COMMENT
The 1,101% High Yield Profit

High yield works. Stock market statistics clearly show the returns from generous dividend-paying shares have crushed the market average.

The proof is based on year-end data for the FTSE 350, FTSE 350 High Yield and FTSE 350 Low Yield indices from 1985.

(The FTSE 350 index consists of the largest 350 companies on the London market with those sporting the highest yields included in the High Yield benchmark and the remainder making up the Low Yield.)

Here's a summary of the outperformance:

The 1,101% High Yield profit over nineteen years is equivalent to about 14% per annum. In contrast, the FTSE 350 has returned around 11% a year since the end of 1985, while the Low Yield index has provided approximately 8%.

Note that the High Yield index has consistently outrun its Low Yield cousin and the wider market. This table shows the average gains over one-, five- and ten-year periods:

So much for FTSE history -- how can you profit from high yield?

Sadly, nobody has yet thought to introduce a FTSE 350 High Yield index tracker. But not to worry -- The Motley Fool's Value Investor newsletter recommends income shares that should collectively outrun the market over time.

Every month, the Value Investor pinpoints a large-cap company that boasts an attractive and sustainable dividend yield, and aims to help ordinary Fools build a diversified income portfolio. Since its launch in January 2004, the Value Investor's 14 high yield recommendations have gained 16% (as at 16 March 2005, including bid/offer spreads and declared dividends, but excluding dealing costs) while the overall market has improved 12% (with dividends reinvested). Two demonstration income portfolios set up in 2000 and 2003 have also beaten the market, gaining 36% and 56% respectively. Read more.

The performances of these income recommendations and portfolios back up the FTSE statistics. They add to the evidence that high yields and re-invested dividends can boost returns significantly. To start your dividend portfolio with the Value Investor newsletter -- and enjoy The High Yield Portfolio Explained special report -- click here for a no-obligation trial.