Wednesday, February 20, 2013

The joy of dividends

Consider the following scenario:
Your friend, Joe, just got a job at Wal-Mart for $10 an hour. After FICA and other withholding he takes home $8. Over the course of the next two weeks Joe works 86 hours. That's 10 days, 8.6 hours a day, from 9.00 till 17.36, without breaks, sitting behind the cash register, sweeping floors and dealing with customers. 
At the end of this period his manager writes him a check for $688. Joe walks out of the building, to the parking lot, hands me the check without saying a word. I put it in my pocket, step into my car, and drive off into the sunset. Those 86 hours, as Joe was working, I was playing video-games, hanging out with friends, reading, watching movies and relaxing. Yet, I now have his paycheck.


The point of this story? I wanted to illustrate why cash dividends bring me joy. 

I started collecting cash generating assets back in September 2011, focusing on dividend growth stocks. Since then I've been putting in $1000-$1500 a month into stocks, buying conservatively managed, financially strong, wide-moat businesses which have a history of raising cash distributions to their shareholders each year. 


2012 was my first full year of investing, in January 2012 my portfolio stood at a meager $7,000 and January 1st 2013 my portfolio had grown to $20,800. Along the way I collected $688,06 in cash dividends, which I reinvested into more cash generating stock. I didn't actually have to work for that cash that got deposited into my broker account, I just had to invest my capital into quality businesses. They made that $688,06 for me.
Just as if a hardworking employee of Wal-Mart had given me their net earnings for 86 hours of work. If you go through life making decisions like that, you find that the cash flowing into your portfolio can continually expand so that a trickle becomes a drip, a drip becomes a stream, a stream becomes a torrent and a torrent becomes a deluge.

I've collected $688,06 and that is just year one for me, I can't wait till I'm 5, 10, 25, 40 years down the road and really see the brute force of compounding kick in.

Thanks for reading, take care. 



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