• The ten-year total return on the FTSE 100 is 155%, whilst share prices have only appreciated 75%¹
• For the twenty years to November 2025, 56% of the Asia Pacific region’s equity returns came from dividends²
• Global dividends hit a record $519 billion in 2025 Q3, up 6.2% from 2024 Q3³

Equity income investing is focused on generating a steady stream of cash flow from dividends rather than relying primarily on share price appreciation. This style of investing naturally creates a bias toward value stocks, as companies that return excess cash to shareholders tend to be mature, profitable, and are not reinvesting it all for growth. There is a common misconception here that companies that pay out dividends instead of reinvesting it have inferior growth prospects as they had nothing better to do with the cash. In reality, reinvestment opportunities are not always cost-efficient. Dividends are not a sign of stagnation but of rational capital allocation and disciplined management; it then also gives the investor an opportunity to redeploy that cash into a higher growth opportunity that the business may have had at the current time.

By targeting yield and thus healthy cash flow, income investors often gravitate toward sectors such as utilities, consumer staples, financials, and energy – areas that historically exhibit more stable earnings and less speculative valuation risk. That bias introduces a defensive character to portfolios, particularly during periods of market volatility, as consistent income can cushion drawdowns and a lower valuation starting point means there is less room to fall (in theory). Crucially, income is not merely a byproduct of investing but a core component of total return: over long horizons, reinvested dividends have contributed a substantial share of equity market gains.

The below chart shows the FTSE 100 price return in green versus the total return (price + dividends) in red over the last decade. It highlights how dividends have added more value than capital appreciation.

Source: Alpha Terminal 12.02.26

And it’s not just the UK stock market. Dividend culture and corporate understanding of shareholder returns are spreading round the globe. Global dividends hit a record $519 billion in Q3 2025 with 88% of companies increasing or sustaining dividends in the quarter. The US saw a record payout, whilst Japan reported a 13% growth in dividends and Emerging Markets an 11% increase.³ UK investors used to look to the EMAP regions for growth, but the below chart shows how over the last twenty years, the majority of the index return has come from dividends.

Source: Jupiter AM, Bloomberg, 31.12.25

Bowmore Portfolios

At Bowmore, we are agnostic to where our returns come from. We want to enhance our Total Return for clients and are proactive about how we do that. In 2020 and 2021, you would have found us leaning more into Growth ideas for share price appreciation as interest rates were low and governments were piling money into the economy. Now, we’re leaning much more into the income style of investing as valuations creep higher, putting growth stocks at risk of a correction, and corporate governance reforms continue to drive dividend growth.

 

Source: AlphaTerminal, data as at 12/02/2026

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.

Sources:
1. Alpha Terminal, 12.02.26
2. Jupiter AM, Bloomberg, 31.12.25
3. FE Trustnet, November 2025