Each time you invest your hard-earned cash in mutual funds, ETFs, stocks, bonds, CDs, or GICs, there’s that inner voice saying “what happens if the invest tanks and I lose my money?”. As an investor your mind races with questions like:
- What if the stock market crashes?
- What if corporate executives are stealing money from the business?
- What if the financial results are made up, and the company goes bankrupt?
- What happens if I lose my savings?
These are valid questions, and the solution is to build a money producing machine. A machine that will provide you with a constant stream of growing income. I achieve that by investing in quality companies that provide a constant stream of growing dividends.
Dividends are real, just like the cash in your pocket.
“In other words, a company can tell you about its earnings, but there is always a certain ‘flexibility’. There is no flexibility when it comes to paying and increasing dividends. The company must have the cash to pay you. What you see is what you get. Through the dividend, a company can show you how well it’s doing. So dividends are real, like the income from an apartment building or from a liquor store or from a bank CD [term deposit]. And dividend growth is real. Neither dividends nor dividend growth is some propaganda from the company, nor some hype from a brokerage firm or newsletter writer, nor some error in judgement by a finance magazine.”*
Let’s take a look at a real-life example. In 1988 Wal-Mart’s dividend was $0.01 per share, today the dividend is $1.96.
A $4932 investment in Wal-Mart back in 1988 would generate $18,816 in dividends annually today. Plus your shares (all 9600 of them) would be worth $799,104 today. And don’t forget dividend growth, Wal-Mart been consecutively increasing dividends for 42 years now. So, there’s a very good chance the $18,816 in annual dividends would increase next year as well.
Focus on dividends, hold your shares for the long-term, and your money producing machine will continue generating growing cash for years to come.
Did you enjoy reading this article? If so, I encourage you to sign up for my newsletter and have these articles delivered via e-mail once a month…and it’s free!
*p. 34, The Single Best Investment, by Lowell Miller