💸 Beyond Dividend Yield
Today is Dividend Day.
In this series, I will teach you 5 things about Dividend Investing in less than 5 minutes.
1️⃣ Compounding Accelerates
If you save $10,000 per year at a 7% return, you’ll be a millionaire in 30 years.
How long do you think it will take to get to your first $100,000?
The first $100,000 takes almost 8 years to achieve - 25% of the total time.
How about for the last $100,000?
The last $100,000 takes less than 2 years - compounding accelerates.
2️⃣ The stock market is volatile
On average, the stock market returns 8% per year.
How people think investing works:
Year 1 = 8% return
Year 2 = 8% return
Year 3 = 8% return
Average return = 8% per year
How investing actually works:
Year 1 = +20% return
Year 2 = -10% return
Year 3 = +14.8% return
Average return = 8% per year
3️⃣ An investing quote
Peter Lynch is one of the most successful investors in history.
He managed the Fidelity Magellan Fund from 1977 to 1990, achieving an average annual return of 29% (!).
Lynch knew the importance of being prepared for volatility.
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready.” — Peter Lynch
4️⃣ Beyond Dividend Yield
Johnson Asset Management released an interesting report recently.
They showed that when you own stocks with strong dividend growth and positive shareholder yield, you get very attractive results as an investor.
The image shows that positive shareholder yielders have higher returns and lower volatility.
Click the picture to access the entire white paper.
5️⃣ Example of a dividend stock
American International Group sells insurance policies in the US and internationally.
It is an example of a company with a positive shareholder yield.
The chart shows that AIG has consistently paid dividends while buying back a lot of shares.
Profit Margin: 7.8%
Forward PE: 12.4x
Dividend Yield: 2.1%
Payout Ratio: 16.8%
Source: Finchat
That’s it for today
In case you missed it:
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Finchat: Financial data