How Much Do You Want to Make?

If you’re an investor who needs income now, I’ve shown you how you can double your yield within ten years by owning stocks that grow their dividends by 10% per year every year.

The increasing yield on cost should stay ahead of the pace of inflation and, if inflation doesn’t get too ugly, put a little extra in your pocket as well.

But where this method of investing really gets exciting is when you reinvest the dividends.

We’d all like more income today. But if you’re an investor who doesn’t need the income right away and can put off instant gratification for long-term benefits, reinvesting your dividends can generate the kinds of returns you probably thought were impossible.

For example, you can triple your money in ten years owning stocks that go up less than the market average.

A stock with a 5% yield that grows its dividend by an average of 10% and whose price rises 6%, below the 7.48% long-term average of the S&P 500, generates a compound annual growth rate of 12.34% over ten years. An investment of $10,000 turns into $32,028.

Just five years later, that $32,028 nearly doubles to $62,754; it more than doubles again five years later to $132,757 for a compound annual growth rate of 13.8% and a total return of 1,227%.

So for those of you who have 20 years, a $100,000 investment today would be worth $1.32 million in 20 years.

The dividend reinvestment strategy gets its power from compounding dividends. The concept of compounding is something that should ...

Get Get Rich with Dividends: A Proven System for Earning Double-Digit Returns now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.