For those of you who know our philosophy, you know we believe that quality, durable and growing dividend income is the engine of long term investment returns. When reviewing the production of returns through history we have often cited a study done by the Brandes Institute, originally published in 2004, titled “Examining the Income Component of Total returns”, and recently updated. The link to the updated piece, “Income as the Source of Long Term Returns”, is below. It may surprise many investors to know that over a legitimate investment time frame, it’s not capital appreciation that makes the most impact, it’s the income produced through dividends. The income component makes a meaningful impact as early as five years (over a 40% contribution), reaches equality with capital appreciation around a 10 year horizon, and then becomes increasingly dominant as horizons extend further. Given our belief that appreciation for stocks over the next five years and beyond will not be driven by ‘Fed Induced’ price to earnings multiple expansion like it has the last five, the focus on income production from equities may be all the more important.