This is not the same as the frequently uttered mantra that the majority of the return on equities comes from reinvestment of the dividends paid. Dividends which are reinvested have to be used to purchase shares at market value — at three times book value currently in the S&P — whereas each $1 of retained earnings gets reinvested at book value. It is the reinvestment of retained earnings, not dividends, which provide the majority of the growth in the value of equities.
I have pointed out that links to FT require the user to have paid subscription. To this end I will be editing posts so as to allow "all" users to access these articles by using their normal search facility. Raptor.
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