How Reinvesting Dividends Will Make You Rich
I subscribe to the Motley Fool and their Hidden Gems investment newsletter. Frequently, the service sends me emails with links to their latest analysts' reports. This week the following showed up in my inbox: "5 Unbelievably Solid Companies" by Brian Richards and Tim Hanson. These items in the report caught my eye:
- Procter & Gamble (NYSE: PG). Has been paying dividends without interruption since 1890.
- 3M (NYSE: MMM). In February, 3M raised its dividend for the 51st consecutive year.
- Coca-Cola (NYSE: KO). This year, raised its dividend payout for the 47th year in a row.
- Johnson & Johnson (NYSE: JNJ). Raised its dividend for the 46th straight year in 2008.
- Johnson Controls (NYSE: JCI). Has paid dividends to shareholders since 1887.
But hold on - there's more to these numbers!
I decided to research the dividend history of Johnson & Johnson (as my daughter Rebekah has owned JNJ since she was twelve years old). Here's what I found:
On January 1, 1979, the price of a share of JNJ was $1.54. In 1979, the company paid a per share dividend of $.0417 (4.17 cents). On Friday, JNJ closed at $52.15 with a dividend of $1.795 per share paid in 2008. If an investor bought 1,000 shares at the beginning of 1979 ($1,540 investment) and faithfully reinvested the dividends, the investor would now have 1,802.45 shares and be worth $93,997.79 (annual return of 14.2%).
If the investor spent each dividend check rather than reinvesing, the investment would be worth $52,150 today.
Now that's an argument for reinvesting your dividends!
The Sacramento Executive
Note: email me at email@example.com and I will send you the details on my analysis.