The missing factor in new highs: Dividends

Pisani: Better news out of Europe

The is at a new high, but it has been there all year, once you factor in dividend gains of roughly 2.2 percent.

The S&P hit record highs 10 times in 2016, once dividends are factored in, according to Dan Wiener, the President of Advisor Investment Management and editor of the Independent Advisor for Vanguard Investors.

How important are dividends? They account for half of the S&P's total returns over long periods of time, according to Wiener. Since 1988 the S&P 500 index is up about 720 percent while the S&P Total Return index has gained about 1,450 percent.

Think about that. Your actual returns on owning the S&P 500 are twice what the price index indicates since 1988, if you reinvested the dividend.

And ETFs that are dividend-weighted have been hitting new highs as well, as Luciano Siracusano, Executive Vice President and Chief Investment Strategist at Wisdom Tree, has pointed out to me.

All five of the Wisdom Tree U.S. dividend-weighted ETFs listed below made all-time highs yesterday:

WisdomTree Total Dividend: Exposure to the entire dividend-paying part of the US market

WisdomTree LargeCap Dividend: Large-cap

WisdomTree MidCap Dividend: Mid-cap

WisdomTree SmallCap Divdend: Small-cap

WisdomTree High Dividend: High dividend yielding

The DTD, for example, is tied to a dividend-weighted index that reflects the proportionate share of the aggregate dividends each component company is projected to pay in the coming year. The biggest holdings are ExxonMobil, AT&T, Verizon, Microsoft, and Johnson & Johnson. Current dividend is 3.06 percent.

By the way, the search for yield continues in the bond market as well. The largest corporate bond ETF —the iShares Investment Grade Corporate Bond ETF, took in $1.1 billion of new funds on Thursday. That's its biggest daily inflow ever and the largest ever recorded for a corporate bond ETF.