Capitalism.com with Ryan Daniel Moran

Reinvesting dividends! It sounds boring.

 

Just wait ‘till you see the compounding cash flow numbers on this strategy, you’ll understand why it’s the only reason Ryan cares about dividend paying stocks at all.

 

Are you looking for an investment workhorse that will build a nest egg for your future? Pick up a good habit and put 10% of your earnings into this long term strategy.

 

Key Takeaways

[2:55] Ryan starts off by sharing his personal minimum criteria: a stock that pays a minimum of 4% and has raised its dividend every year for at least 10 years.

 

[5:35] As an example we’ll use AT&T whose stock trades at about 40$ a share.

 

Let’s buy a hypothetical 300$ worth at a 6% dividend a year for a measly 18$ a year.

 

[7:08] AT&T have raised their dividend for at least 10 years: let’s posit a 10% annual raise.

Y1 — 6%

Y2 — 6.6%

Y3 — 7.3%

Y4 — 8%

Y5 — 8.8%

Y6 — 9.8%

Over 10 years these numbers become really interesting.

 

[9:03] The next step is the dividend reinvestment plan:

Y1 — 10 shares at 6% reinvested

Y2 — 10.5 shares at 6.6% reinvested

Y3 — 11 shares at 7.3% reinvested

Y4 — 12 shares at 8% reinvested

Y5 — You see where Ryan is going with this...

 

[11:35] There is a double compounding effect over time which means that at some point when you stop reinvesting, you still have cash flow, and you still own the underlying stock which means you can sell it, borrow against it, etc.

 

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Direct download: FFL_6_03.mp3
Category:Business -- posted at: 5:00am EST