The most powerful investment tool is compound interest. If you have a mortgage or a loan, you know the cost of compounding. For your savings and investments you want compounding to work for you, The higher the interest, the more money you will make in the long run. In the stock market while many focus on increasing prices, the other part of the market is interest (bonds) and dividends.
There is a website which allows individuals to look at how compounding dividends has grown the value of the stocks. The website is longrundata.com. A simple example is Johnson and Johnson – some of you know the name for household products including Johnson Baby Haircare, Band-aids, Tylenol, Reactine and a host of other products. The company has paid dividends for years – if you had invested $1,000 in the stock in 1970 and reinvested the dividends, the value would be $213,375. If you had used some of the savings from Wal-Mart and invested since 1977, your return would be 23% and the 1,000 would be $1,864,750.
Linking to dividend paying stocks, buying a dividend paying company which has consistently raised its dividends and expects to continue is a great investment. The stock price will go up and down, but the compounding is where the stock receives its extra boost. There are great examples of good companies all over the place, with compounding it does not take a lot of money to get started but does take a number of years to see the results. If you want overnight riches try for growth stocks, if you want long run proven returns dividend paying stocks is a good path to take.
There are more questions than answers, till the next time – to asking questions.
Below is a list of companies on the exchange and the type of returns for a low risk investment from the website longrundata.com. Starting or adding to companies such as these has proven to be a good investment.
The S&P 500 Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.
Number of Constituents as of Jul 02, 2013: 41
| Company | 5 Years | 10 Years | 25 Years | Years |
|---|---|---|---|---|
| 3M Co. | 4.21% | 6.65% | 6.71% | 54 |
| Abbott Laboratories | 9.62% | 8.19% | 13.29% | 40 |
| AFLAC Inc | 10.87% | 19.27% | 16.41% | 30 |
| Air Products & Chemicals | 10.99% | 11.92% | 9.98% | 30 |
| Archer-Daniels-Midland Co. | 8.76% | 12.27% | 12.76% | 37 |
| AT&T | 4.39% | 5.14% | 5.87% | 28 |
| Automatic Data Processing | -22.79% | 13.29% | 14.65% | 38 |
| Bard, C.R. Inc. | 6.1% | 6.14% | 8.15% | 41 |
| Becton, Dickinson & Co. | 12.58% | 16.69% | 12.54% | 41 |
| Bemis Co Inc. | 3.55% | 6.76% | 10.11% | 29 |
| Brown-Forman Corp B | -16.27% | 9.65% | 14.81% | 29 |
| Chubb Corp | 7.17% | 8.89% | 7.31% | 47 |
| Clorox Co. | 11.8% | 11.3% | 11.66% | 35 |
| Coca-Cola Co. | 8.45% | 9.81% | 11.31% | 50 |
| Colgate-Palmolive Co. | 11.75% | 12.98% | 11.15% | 49 |
| Consolidated Edison Inc. | 0.85% | 0.87% | 1.99% | 38 |
| Dover Corp. | 11.55% | 9.43% | 9.83% | 57 |
| Emerson Electric Co. | 8.13% | 7.54% | 9.04% | 56 |
| Exxon Mobil Corp. | 9.74% | 9.01% | 6.28% | 30 |
| Family Dollar Stores Inc. | 12.8% | 12.44% | 18.66% | 36 |
| Franklin Resources | 11.1% | 14.46% | 19.31% | 31 |
| Genuine Parts Co. | 6.28% | 5.49% | 6.53% | 56 |
| Grainger, W.W. Inc. | 17.96% | 15.65% | 11.64% | 41 |
| Johnson & Johnson | 8.18% | 11.68% | 13.53% | 50 |
| Kimberly-Clark | 6.9% | 9.45% | 8.79% | 40 |
| Leggett & Platt | 7.89% | 8.59% | 18.18% | 41 |
| Lowe’s Cos Inc. | 18.2% | 31.1% | 16.52% | 50 |
| McDonald’s Corp. | 13.86% | 28.43% | 16.69% | 36 |
| McGraw-Hill Cos Inc. | 4.46% | 7.18% | 6.53% | 39 |
| Medtronic Inc. | 21.92% | 15.49% | 19.41% | 35 |
| PepsiCo Inc. | 8.35% | 13.59% | 12.51% | 40 |
| Pitney Bowes Inc. | 0.79% | 2.43% | 8.62% | 30 |
| PPG Industries Inc. | 2.78% | 3.31% | 5.92% | 41 |
| Procter & Gamble | 10.21% | 6.9% | 10.84% | 56 |
| Sherwin-Williams Co | 4.36% | 10.12% | 10.12% | 34 |
| Stanley Black & Decker | 8.09% | 6.16% | 6.1% | 45 |
| Sysco Corp. | 7.28% | 8.68% | 21.24% | 43 |
| Target Corp. | 20.48% | 18.59% | 12.06% | 45 |
| VF Corp. | 6.32% | 12.06% | 8.72% | 40 |
| Wal-Mart Stores | 12.59% | 18.16% | 20.51% | 38 |
| Walgreen Co. | 23.65% | 21.22% | 14.39% | 37 |
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