drip

"........Look at the history of Coca-Cola.  It went public on 1919 at $40  a share. Today, one of those single  shares is worth $248,000.  But with its growing dividends reinvested it is worth  a stunning $6.7 million.  ( By the way, that  original $40 share is now throwing off $221,163 in dividends a year!)"

EFFECT OF DIVIDENDS ON GROWTH OF INVESTMENT
Usually stock returns are derived from future stock price appreciation and dividends paid for each share by the company. Dividend is a stockholder’s share of profit of the company’s profits paid to stockholders, usually in cash, rarely in more stocks (shares). Stock and share are the same and either may be used for the same purpose. The main idea behind paying stocks as dividend by the company is to preserve cash for the company's future needs. Not all companies pay dividends to their shareholders. Companies may reduce or stop paying dividends if a company’s earning falls. Many companies not only consistently pay dividends, but also increase dividends year after year.
Why full dividend reinvestment is a must to accumulate great sum of wealth is discussed below. Dividends that are are fully reinvested by buying more of company’s stocks creates a compounded growth rate of return, resulting in a huge sum over a long period. This is due to the power of compounding,as discussed in the previous chapters of this book.
The Dow Jones, S&P 500, NASDAQ, Wilshire 5000 Indices do not include dividends paid yearly in the rate of return. This is a very important factor that investors should be aware of. The real return of Dow including reinvested dividends would make the value of the "index to be over 250,000 points today" (1). This is compared to Dow values since inception in 1896 of less than 100 to maximum of about 14,000+ in 2007). "It is commonly known that it took the market 25 years to recover from its 1929 peak and the Great Depression. However, the inclusion of dividends in the index mitigates the effects of the Great Depression. A new all-time high is reached in January 1945 instead of November 1954 if dividends are included" (2).
If $107.23 was invested on 12/31/1919 into a Dow Jones index fund and all dividends were reinvested for more fund shares, the dividend income would have grown from $5.80 in 1920 to $8,715.12 by 2005 and the total investment (appreciation + dividends) would have grown from $107.53 to a $371,028.01 (3

"Why dollar-cost average into these stocks now? Because the data from those really, really monstrous bear markets, the ones that accompanied the Great Depression, show that investors who bought dividend-paying blue chips and reinvested the dividend did just fine in the bear markets that lasted from 1929 through 1942." (4)
The Dow Jones Industrials dropped 87% from August, 1929 through June 1932. Even in April of 1942, the Dow stayed down to 74% from August, 1929 level. The Dow did not recover to 1929 price level until 1954. So an investor had to wait to break even from 1929 until 1954 if only the stocks prices were considered (4).
"But an investor who had collected dividends and reinvested them would have seen a 340% total return by 1954, according to the Wharton School's Jeremy Siegel, the author of "Stocks for the Long Run."" (4).
In a bear market as the stocks prices go down, dividend yields go up. The investor will get more dividend for each new and old invested dollar. An example of this is: Intel stock paid 1.95% dividend on Nov., 3, 2006. The yield became 4.64% on Feb., 24, 2009 as the price of Intel stock fell (from $20.51 to $12.57) plus increases in Intel's annual dividend from 40 cents a share in 2006 to 56 cents a share in 2009, a 40% increase. The bulk of the yield was a result of the drop in the stock's price (4).
The above example indicates why even in a bear market one should keep investing to get the full benefits of dividend paying stocks.