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IFB115: How to Make Money with Dividends When It’s Just Pennies

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern. To decode industry jargon, silence crippling confusion and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:37                     All right folks, we’ll welcome to Investing for Beginners, the podcast. This is episode 115 tonight we’re going to go ahead and take some more listener questions. We’ve got some fantastic questions that Andrew and I wanted to answer on the air. So we’re going to go ahead and talk about those. So without any further ado, I’m going to turn it over to my friend Andrew, and he’s going to go ahead and read the first question for us.

Andrew:                              00:59                     Perfect. So I have a question here from Camberley. She says I have some questions regarding IFB episode four the eight or the fine stock indicates a failing business. , I guess let’s go through these questions one by one. Number one. If you don’t know this, a falling stock until it’s too late, whether the options is the only option just to sell right then and accept your loss. So if you don’t mind, Dave, I’m going to take this one first. Absolutely. Go for it. So that’s, it’s tough, right? Because if we could figure out how to avoid falling stocks, we would do it. We would all do it, and we would all be very, very wealthy. The, so she did mention she listened to the episodes. So I did try to explain how you need to figure out the difference between a stock that is falling because the business is bad and a stock that is falling because of temporary sentiment that is negative in the stock market. I think a, and it goes really to what we try to teach.

Andrew:                              02:08                     To understand that very important difference, you have to understand the financials of a company. And so that’s why a tool like the value sharp indicators spreadsheet can be very useful in understanding the financials. So as an example, if you look at a stock and let’s say, the perfect example is like some of the recent developments we’ve seen, which I find this comical yesterday. Um, you know, we’re recording this podcast format, so people who might be listening monthly there. So it’s, it’s Kinda tough to do news on the podcast, but I’ll tell you we’re, we’re recording this at the very beginning of August 2019, and so there was like two, there’s like two or three big news themes. One of them is the Federal Reserve just in another rate cut, um, in a time where rates are arguably, really low already. Um, that’s a separate issue.

Andrew:                              03:05                     Second, but the president is involved on Twitter with that as well. And then the second thing is the trade war, which is still going on. And so we’ve had this thing go back and forth, back and forth between Donald Trump tweeting about tariffs and how maybe we’re making progress with the trade talks with China. And then stocks jump up and then, oh, maybe Trump has a bad day. And he says, I want to add more tariffs. And then it’s just funny to watch the stock market crash after that. So we didn’t have a crash per se in the, in the entire stock market yesterday. And that might be because of some of the balance between like good news from the Fed cutting rates and, and bad news about the Trump tariff tweet. But like in the apparel sector particularly, and some of these other stocks that export a lot to China, they really, they took, took a big, big hit.

Andrew:                              04:07                     So that can be one example where if you look at the financials of the business, and right now that theme is apparel stocks among some other ones too where of course this is all going to be a personal opinion. But in my opinion, the negative sentiment does not, does not; it’s like doesn’t justify what we see in the financials. So what we see in the financials, depending on which stock you’re looking at, um, you might see maybe an earnings drop where maybe earnings got cut in half or maybe revenue went flat or even went lower. The things of that nature. Right. And then you compare that to how our stocks doing. So like as an example, in my opinion, let’s say a stock goes down 25%, but maybe earnings are down 10% that might be an obvious example of like, well maybe they’re overreacting, but it’s not always black and white like that either.

Andrew:                              05:16                     So I kind of struggle to save it to say that that, oh, you compare the percentages. I don’t think that’s the case either. And I think Wall Street’s usually pretty smart about; they’re looking a little bit forward versus in the rear. However, if you’re, if you’re taking a longer-term approach and you’re okay with like, there’s a big difference between a, a company with earnings were there maybe 20% less profitable for the next two years, three years. And so Wall Street doesn’t like that. But I’m a longterm investor; I don’t care. I’m looking ten years out, and I understand that, that there are these cycles in profitability, even in some of the best businesses. And so I’m not going to worry about that kind of a drop versus okay. A situation like toys r us a couple of years ago, I’m, I’m failing to think maybe like GE more recently and I’m sure there are some other stocks that are having, we’re talking about like major, major profitability issues where sometimes you can see it as a company with negative earnings.

Andrew:                              06:24                     That’s a really easy one. , I mentioned debt to equity increasing and the leverage getting kind of out of hand. Sometimes you’ll even see a stock with more total liabilities and total assets, which I can’t even imagine how sustainable that would be. Or even something as simple as, you know, they’re just burning through cash from free cash flows or operating income. And it’s, it’s getting to a point where it starts to look concerning, and it’s not some small thing, but maybe another scene over very many years, you know, versus just being one year hiccup, I guess. There are so many different factors, and there’s not going to be, again, one black or white answer. And you know, every industry is different. Some of them kind of have more ups and downs than others. And these news developments are always different.

Andrew:                              07:18                     You know, you always have different political issues, you have different economic issues, and there’s a lot of different cycles to go along with that too. So I think having more experience just being tuned in with what goes on in the market, I think that helps to have a toe dipped in. I think reading particularly about historical events, and I think that gives so much context because there’s something about looking at the past and not being emotionally invested in it and just kind of observing it. And then it’s funny how you can see the same parallels today. So one great example of heard referenced in several books is like the Cuban missile crisis and how the stock market crashed. And so, I don’t know, maybe looking back today from the safety of not having missiles pointed at us at our other office chairs and our nice air conditioning, that’s easy for us to say, well you know, these investors are freaking out.

Andrew:                              08:17                     That’s stupid. The type of businesses that were crashing is going to be around five, ten years later, regardless of whether missiles hitting from Cuba or not. But at that moment, Wall Street still freaks out. People still sell the type of stocks that you would think they should never sell in. The type of businesses that you would think would be around for a very long time. And so when you see a similar type of scare or something that you can perceive as being more temporary rather than a 10 or 20 year kind of development, then maybe you start to see those same parallels and you see the stocks crash and instead of feeling nervous and feeling like, well, do I need a sell? You feel confident because you, you understand like historical context. You understand that what the stock market’s doing is kind of like that’s the way it is.

Andrew:                              09:07                     You know, get mad at a fish for swimming. You don’t get mad at the stock market for behaving in the way it does and, and you don’t get mad if your stock is falling in that case because you understand that this is just the way of things, the natural way. But that also, so having that historical context helps. Having that kind of ear to the ground helps. But also I think you need confidence in your analysis that the business is doing fine and that this is a temporary thing and that the business model is strong. Another part of, of seeing the strong business model outside of maybe noticing that these historical cycles are kind of normal or maybe the company has these, these sort of temporary dips in their earnings or their revenues, you know, and, and that’s not something to be concerned about.

Andrew:                              10:01                     I think another big indicator for me that makes me feel good about the stock is when they have a strong balance sheet. So you know, I can have a stock that may earn 50% less than; ideally, I would like it to or that Wall Street would like it to. But the main, if they’re stuck with, with all these assets, they have all this property, maybe they have all this inventory or all this equipment or even just a ton of cash on their balance sheet, or they have like no debt. It’s very hard for a company that has no debt to go bankrupt unless they suddenly have terrible, terrible losses where you know, they’re like throwing cash into a furnace, and you can pick those out too. So I think having, to understand the balance, you need to understand the fundamentals of financials and the business.

Andrew:                              10:49                     So it kind of all circles back to whether it’s the value type indicator spreadsheet, whether it’s some other valuation tool, whether it’s, making your kind of analysis based on whatever metrics you know, and then building that base of knowledge as you go along. All of those sorts of things help you make that decision. So the question doesn’t become, what are my options? What am I options for having a falling stock until it’s too late? Right. , the question becomes, is the stock falling? Because the business is really in trouble or because it’s just a temporary thing. And so the question then is, am I selling because yes, the business is bad or am I just going to hang on? And so if I’m hanging on, is it a loss? You know, can’t use the words to accept your loss. Yes, you have to accept your loss when it’s a stock in a business that hasn’t performed from a business perspective the way you’d like, but if it’s something that you’re confident is going to bounce back based on all of these things I’ve said, then it’s not really a loss. And this, I think buffet said, or somebody said a quote where it’s, it’s not a loss until you sell. And so in those cases you’re, you’re hanging on and waiting for the further developments — so good question. A good follow up to what we talked about in that episode. Hopefully, it wasn’t too repetitive, but those are the types of things I would think of when it comes to a stock that’s falling.

Dave:                                    12:24                     Yeah. Those were the things I would think about as well. , all those, all those different ways of looking at it. And I, you know, I guess the, to hammer your point about the difference between the kind of the near term and the far-term. Look at the company yesterday when the Fed announced those losses are the losses, the cuts in the rates, particularly the banking sector got hammered, yesterday, and it will bounce back because most of these companies haven’t even reported their financials yet, for their next quarter.

Dave:                                    13:00                     And so the fundamentals of the company hasn’t changed, but now all of a sudden the stock is going down because they’re anticipating that it could change, but they don’t know. And so wells Fargo was taking a beating yesterday because everybody thinks they’re going to make less money because of the cut in the rates and you won’t know that for another two or three months. So it’s, it’s, you know like Andrew was saying, it’s an overreaction to a short term news event. You won’t know until the next, the next quarterly reports come out, or that, or the annual report comes out. And I think having the advantage to having a smaller portfolio that we’ve talked about in the past is you don’t have a lot of things to look for. And so if you have 15 to 20 stocks, then that’s 15 or 20 things that you can easily create.

Dave:                                    13:53                     You know, a checklist if you will, of things that you can look at on a quarterly or every six month basis and looking at a way of, you know, analyzing, you know, it could be just a simple thing like just looking at revenue, earnings and debt-equity and that’s it. And maybe those are the only three things that you pay attention to. And if you find something in any of those ideas that look like it could be, you know, something that is caused for our alarm, then you can dig deeper into it. But I think a great focus is a debt to equity. Because as Andrew very adroitly said, if a company has no debt for them to go bankrupt is going to take something catastrophic. You know, like every iPhone all of a sudden immediately burst into flames and nobody can use them. Well, that would sink apple pretty darn quick, but they have almost no debt on them, on their under books.

Dave:                                    14:52                     And so for them to have a permanent loss that would be significant would be, you know, a catastrophic event and so, and something like that as something that you’re going to be ordered to in the news. And I’ll give you another example of kind of a difference between the examples I was showing you and something more permanent. So everything that we talked about a couple of episodes ago with Gamestop and my investment with them, they’re down, it’s now down to $3 and 83 cents a share. So it’s even fallen further from two weeks ago when we discussed the stock. And so those are something that’s a permanent loss. And what do you do with that? You either, you either hang onto it and the vague, vague hope that it’ll go back up or you accept your loss and sell out of it and try to learn from, from what happened.

Dave:                                    15:44                     And you read a lot about that, that people try to learn from their mistakes as much as they do about their gains or their good choices. And I think that’s one of the crucial things that people need to focus on when they’re talking about investing, is trying to look at what happened, why did it happen, what, what kind of fallacy did I fall into? Was I making a good assessment of what was going on with the company? And in my case, obviously I was not, and like I told Andrew, I was drinking the Koolaid. I wanted to like the company because I fell in love with it. And so I did, I tainted what I was looking at based on that. And those are, that’s a normal fallacy. It’s a normal thing to happen to people, but that’s something that you can do when there is a loss with your company is you can try to look at what happened and why it happened like that.

Dave:                                    16:42                     And unfortunately it’s part of the risk of investing in, in a company, in the stock market is that there are, there are going to be losses sometimes and not everybody’s going to hit it out of the park. Even Warren Buffett has had mistakes. Charlie Mugger has had mistakes, but when these providers had mistakes, he had a company that he invested in not too long ago that went bankrupt, and he lost a lot of money, and it’s unfortunate, and it was a mistake on his part. But you know, he, he incorrectly assessed the management of the company, and that’s what caused the company to go bad was they made a buck. They made a bunch of very bad decisions, and it caused the company to go bankrupt. So nobody’s perfect, and you know, try not to beat yourself up when you’re, when you’re looking at these things and try not to let it discourage you from investing in the stock market. Because as Andrew and I have talked a lot about, this is one of the greatest ways to create wealth for yourself as you get closer to retirement or any other options that you want to have farther down in your life.

Andrew:                              17:44                     That was very good. Brilliant. I think. Said after that. Okay. Okay, so let’s, let’s answer the second part. So what happens when a company leaves the stock market? Does this only happen when they declare bankruptcy, or are there other times also what happens to shareholders’ investments? So there are several ways that a company could exist. So a company could go private. We saw this with Dell computer a couple of years ago. Basically what happens is whether that’s a group, like whether it’s a group inside of the company, insiders, management, and board of directors, a what, or if it’s just some private group with a bunch of money and they want to take ownership of that company. So they can make an offer, hey, we’re going to, we’re going to pay, let’s say, Dell, I don’t remember what they closed that. I think it was something like $30 a share. So, hey, we’re going to, we’re going to pay $30 a share to all of your shareholders. Um, and so that comes out to whatever, $2 billion, whatever it is.

Andrew:                              18:48                     And then now the shareholders, they, they, they hold a vote, then they say it’s called the proxy vote and they all vote on whether they want this deal to go through or not. And so if the deal does go through, um, the group that is taking ownership of the stock, they pay the money, and then they acquire all the shares, and all the shareholders get the pay that and then that company’s ticker symbol disappears and it’s gone. Another way is a merger and acquisition. We’ve talked about those in the past, in the archives and similar kinds of the story except instead of a private group taking it, it’s a public corporation. And so there’s a lot of different ways those transactions can go through. It can be an all-cash thing. Like the example I just said, it can be a mixture of you get some shares of the company that’s acquiring the business you own or, um, you could get all shares and no cash.

Andrew:                              19:47                     So those are some of the things that could happen. And then the same thing happens where the ticker goes away. What I found interesting, as an aside real quick is as I was doing a lot of historical research on, a bunch of different stocks and even with some of the stocks that I’ve owned so that I would like to recommend some for the leather. And then I was even; I was tracking them, I was doing this for a while where I was tracking them after I sold and to see how they did afterward. And that’s kind of, if you want a good way, the torture yourself, that’s a great way to do it because now not only are you highlighting the times where you sold for a loss, but then you’re also seeing them recover and bounce back and now you see how much you could have gained.

Andrew:                              20:30                     So I don’t know if I would recommend doing that. Um, but, as an effect, effective doing that, I saw two or three stocks I owned that eventually became acquired in a merger and acquisition. And when you research, on the history of the stock market, the history of stocks, backtests, things like that, there’s not a lot of talk about how those and of um, transactions happen. And so I think, you know, as we talked about this, at least a year ago I think where I have that booklet, right, with all these different stocks back in the 70s, and, and this big long list and some of the stocks on, there are a bunch of names that we just never heard of in today’s world. But you know, so s coming as somebody you might think, oh, well those have just been a bunch of stocks that have gone bankrupt.

Andrew:                              21:26                     And so those would have been terrible investments. But that’s not always the case. A lot of these stocks can and do get acquired or go private, and so you don’t hear their names anymore, but the shareholders aren’t necessarily left out to dry. They can also be handsomely rewarded. And now they can take that cash and move it towards a different investment in the stock market. A lot of times with the mergers and acquisitions and even companies going private, you know, the, as those proxy votes happen, a lot of times they’re not going to agree to the deal unless it’s a good deal for them. And so a lot of times a company who wants to acquire another company will have to pay a premium for that. And so as a shareholder who owns that, that’s generally a pretty nice, pretty nice deal for you. So, you know, don’t, don’t look at the past and look at how, how much the names have changed and made them make you think that all those past companies went bankrupt.

Andrew:                              22:26                     That’s not always the case. And understand that this is a way that stock tickers kind of leave, the indexes. And then obviously the last thing that happens is a bankruptcy, which we’ve covered that in the past too. Um, those leave the index. What happens is goes to the courts. Usually, the stockholders get nothing. The bondholders sometimes get some of their investment back, but all depends on how much money’s left, how much, how many assets are left. And sometimes the bondholders get like 40 cents on the dollar to what they were owed. So this is um, kind of the, the different scenarios. There might be a couple more. I’m not thinking of it in general. These are the big ones that you’ll tend to see, and so it’s not always bad and kind of what I was saying a couple of weeks ago, I tend to have maybe that personality where I look at the worst case scenario, which will be great. But at the same time, um, maybe that kind of sheds a negative light on really, um, some of the great things that happen with the stock market. And so I think, you know, holding stock in a company that gets acquired can be an excellent thing. The ideal is to have these types of long investments where they could pay you dividends. I continue to increase, and you have a nice income forever. But also taking the gain every once in a while is nice too, and that can happen as companies leave the stock market.

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Dave:                                    24:01                     Hello, Andrew. , I’ve been trying to binge your podcast as much as I can. We talk so much about dividends. However, I started investing in Robin Hood started in early May before I heard you don’t like Robin Hood. Haven’t quite understood why yet. I have thrown money into it way too fast without making much thought besides looking at which companies I know that are successful like Disney and will continue to do so. Other ideas they use, we’re looking at a three month, one year and five year past and if they seem to be trending up, I bought some, but back to dividends. I’m trying to figure out how to make money based on those because I only have made 30 cents on one stock so far and 18 cents on another. I couldn’t imagine investing millions to make thousands of dividends because it would take me a hundred years to get to that point. I don’t know enough about investing obviously to get the ins and outs, which is why I’m listening to your podcast. I appreciate the time taking to answer my question. Andrew, what are your thoughts after all you are the Drip King.

Andrew:                              25:10                     I love it. So, um, the Robin Hood thing, I don’t want to get too into that. I think maybe re-a listen to the episode, bunch of reasons why their business model, um, there are better options for a standpoint and the fact that they don’t drip, which kind of leads into the second part of the question. And so yeah, totally get the whole thing with the dividends and seen such small amounts in the beginning and thinking, how is this ever going to make me wealthy? I get that. And that’s good; it’s a, I think it’s a, it’s a, something that began there. Investors need to get past. And I think a lot of them need to. And so I talked a little bit about um, being optimistic and, and some examples of companies that if you invested and did the drip, how I became fantastic returns for a lot of these investors.

Andrew:                              26:09                     The, the thing I would say about this is when you look at a dividend, you don’t want to look at it as a one-time thing. So when I’m buying a stock, and I’m buying it for the dividend, I’m not buying it for the dividend today. I’m buying it for the dividend ten years, 20 years, 30 years and 40 years later and the, and the most ideal of cases. And so what’s nice about buying a stock with a dividend as you’re just putting that money in once and now you have an income stream. So think of it like the way people think about buying rental properties. People like to buy rental properties because you kind of, you have the mortgage that you pay off once, but then now you’re getting this recurring sense of revenue from people who are renting from you. And so stock is the same way, except you don’t have a lot of the downsides that come with rental investing.

Andrew:                              26:59                     And so not only do you get, you know, you invest that money once you got a dividend in year one, and then if you hold it again, you get again in year two, year three. So that, you know, if you got 18 cents, it’s not just the 18 cents sister, you’re going to get 18 cents next year and next year, next year, next year. So eventually, you know, hopefully, that, that will pay for your investment on its own. Now you also have to take into consideration that companies are going to grow that every year. So if they’re doing 18 cents this year, maybe next year they’re doing, like I had a stock yesterday eland their pick. I loved, I loved seeing this, by the way, news that they, they upped their dividends by 25%. So you know, if they could do that every year, men, the type of compounding you will see.

Andrew:                              27:50                     So, you know, if it’s 18 cents this year, um, maybe it’s 20 cents the next year, maybe it’s, um, 25 cents next year, 30 cents next year. And so that’s compounding. And companies all are trying to do that when they’re paying a dividend. And if they’re not, you know, you need to get out, and you need to find a company that is so, so that’s growing and you can see how it’s expanding and multiplying over time. And then you can also throw in the compounding that you get from re-investing. So if you take that dividend in year one and instead of saying, Oh, I’m going to buy a piece of gum with it, maybe you put that back into the stock and now you’re accumulating shares of the stock. And so as you accumulate more and more shares of a stock, it’s going to pay you higher and higher dividends. So now the company is growing the dividend, you’re growing the dividend manually by reinvesting.

Andrew:                              28:46                     And so it starts to snowball from there. And like I said, you’re not looking at it year one, I’m looking ahead at year 10 and looking at those dividends. And that’s really where you’ll see the type of returns. So obviously it’s going to make finding the right companies to do that. You want to find companies that are going to grow their dividend. You want to find them that are going to do it without sacrificing the longterm health of the business. So that means you need to be in fundamental, really good companies with good profits and you also need to hang on and, and one thing that we know about the stock market is it goes crazy up and down. And um, kind of like that first question today, you’ll have stocks that fall, and you might feel like it’s, it’s too late. And I wish I would have caught this and sold it before it fell.

Andrew:                              29:35                     While that’s, it’s always going to happen if it’s not the stock, it’s the next stock. So how do you recover from that? So if you’re thinking ten years ahead instead of this year, well then I’m thinking I’m going to hold through this because everything else looks fine. So that’s really what you need to think about with the dividends. And again, I always stress like trying to work through some of those hypothetical examples yourself and really if you can see how the numbers get insane as the longer length you let it compound the, the better stocks you buy that grow their dividend year after year after year. It multiplies through a lot. So yeah, in the beginning, it’s really small. I’ll give two examples of just how powerful this can be. Number one, I first started the leather, this was 2014, and for those of you who don’t know, super quick snapshot, Eli Leather, I have a real-money portfolio.

Andrew:                              30:30                     It’s a Roth IRA. I’m putting a $150 a month in it every month, and I’m buying one stock with that $150 a month. And then those are giving dividends, and I’m reinvesting those in a drip program. So that first year I think I made, cause I started there in October, I wish I had this pulled up, but it was probably less than the dollar in dividends. And then you fast forward three or four years, and I had something like $150 in dividends. So what was that? Well, first it was that first stocks dividend grew. So maybe it grew from like let’s say 18 cents. Maybe it was like, I don’t know, 25 cents. Right? But it, so that grew and then it was accumulating shares, and it continues to the payment that dividend year after year after year. And so that helped to the dividend, payment. And then each new stock you’re buying, that’s, that’s a new income stream that’s coming in.

Andrew:                              31:31                     So not only is it not just the first year, but it’s also all the other investments you have coming in. Those are all adding to it. And then when those are all growing, now it’s multiplying even faster. So I, in that case where I was three or four years later, I had a special dividend come in from one of the stocks. I had a pretty large allocation, and so that’s that combined with the other stocks that were growing, combined with the fact that I have more money in the market versus when I first started. So now we’re talking about $150 in that year in dividends versus just like 18 or a dollar, whatever it was the first year or so. A part of it is patient. Part of it’s the compounding part of it is as you put more money in overtime, that’s going to grow.

Andrew:                              32:18                     But it’s really, I think the biggest thing is putting that money in first and how it’ll pay you a dividend continually and growing continually over time. That’s really how you’re going to make your fortune, so you’re not going to see overnight, you’re not going to see it in year one. I think the perfect example too, to wrap it up with the second example, the perfect example of this is Warren Buffet and I talked about this and then an email I sent out a couple of days ago. He put something like one point $4 billion into Coca-Cola back in 1989, so I don’t even know if I was alive back then or not. But really in the world of investing, that’s not a crazy long period. That’s 20 years. So 1.6 billion today, 20 years later, he is making 600 million-ish in dividends every year from that Coca-Cola investment. So almost half of what he put in back then he’s getting, and not just once, but every single year.

Andrew:                              33:23                     The imagine like if we have those, that type of an opportunity, you know, to make that kind of investment now people would be, everybody would be a billionaire cause how can you, you know, put money in once and have it double basically. Essentially it’s doubling every two years. And those, then those dividends are, he, he’s funneling those into other companies, and they’re making even more money. And that’s really how Buffett’s made his fortune. And it hasn’t been something that’s, that’s because of what he did in one year. It’s something that’s accumulated over the years. So I hope, you know, every, every time I try to introduce drip and, and get people excited about drip, I tried to come at a different angle. And I hope one of these times that I explain it to people, and it lights that fire for you.

Andrew:                              34:13                     And so that’s just another way of, of how these dividends can build great fortunes. It’s a castle’s not built overnight. It’s built brick by brick. And the same thing with your wealth. The same thing with income streams and the same thing with um, the way that dividends are going to make you wealthy. And so those, for those reasons and probably more that I haven’t thought of today are all reasons why you can take those small dividends and, and feel confident that over time it can lead to serious, serious gains.

Dave:                                    34:47                     That’s perfect. And you know, there’s not much more I would want to add to that. I guess a question that I have for you when we talk about the returns of the, of the stock market over the last, you know, period, whatever you want to pick, how much of that is based on, how much is that including dividends or?

Andrew:                              35:08                     You gave me a softball.

Andrew:                              35:11                     This is, talked about in a lot of different investing books. So anywhere from like 60 to 75% of the total return over the very, very, very long term with the stock market has been because of dividends. So that’s gotten lower over time based on a lot of different factors, interest rates, buybacks, but it’s still a significant portion of investor return. And so part of that is the fact that when there’s a bear market or a recession, you’re not getting hardly any or maybe even negative returns from the stock market because stock prices are crashing. So that dividend is keeping your returns afloat, and it’s making up a big part of the return. Um, but the second and the one I think is, is even more of an of a factor. And something that conceptually is kind of like the next level up is this idea that if you’re reinvesting those dividends, um, you’re compounding your wealth, you’re compounding your ownership, and it’s exponentially expanding over time.

Andrew:                              36:17                     And so if I have a stock and I paid 100 bucks on it, and it doubled, let’s say, let’s say a 10 x, 20 years from now, that’s great. I got a 10 x. But if I had dividends, so now instead of $100 of the stock, I have $200 of the stock, then my 10 x on that is 20,000 instead of 10,000. So maybe that’s a great kind of number, numerical explanation in podcast format that encapsulates just how much of a difference compounding and, and dividend reinvestment can make. And it’s, it’s because of things like that.

Dave:                                    36:54                     Yeah, that’s a perfect illustration. And I think that’s one of the things that to me is so, um, exciting about dividends is how much it can grow your money. A while you were talking, I just for Giggles, I pulled up a calculator and a compound interest calculator on the Internet, and if I put in a hundred dollars, just that’s my initial investment, and I don’t make any other contributions over 20 years at three and a half percent. , which would be, you know, a pretty, a nice dividend. You’d earn another a hundred dollars for doing nothing. , I mean s you know, just the continuation of the dividend being, you know, invested, um, which, you know, give you a hundred bucks for doing nothing. I mean, wouldn’t want a hundred bucks for doing nothing. I mean, that’s, I mean, that’s just the power of compounding and you know, what dividends could do for you.

Dave:                                    37:48                     So, you know, yes, you know, drew, when you’re talking about starting, it looks like peanuts, and it may feel like peanuts, but if you, I promise you, if you keep at it, it’s, it’s going to add up, quite substantially over time. You know, it may never get to the Warren Buffet level, you know, that’s, you know, those are the US mere mortals may not be able to afford to buy, you know, one point $5 billion worth of coke., you never know. But anyway, so, um, I think that was kind of my thoughts on that.

Andrew:                              38:20                     No. I mean, yeah, three and a half percent. You’re just taking like the worst case as if the business never grew and it just paid like a steady dividend. That’s it. That’s a great example of compound interest, and stocks can do wonderful things. Businesses can do wonderful things. So the dividend can even be just the cherry on top. Sometimes, it just depends, but I think the options are limitless and the ceiling is so, so high, and dividends can be a big, big part of that depending on which stocks you buy.

Dave:                                    38:55                     Yeah, exactly. I guess another thing is I’d like to illustrate too is you know the point that Andrew made about when the stock is not doing well on the stock market, if it’s paying a dividend, they’re not going to cut that. I mean, unless there are financial reasons that caused them to do that, they’re not going to cut those dividends. So that’s still going to be returned that you’re going to be able to earn even while if the stock is not doing well in the market because of other factors besides, you know, the company not doing well. You know, like we were talking about earlier with Kimberly’s question, you know, if the stock market is, is beating the stock down for whatever reason, if there are economic factors going on but the company’s still making money. Every everything else is doing well; you’re still going to get paid a dividend, which is still going to help you, you know, your wealth growth. So it, you know, there are so many advantages to dividends that it just needs to be something that’s, you know, a part of your investment strategy. Absolutely. 100% all right folks will, that is going to wrap up our discussion for this evening.

Dave:                                    39:58                     I hope you enjoyed our conversation. , we had some great questions, and those were a lot of fun to answer, and I am glad we got to hear that Dirk King and I’m glad he was in the house for us for a little bit today. So hopefully you understand a little bit more about how the power of dividends and compound interest can make you a very wealthy person if you stick with it. So without any further ado, I’m going to go ahead and sign us off. You guys go out there and invest with a margin of safety. Emphasis on the safety. Have a great week, and we’ll talk to y’all next week.

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