogle example) for a total of 10%/year. $100 becomes $1,378,000!
Now stop for a minute and think. When I added in the dividends, I suddenly had way more money! 97.5% of my gains came because I reinvested them! Dividends are awesome!
BUT - you could just spin it the other way and say that the capital gains accounted for 99.6% of the gains when you start from the default state of an only-dividend scenario.
The point is this: If you are getting 6% from capital gains and 4% from dividends, then 60% of your gains are capital gains. Period. Otherwise over any long time scale, adding in ANY RANDOM FACTOR that boosts the investment yield will "account for" most of your profit.
That's just how exponents work. I could add in a special "magic investor bonus" of 1% on top of that 10% and it would "account for" most of my gains over that time period (in fact, my 1% magic-factor raises my total to a cool $3.4 million - the vast majority of my gains!)