Dividends

Earning $417,792 from just one stock?

By Kanwal Sarai
Categories ▾
Imagine earning $417,792 each year for the rest of your life, and getting annual increases too! I’ve written many times about the power of dividends especially increasing dividends. Now let’s take a look at a real-life example with Wal-Mart.

Wal-Mart shares multiply

Wal-Mart became a public company on October 1, 1970 and started issuing shares at $16.50 each. Since then the company has had eleven 2-for-1 stock splits. Basically this means that if you purchased 100 shares in 1970, today you would own 204,800 shares:

1970: 100 shares

1971: 200 shares (2:1 split on 6/11/71)

1972: 400 shares (2:1 split on 4/5/72)

1975: 800 shares (2:1 split on 8/22/75)

1980: 1,600 shares (2:1 split on 12/16/80)

1982: 3,200 shares (2:1 split on 7/9/82)

1983: 6,400 shares (2:1 split on 7/8/83)

1985: 12,800 shares (2:1 split on 10/4/85)

1987: 25,600 shares (2:1 split on 7/10/87)

1990: 51,200 shares (2:1 split on 7/6/90)

1993: 102,400 shares (2:1 split on 2/25/93)

1999: 204,800 shares (2:1 split on 4/19/99)

Suppose you purchased 100 shares in 1970, your initial investment would have cost you: 100 shares x $16.50 = $1650

Worth over $19.9 million today

Your $1650 investment would be worth over $19.9 million today:

204, 800 shares x $97.48 = $19,963,904

Dividends are even better

Today the annual dividend per share for Wal-Mart (WMT) is $2.04.

If you had invested $1650 in Wal-Mart in 1970, today you would receive $417,792 in dividends each year:

204,800 shares x $2.04 dividend = $417,792

Dividends continue to grow

Wal-Mart has also increased its dividend for more than 44 consecutive years; therefore it is highly likely that the $417,792 would continue to increase in the future. Not a bad way to earn $417,792 annually, think of all the money you’ll save without having to drive to a job every day  🙂

How should you invest?

This example shows you the power of holding a quality dividend paying stock for the long-term. This example is not meant to dissuade you from investing, don't think you had to start in 1970, you could have started 5 or 10 years ago. Or you could start today. Focus on buying quality dividend paying stocks when they are undervalued, then hold for the increasing dividends.

When it comes to investing the Simply Investing way, patience is very well rewarded!

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Showing 6 comments
  • dividendgeek
    Reply

    Just for comparison 1,650 in 1970 is equivalent to 10,756.21 in 2018. This is only considering CPI. If you take into account medical inflation it might be a lot more. So, 1650 might look small now but was not definitely easy back in 1970. Investing remains elusive to lots of people today and was probably the same years ago :-). Investing is definitely good … I hope more Americans can achieve it.

    • Kanwal Sarai
      Reply

      That’s a good point. Let’s assume we divide everything my 10, so the person bought 10 shares for $165, worth about $1075.62 in today’s dollars, that would still generate $41779.20 annually in dividends. Dividend value investing takes time, and the sooner people start the better off they will be. Thanks for sharing your comments!

  • Steveark
    Reply

    My dad invested $1000 in WalMart stock in two chunks, he even had the real paper stock certificates which my brother and I eventually inherited. They weren’t worth $16.9 million since he didn’t get them right at the start of the company but the $1,000 still grew to $80,000 by the time we inherited them. It was actually kind of hard to figure out how to sell real paper stock certificates but we did eventually get them turned into digital accounts.

    • Kanwal Sarai
      Reply

      Great story, it really shows the power of investing over the long-term. Thanks for sharing!

  • Raihan
    Reply

    Kanwal need your opinion on Walmart with reference to Amazon. Lately there is lot noise in the media re Amazon threat. Thanks

    • Kanwal Sarai
      Reply

      The Walmart vs Amazon debate has been going on for a long time now. I do not know which company will be the leader in the retail space. But I do know that in every market there are at least 2-3 top leaders (Coke/Pepsi, Exxon/Chevron, Ford/GM, IBM/HP), in order to diversify your investments buy the top 2-3 leaders in their space when they become undervalued and are still quality dividend paying companies.

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