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On This Day - 14 MAY 2019
3 Stocks to Bet on to Become a 'Dividend Millionaire'

Richa Agarwal, Research analyst

It's a real story...

In late 1940s, Quincy, a town in Florida, became the richest (per capita).

It wasn't the natural resources or a flourishing trade that helped the city bag this title.

It was in fact, one man's taste for aerated drinks.

That man was Pat Munroe, a well-known banker in the town.

In the 1920s, when the entire US economy was caught in the grip of recession, Munroe made an interesting observation. He noticed that while people were cutting down spending amid the slowdown, one small luxury they were not willing to give up on was a bottle of Coca Cola. This was a product with evergreen demand.

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Amid a conflict with bottlers and sugar companies, the stock had crashed 50% from its offer price when it went public in 1919. A savvy Munroe began loading up on the shares of Coca Cola. He further asked the folks in the town to do so. He even lent money to people to buy Coca Cola shares, and underwrote bank loans, backed by these shares.

Over the next two decades, Quincy perhaps was the only town that was relatively unscathed by the great economic depression, thanks to the dividends from the stock. Some used these to buy more of the stock.

Over the next two decades, this modest farming town became the richest town (per capita) in the US.

As per the news reports, Quincy became home to at least 67 'Coca Cola Millionaires', who passed this wealth to next generation.

Here's the most fascinating part...

Since listing, the stock has undergone multiple splits. As per various reports, a US$40 investment (offer price for Coke) in 1919 would have multiplied wealth by over 5,50,000 times, assuming all dividends were reinvested. Someone who chose to not reinvest dividends and spend them instead, would have multiplied wealth by over 20,000 times!

I'm sure a lot of you would be wishing your grandmas were born then and had followed Mr Munroe's advice.

Such is the power of well-run dividend paying companies.

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When bought at reasonable valuations...they can be the best compounding vehicles.

But dividend investing is hardly this simple.

A company that borrows to pay you dividends is unlikely to add any value to your portfolio. Also, you can't just bet on the stocks with high dividend yield. You must make sure that these dividends will keep flowing.

The key is to bet on bargain stocks with solid fundamentals, that are led by competent and ethical managements, and offer healthy dividends too. My recent report - Steady Income Smallcaps shares 3 such dividend multibaggers opportunities.

As markets continue to rattle amid earning season, upcoming elections, volatile crude price and US China trade war, it's a great idea to add some stability to your portfolio by adding dividend stocks.

Warm regards,

Richa Agarwal
Richa Agarwal
Editor and Research Analyst, Hidden Treasure

PS: Bet on these high potential small caps with regular pay cheques... get our Steady Income SmallCaps report with 3 dividend stocks you could consider buying right away.

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