Sound too good to be true?
This is not some “snake oil scam” or “get rich quick scheme”to trick you into reading this article.This is the absolute truth and one of the most compelling reasons to invest in dividend growth stocks.
How would you feel about getting a 9% raise every year?
Better yet, how would you feel about getting that raise by doing nothing except holding onto a great dividend paying stock?
This is an example of the power of dividend growth.Not only can you re-invest your dividends to leverage the power of compound interest, the dividend growth exaggerates that power even more! You really can’t afford not to invest in dividend growth companies over the long term.
The Math To Prove It!
Consider Bank of America (BAC) and their rather juicy 4.40% Yield.
Here are the yearly dividends paid on Bank of America stock over the past 5 years:
- 2006 – $2.12/ share
- 2005 – $1.90/share
- 2004 – $1.70/share
- 2003 – $1.44/share
- 2002 – $1.22/share
Had you purchased Bank of America stock in 2002, you would have received an average of a 9% raise in cash flow every year by doing nothing but holding the stock. When’s the last time you got a 9% raise for doing nothing?
Are you ready for something even better?
Assume that you purchased your BAC stock on this day in 2002. Your split adjusted (Aug. 2004) purchase price would be $38.45.
Not only are each one of those shares worth about $51.00 today, for a 32% capital gain, you also have a current dividend yield of 5.5% on your purchase price!