The income produced by a portfolio is often overshadowed by capital growth but it is important for two very specific reasons.
The first is that it contributes to the total return from shares, which is a combination of the capital return and the income return. Importantly, this assumes that income is reinvested back into the index as it is paid. The cumulative income return, plus the growth on the monetary value of the income which has been reinvested, amounted to £3,062.78, over the 16 year period in question. This gives rise to a total return of £7,016.20, which is significantly more than double the starting capital of £3,242.06. This clearly demonstrates the power of compound returns and the long term effect that it can have.
The second reason that income matters is it remains a very important valuation metric when considering whether the stock market is looking cheap or expensive. As I noted earlier, anyone currently investing in the All-Share Index will receive 3.48% per annum in income return. I think most income investors would agree that it is difficult to find such a generous return elsewhere, and more particularly from an asset that has doubled the amount of income that it has paid over 16 very difficult years.