dramatically from the 1980s up to about 2000. From 2000 to 2013, stock prices bounced up and down, but ended

up at about the same level. Since 2009, both indexes have for the most part increased.

Table 17.2 shows the total annual rate of return an investor would have received from buying the stocks in the

S&P 500 index over recent decades. The total return here includes both dividends paid by these companies

and also capital gains arising from increases in the stock value. (For technical reasons related to how we

calculate the numbers, the dividends and capital gains do not add exactly to the total return.) From the 1950s

to the 1980s, the average firm paid annual dividends equal to about 4% of its stock value. Since the 1990s,

dividends have dropped and now often provide a return closer to 1% to 2%. In the 1960s and 1970s, the gap

between percent earned on capital gains and dividends was much closer than it has been since the 1980s. In
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