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Dividend Paying Stocks
I would like to share with the reader an article printed in
the financial section of U.S.A. Today on March 7, 2003 which exemplifies the awesome power of a stock dividend.
MICROSOFT TO ISSUE FIRST DIVIDEND TODAY:
Microsoft investors will get their first payday today,
when the tech giant shells out its first dividend. At 8
cents a share, the dividend will cost the company $850
million. Co-founder Bill Gates, who owns about 1.2 billion
shares will receive a dividend of $96.5 million. The
dividend marks a shift for Microsoft, which had long
hoarded cash - to the tune of $43.4 billion – for research,
acquisitions and legal claims.
After reading this article I couldn’t help thinking about a
report, which I believe stated that there were an estimated
33 million people in America living under the official
poverty level. Bill Gates, by giving away his Microsoft
dividend to those living under the poverty level could begin to create 96 millionaires, year after year after year. What a boost to the economy that would be! Imagine all those new millionaires every year spending money on something other than food, Salvation Army clothing and shelter.
Bill Gates (by giving away his Microsoft dividend) could
begin to eliminate all the hardships for those people
currently living under the poverty level. Of course, I would probably start feeling sorry for all those people who were living right at the poverty level. I could almost hear Ma telling Pa now, “If we only didn’t sell those $40.00 worth of aluminum cans, we could have been millionaires right now.” Then again, those newly created millionaires would probably begin buying computers filled with Microsoft
software and Bill Gates would start getting his money back.
And, if that wasn’t enough, the newly created millionaires
probably hadn’t read my book! They would probably start
using their computers to start day trading in the stock
market and end up right back where they started. Holy moly!
I better finish this book or they won’t stand a chance!
(Note: Bill Gates and family have already given millions and millions to charity. It was announced on CNBC that on April 24, 2003 Bill Gates had just donated 28 million dollars to S. Africa’s AIDS program.)
As an individual investor in the stock market for almost 40
years I have found that companies that raise their dividend
every year outperform those companies that stop or trim
their dividends.
For example, Dominion Resources had raised their dividend
from 1984 to 1994 every year, and then stopped in 1994.
Since then the company continues to pay a 64½ cent a share
dividend, with a dividend yield of around 4 percent a year.
The stocks performance since 1994 has been mediocre, rising
in price from the 40 dollar range in 1994 to the 60 dollar
range in 2004.
Now compare that stock’s performance with Comerica, a
company that has raised their dividend for the past 35
consecutive years. In April of 2003, Comerica’s stock price
was around 37 dollars a share, paying a dividend yield of
around 5%. Today, July 20, 2004 the stock closed at $58.28 a share, paying a dividend yield of 3.57%. A $21.00 a share
move in the stock in 1 year and 3 months and in March of
2005 the company will probably raise their dividend again
for the 36th consecutive year. (By the way, Comerica’s stock performance for the past 14½ years (with dividends being rolled back into the stock) has returned a little better than 15% a year, compounded annually.)
The simple point I’m trying to make is to invest in those
companies that have a history of raising their dividend
every year. There are hundreds of them. A company that just
pays a dividend is not good enough; find those companies
with a historical record of raising their dividend every
year.
For more excerpts from the book ‘The Stockopoly Plan-
Investing for Retirement’ visit: http://www.thestockopolyplan.com
Charles M. O’Melia is an individual investor with almost 40
years of experience and passion for the stock market. The
author of the book ‘The Stockopoly Plan’; published by
American-Book Publishing. The book can be purchased at
www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml
