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Have You Missed Out On The $1 Trillion Payout?

coins cash moneyAccording to Henderson Global International, a record $1 trillion was paid out to shareholders around the world last year. The rate of dividend growth in 2013 wasn’t exactly spectacular – just 2.8%. However, when measured against the payout in 2009, the rise in global dividends has been an impressive 43%.

But the news is even better for us investors in Asia. The dividend payout in 2013 was 79% higher than in 2009. And the good news, it seems, doesn’t stop there. According to the bean counters at the fund manager, faster growth in dividends is expected in 2014.

Income investing is often seen as the poor relation in stock market investing. Many investors, it would seem, prefer growth investing, which is perceived as being more exciting and perhaps more lucrative. However, the two seemingly separate strands of investing, which can divide the investing community down the middle, can be equally important.

Consider a company such as Super Group (SGX: S10), which reported results this week. Over the last five years, the total annual return has been an extraordinary 58%, as the shares climbed from a dividend-adjusted price of S$0.35 to S$3.90. However, less than half the total returns have been generated through the rise in the share price. The bulk has come from reinvested dividends.

Reinvested dividends have also been an important generator of total returns for companies such as Raffles Medical Group (SGX: R01), SATS (SGX: S58), M1 (SGX: B2F) and StarHub (SGX: CC3). In fact, if dividends are perceived as the icing on the cake of investing, then in the case of these companies, the payout is not just the icing but the cherry on the icing on the cake.

However, to enjoy total returns, it is vital to reinvest the dividends you receive regularly. Many companies in Singapore offer dividend payment in the form of shares rather than cash. That is not only a cheap but a very efficient route to reinvest your dividends. It can be a great way to watch your initial investment grow, almost effortlessly year after year after year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.