What A Measly $59.50 Dividend Can Do

A $59.50 stock dividend can do wonders for your investment successI was looking at one of my trading accounts the other day and noticed a dividend of $59.50 had been paid into it.

Now $59.50 will not make you wealthy in and of itself.  I’m sure we can agree on that.  But something in the back of my mind told me that this stock investment paid dividends monthly instead of quarterly like most dividends are paid.  And this got me thinking about dividends and their wealth effect.

So I looked through my statements, and sure enough, I was right.  Every month, this Calamos Convertible and High Income Fund (CHY) was depositing $59.50 into my account like clockwork.

And that’s important because it illustrates how valuable dividends can be to your investment success.  To support that thought, let’s run through the entire investment transaction.

I had bought 700 shares of CHY in early 2009 during the stock market crash.  So I was able to get them at a good price of $8.62 a share for a total investment of $6000 (I’ll round some numbers in my examples to keep it easy).

So as I looked over my statements, I noted that I had collected three and a half years of monthly dividends. That came to a total of $2500 I had already collected from this $6000 investment.  And there was no reason to believe I wouldn’t keep collecting another $59.50 in my account every month going forward.

But it gets better.

Because CHY had increased in price from $8.62 a share to $12.49 a share.  So I’d made another $2700 on the price increase.

So in total, I have made $5200 in three and a half years on a $6000 investment.  I have almost doubled the investment.  It has almost paid for itself completely.

And thirteen more months of dividend payments, even assuming no price increase, will bring the total to the original $6000 investment.  That will work out to be $3300 in dividends and $2700 in price appreciation.

I will have doubled my money in four and a half years.

The investment will have paid for itself.

All of my investment capital will have been returned to me

And everything from now on is pure profit.

Also note that over half of this happy situation was because of the dividends.  So you see why I said early on that dividends can be valuable to your investment success?  And how a dividend paying stock investment can return all your capital in under five years and turn into a pure profit machine?

Now investments like that really can make you wealthy.

All from a measly $59.50 dividend.

To your health and prosperity – John

P.S.  Here’s a little heartwarming dividend fact for you.  Legendary investor Warren Buffett invested in the Coca-Cola Company between 1987 and 1989.  He liked it as an investment for a number of reasons, one being that it paid dividends that increased year over year.

As of 2011 he owned 200,000,000 shares in his Berkshire Hathaway fund.
Coke paid dividends of $1.88 a share.  That’s $376,000,000 in dividends – in one year.

And 50% of his total investment cost, coming back to him – EVERY YEAR.

Coke is it!  And dividends too!

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