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Double Your Money with Dividends – WW #23

This isn’t a post about how to double your money in 30 days. I won’t even teach you how to double your money in a short time. These kind of results can’t be guaranteed, and anyone saying otherwise doesn’t care about your well-being.

Aside from gambling or taking extreme risk, you shouldn’t expect to be able to double your money quickly.

But, you can do this in the long term. The beauty of what I’m about to tell you is that it’s been proven. This is how people like Warren Buffett built their wealth. It’s realistic. And the best part is once this money doubles, it continues to double more and more.

Double Your Money, Build Your Wealth

Like a giant snowball, your wealth will continue to attract more and more money as time goes on. It takes a long time to build, but through your efforts you can have a giant snowball of cash that never stops growing.

The majority of millionaires are older than 45, and most of them are first generation. They find success by compounding their wealth. Millionaires buy investments like stock paying dividends that will provide steady cash flow and an ever increasing return.

Now that I’ve weeded out the suckers, I can start talking to the people who will benefit most by this advice.

I’m talking to those who think the same way as me, realists who know that every dollar comes from hard work. Intelligent people who realize that wealth is built, it doesn’t happen overnight. These are the people who can benefit from the powerful strategy of dividend investing.

double your money

Let’s examine 2 different companies during 1998, to show you the power of dividends.

The first company is the poster child example of a company who has had great returns for its investors without paying a dividend the entire time. You may know the company as Berkshire Hathaway (BRK.B), famously run by Warren Buffett for years.

Ironically, Buffett’s company doesn’t pay its shareholders a dividend, because the company believes that reinvesting that money into the company is more valuable to shareholders. The benefit comes from using that money to grow the business, therefore making the share price higher.

The company is famous in its success. Many people who are against dividends refer to Berkshire Hathaway as the prime example to why dividends shouldn’t be paid. Ok fair enough, I’ll use them in this example as well.

The second company is the type that I look for in investments. A company with a stable position in the market, who has been paying and increasing dividends for decades. These are the type of investments that critics claim to have no growth left.

People looking for huge exciting gains usually pass this type of investment by. Then they look back 15 years later and wonder what happened to them. I’m talking about a company like Procter and Gamble (PG).

Dividend vs. No Dividend Example

So we have a company that has been famous for not paying a dividend, and a company that is famous for paying dividends. They are both considered perfect examples for their respective arguments.

The date is April 17th, 1998. Both companies have seen some significant share price appreciation in the past year. Berkshire Hathaway (BRK.B) is trading at $47.16, and Proctor and Gamble is trading at $42.56.

Now fast forward to the opening prices on yesterday, August 13, 2013. Berkshire Hathaway is now at $117.35, while Proctor and Gamble is at $81.78. BRK.B has gained 148.83% in this same time span that PG has gained only 89.6%.

WAIT A MINUTE. We aren’t looking at the whole picture yet. Let me show you why.

During this time, investors with PG have been collecting and reinvesting dividends every year. I’ve attached a chart below to show each dividend plus how much percent of a share was repurchased with each dividend.

Over the length of the investment, the percentage grew to 35.75%. This means for every 1 share of Procter and Gamble the investor would’ve bought, they would now have 1.3575 shares. This might not seem like much at first, but just look at the vast difference before the dividends were accounted for.

With 1.3575 shares, PG is actually worth $111.01. The return on investment with this number? It is a whopping 160.8%, almost double the first return and easily greater than BRK.B. 

Double Your Money: PG Dividend History


Double Your Money: PG Dividend History cont.

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Double Your Money: This is Easily Repeatable!

What makes this example even more appealing is that it is easily repeatable. The chances of you finding a dividend grower like Proctor and Gamble are much greater than finding a successful non dividend payer like Berkshire Hathaway. Let me repeat that.

The chances of you finding a dividend grower are much greater than finding a successful non dividend payer!

The S&P 500 has 500 companies (obviously). Of those 500, approximately 75% of them pay a dividend. In contrast, a company who is so efficient with excess capital like Berkshire Hathaway is very rare to find. Sure, you can mention Google (GOOG) and Amazon (AMZN), but they are few and far between.

Your chances of finding a successful dividend paying company are much greater than finding the next Amazon or Google. These type of stocks are usually less volatile as well.

Don’t buy into the myth that dividend paying stocks don’t grow. You can double your money with dividends. In fact, your chances are pretty good.

**Double Your Money with Dividends – WW #23**
**All Rights Reserved. Investing for Beginners 2013**
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