In the 1930s, a youngish man named Alfred Cowles III founded the Cowles Commission for Economic Research. One of Mr. Cowles’ first projects involved back-testing stock market performance from 1871 through the Great Depression, paying special attention to the effect of reinvested dividends during this time frame.
This was a purely academic exercise—back then, dividends weren’t something that you reinvested because the technology and affordability didn’t exist for it to make sense. It wasn’t a thing. If you owned $40,000 worth of AT&T, you collected your $800 in the mail every three months and used the dividends to help you support your lifestyle. Wanted to make a house payment and take care of the utilities? That’s what the AT&T dividends were for. Wanted to reinvest? You’d have to make a special buy order to purchase 100 shares. If AT&T was trading at $30 per share, you’d have to come up … Read the rest of this article!