Dividend stocks, particularly high-yield varieties, are favored by investors for their income generation capabilities and potential for capital appreciation. Total return reflects income and stock appreciation, with dividends historically contributing substantially to the total return of investments. For example, a stock bought for $20 that rises to $22 while paying a 3% dividend showcases a 13% total return. Sustainable dividends alongside capital appreciation are vital for achieving good total returns, with research showing dividend-paying stocks outperforming non-dividend stocks significantly over the decades.
Investors are drawn to high-yield dividend stocks for their substantial income streams and impressive total return potential, which encompasses dividends, interest, and capital gains.
Since 1926, dividends have made up about 32% of the total return for the S&P 500, highlighting the necessity for sustainable dividend income alongside capital appreciation.
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