|»Profit Hunter by Equitymaster|
On This Day - 14 MAY 2019
3 Stocks to Bet on to Become a 'Dividend Millionaire'
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.
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.
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.
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.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement
Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407