Forget making a profit; instead focus on the income provided
from your stock portfolio. That's right! Forget making a
profit. The burden is now lifted - no more pressure on making a
buck in the stock market. (Instead of trying to bend the spoon,
that is impossible, instead just think of the spoon as ?
omigosh! - I'm in the Matrix!) When you focus on the amount of
money your holdings are providing in dividends ? and when those
companies selected have a history of raising their dividends
each year ? a lower stock price allows the dividends that are
being rolled back into the stock to accelerate your income. The
total value of your portfolio may go lower, but your income
from that lower priced portfolio would increase dramatically.
Profit by income!
To demonstrate this tip, I'm going to take you back in time,
but the strategy of that time is just as viable today, as it
was in the past. The year is 1990, the stock for the
demonstration is Comerica, and the amount of money invested was
$3,333.34. Comerica (CMA) was selected for one simple reason ?
in 1990 CMA had a historical record of raising their dividend
for the past 21 years. Today's CMA has a 36 year history of
raising their dividend every year.
In January 1990 Comerica was selling at $48.38 a share, paid a
quarterly dividend of 65 cents a share, with a dividend yield
of 5.37% (.65 divided by 48.38 x 4 x 100 = 5.37%). The result
of just holding this stock through the years, never taking a
profit, and simply having the dividends reinvested each quarter
(commission-free) back into the stock is chronicled below:
These are the actual returns based on the closing prices of the
stock on the company's dividend payout date (the date a company
purchases their stock on the open market for investors enrolled
in their stock dividend reinvestment plan; The figures were
taken from the research I did, and is from an excerpt from my
book The Stockopoly Plan ? Investing for Retirement.)
Comerica: (with the dividend each quarter rolled back into the
stock) $3,333.34 into CMA in January, 1990 at $48.38 a share:
Shares purchased, 68.90 shares.
Total Amount of shares at the end of 1990: 72.92 shares.
Total Amount of shares at the end of 1991: 115.01 shares.
Total Amount of shares at the end of 1992: 118.85 shares.
Total Amount of shares at the end of 1993: 245.78 shares.
Total Amount of shares at the end of 1994: 256.96 shares.
Total Amount of shares at the end of 1995: 268.78 shares.
Total Amount of shares at the end of 1996: 277.83 shares.
Total Amount of shares at the end of 1997: 285.32 shares.
Total Amount of shares at the end of 1998: 436.65 shares.
Total Amount of shares at the end of 1999: 446.04 shares.
Total Amount of shares at the end of 2000: 463.82 shares.
Total Amount of shares at the end of 2001: 474.47 shares.
Total Amount of shares at the end of 2002: 490.23 shares.
Total Amount of shares at the end of 2003: 512.60 shares.
Total Amount of shares as of April 1, 2004: 522.23 shares.
On April 1, 2004 Comerica closed at $54.65, for the total
market value of $28,539.87 for 522.23 shares of stock. To put
the total $28,539.87 into perspective, an interest rate of 15
percent a year on $3,333.34, compounded annually for fourteen
and a quarter years would return $28,282.15.
Since this excerpt from my book Comerica has raised their
dividend again, from 52 cents a share per quarter, to the
current 55 cents a share per quarter, payable to shareholders
of record on March 15, 2005.
I own Comerica stock and I have no intention of ever taking a
profit! I will continue being a buyer, as long as the company
continues its program of raising their dividend every year.
However, I also understand that in the stock market there are
no guarantees! It is for this reason and this reason alone,
that diversity is a necessity. If I knew for certain that CMA
would continue its program of raising their dividend every
year, and that the next 14 years would provide better than 15
percent return on my money, I would only own CMA stock. It is
because of this 'risk of no guarantees' in the stock market
that the rewards for investing in the stock market are much
higher than a passbook savings account, CD's or Bonds.
So, to beat the 'risk of no guarantees', and to reap the
benefits of a better return, I diversify into other companies
with the same historical performance. Through a systematic
approach of dollar-cost averaging into my stock positions every
quarter, along with my quarterly dividend reinvestment, I
increase the amount of dividends paid to me each quarter, from
every company that I own. My measurement for success in the
stock market is not measured by the amount my portfolio
is worth. It is measured by the amount of ever-increasing cash
dividends received from every stock that I own. As a matter of
fact, when my portfolio dips in net-worth, my dividend income
accelerates. The reason for this is simple. The lower my port-
folio's net-worth, the higher the dividend yields of the stocks
in my portfolio.
All my personal holdings in the stock market have the same
basic theme. They are all purchased commission-free, have a
long-term history of raising their dividend every year, and are
purchased with the intent of supplying ever-increasing dividend
income for my retirement years. The Stockopoly Plan was written
with this purpose or goal in mind. The Plan itself uses a
timing approach for purchases of more shares each quarter,
along with the dividend reinvestments.
For more excerpts from the book 'The Stockopoly Plan ?
Investing for Retirement' visit:
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 ? Investing for
Retirement'; published by American-Book Publishing. The book
can be purchased at