Note: The latest Standard & Poor's earnings spreadsheet (March 18) puts the annualized dividend yield at 1.86% and the indicated rate at 1.88% (The indicated dividend is the estimate for the next four quarters, based on what was paid in the most recent period).

The same calculation for the 109 years from 1871 to 1980 shows a slightly higher dividend yield of 5.07%.

But when we shift our focus to the period since 1980, the change is dramatic. The total return is over 2% higher, but the dividend component has shrunk to an annualized rate of 2.56%. The latest Standard & Poor's indicated dividend is even lower at 1.88%. As I've often pointed out, over a relatively short period of time, investors shifted their focus from income generation to capital growth.

The boomer demographic was the key driver for this change. It's more than a coincidence that the 401(k) plan was introduced in 1980, just as the first wave boomers were entering their higher income years. In 1981 the Economic Recovery Tax Act permitted all employees, in addition to those not covered by an employee retirement plan, to contribute to an IRA.

The popularity of tax-deferred savings vehicles dramatically reduced the appeal of dividend income. The goal of retirement savings is to grow the nest egg. Thus, the distinction between dividend yield and total return quickly lost relevance. New companies saw less need to pay dividends. Many existing companies reduced their dividends and redirected those earnings to corporate growth (with an accompanying acceleration in executive compensation).

Now the boomers are beginning the move from nest-egg growth to the decumulation phase of their financial life cycles. The decline in dividends will make this transition more problematical than it was for earlier generations, and the decline in private pensions will increase the difficulty. Perhaps dividends will make a comeback. Either way, we will no doubt see an explosion of retirement income products to facilitate the generational shift to decumulation.