“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
— John D. Rockefeller
When I first got started in the investment business, dividend-paying companies still physically mailed checks to their investors.
What a pleasant surprise it was to find a fat dividend check in your mailbox, as none other than J.D. Rockefeller attests to above!
Modern technology has made dividend checks obsolete — dividends are now instantly credited to your brokerage account. That automation makes it easy to underestimate the total return on your investments.
And if you use compounding, your dividends could turn into a retirement windfall unlike you ever imagined.
Compound Dividends: It’s the Real Thing
In my last Wealth Watch article (included below) I reported too many Americans sadly have too little socked away for retirement.
If you don’t want to practice the greeting “Welcome to Walmart” in your golden years, here’s some good news…
There’s still time to catch up.
The best strategy I know for catching up is to focus on boosting your savings now by investing your money in high-quality dividend-paying stocks.
Then you can use the magic of compound dividends to provide a reliable and growing income stream that funds the retirement of your dreams.
A Case Study: Coca-Cola
Here’s a great example using one of Warren Buffett’s favorite stocks: Coca-Cola (NYSE: KO).
Of course you can’t turn back the clock to the 1980s and scoop up a billion dollars in KO shares like the Oracle of Omaha did.
But you don’t have to be a billionaire to profit from the magic of compounding dividends, either.
The math shows us compounding is plenty powerful even for small amounts of money and shorter periods of time.
If you had invested a modest sum of only $5,000 in KO shares 11 years ago, it would have been enough cash to buy about 100 shares at their presplit $50 per share price in 2008.
Then after a two-for-one split in 2012, you would have 200 shares of KO, worth a total value of about $8,600 today!
That’s a not-too-shabby $3,600 gain. And roughly two-thirds of that profit, or $2,350, came from cash dividends alone!
I’m not just pulling these numbers out of thin air, mind you. Several market data services including Yahoo Finance provide stock price and dividend data.
Better yet, most large companies including Coke offer investment and dividend calculators right on the “investors” section of their websites.
Find a stock you’re interested in and check it out for yourself.
Bottom line: Dividend-paying stocks give you the best of all worlds: steady income, lower risk and higher reward. What’s not to like?
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch