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Why would you invest on high dividend stocks?

is it important the amount the dividend increase yearly?

Think of a share of 10€ that pays an annual dividend of 4,0%, 0,40€. Imagin that you invest there 10.000€, so you buy 1.000 shares. If the dividend and the price increse yearly a 6%, the result after up to 20 years will be:

Year

Price

Investment

Dividend

Amount

%

0

10,00

10.000,00

0,40

4,0%

1

10,60

10.600,00

0,42

4,0%

2

11,24

11.236,00

0,45

4,0%

3

11,91

11.910,16

0,48

4,0%

4

12,62

12.624,77

0,50

4,0%

5

13,38

13.382,26

0,54

4,0%

7

15,04

15.036,30

0,60

4,0%

10

17,91

17.908,48

0,72

4,0%

15

23,97

23.965,58

0,96

4,0%

20

32,07

32.071,35

1,28

4,0%

An increasing dividend policy is important because:

  • After 20 years, the dividend yield will continue being 4,0% of share price, but if you compare it with the amount you invest originaly it is a 12,8% yearly.
  • Apart from that , the shares bought for 10.000€ would be valued at 32.070€.

Before