With dividends included and reinvested, the 2016 NASDAQ Return was 11.28%. The number you’ll probably see quoted more often is 9.91%, which was the NASDAQ index price return. Those returns were realized between the 1/4/2016 market open and the 12/30/2016 close.
Just like with the 2016 S&P 500 Return numbers, including dividends was the difference between ‘single digit’ returns and returns over 10%. (Even in the NASDAQ, which historically has paid fewer dividends.)
Note: Choosing the NASDAQ close in 2015 makes more than a rounding error of difference. See note later in article!
Even On the Tech-Dominated NASDAQ, Dividends Matter
We’ve made it a habit to publish these articles annually because dividends are so important to the actual returns of investors. (That’s true even for the NASDAQ.)
Companies listed on NASDAQ pay fewer dividends than companies on the Dow Jones, but even here dividends make a material difference. (See our 2016 Dow Jones Industrial Average return calculation).
Yes, it is true that some investors do not reinvest their dividends in the index. Even so, only using price returns is effectively ignoring dividends altogether. Dividends immediately spent still count as real returns.
The 2016 NASDAQ Return
Marketwatch can show you the NASDAQ Total Return index at historical points. Side by side, here is how the 2016 NASDAQ return compared with the reinvested dividend return:
And, as per tradition, the same data in chart form:
|12/30/2016 Close||Annual Return|
|NASDAQ Total Return||5500.56||6121.12||11.28%|
* Choosing the 12/31/2015 Close instead would give 8.87% and 7.50% returns, respectively. Either way, dividends mattered! But then, so too do the dates and times you pick.
Exact is Good – And Exact Includes Dividends!
Over long enough investing time-frames, dividends will dominate price returns as dividend-purchased shares compound. You need to make an effort to account for them when benchmarking your own returns (even if you don’t want to consider immediately reinvesting, that money was earned.)
Any predictions for the NASDAQ in 2017? Do you know why most financial news articles don’t quote dividend adjusted returns?