|
Dividend Paying Stocks
By: Charles O'Melia
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.
To read the PREFACE from the book ‘The Stockopoly Plan- Investing for
Retirement’ visit: http://www.thestockopolyplan.com
About the Author:
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 http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml |
