Dividend Growth - Throwing Fuel on the Fire

Dividend Growth - your portfolio’s accelerant, it’s the fuel to the fire, the gas that drives your compounding machine.

It turns small initial yields into mortgage payments. Dividend growth increases your income and drives the share price into the stratosphere. If you’re still not interested in dividend growth then turn the page but if you’re still with me I’m going to take you back a few years. Back to the year of 1977. The year Apple was Incorporated, it snowed in Miami, FL, and there was a 25 hour Blackout in New york City. These were all significant events but they’re not why we’re discussing 1977.

In 1977 you could of picked up shares of Johnson and Johnson for $65 a piece or $6500 for 100 shares. The dividend yield at the time was a not so staggering 2.2% or $140 a year. Most people looking for an income producing stock would of passed right by this company not even giving it a second look, can you really blame them?

Looks can be deceiving though. Fast forward 30 years to the year 2007, I’m sure plenty of interesting events also happened on this year but I’m not writing a history book so we’re going to keep moving along. Johnson and Johnson during the previous 30 years managed to grow it’s dividend payout at a rate of 14.4% a year! Almost doubling it’s yield every 5 years. This is how a pretty insignificant amount of money grows into a very significant amount of money, quickly.

$140 a year in income, that’s what we were receiving back in 1997. In the year 2007 we’re now taking home $7,968 a year! Not too shabby. I’m sure a lot of people have been kicking themselves for not taking another look at JNJ back in the late 70’s - 80’s. I know I would be but I didn’t manage to make my way out of the womb for another 5 years.

In May 2007 the price per share of JNJ closed at $63.72, the stock has been split 5 times and has subsequently turned your $6,500 investment into $304,896. NICE!

This may sound impressive but who could of really held on for 30 years without selling? The people collecting the quarterly check, that’s who. The above example does not even include reinvested dividends, you would of collected over $50,000 just holding the stock. This my friends, this is the power of dividend growth. A historical example it is, but when you find a solid company growing it’s dividend at 14-15% annually, this is the outcome.

Band-aids - they repair cuts and portfolios

Date collected from - The Ultimate Dividend Playbook: Income, Insight and Independence for Today’s Investor

Share It!:

• 
• 
• 
• 
• 
• 
•