If you owned $2,000,000 worth of Campbell Soup Company stock, you would receive $64,000 a year in cash dividends mailed to your home or office, or directly deposited into your bank account depending upon your preference. How did someone come up with the $2,000,000 to begin with, though, given that we know 90% of wealth is self-made in the United States? Here are some thoughts ...
Over the years, I’ve written a lot about dividends on the Investing for Beginners site at About.com. In fact, over the past few years it has been one of my absolute favorite topics to cover because through the Great Recession of 2007-2009, those who owned a collection of high quality dividends stocks were better able to ignore market fluctuations and avoid selling their ownership to pay their household bills.
It isn’t an infrequent thing I’ll hear people opine, “yeah, but who has money sitting around to invest enough to matter?” It’s then that I realize the wisdom of Solomon when he said, “Do not despise the day of small beginnings.” Most people don’t even try to begin collecting assets because the dividend checks start out at only a few dollars each quarter. But money is like a farmer growing a crop. It only takes a few seasons for the seeds you planted to begin to throw off enough seeds of their own for you to drastically increase your yield per acre.
Hard Work Isn’t Enough – You Need to Own Cash Generating Assets
It is almost exhausting reiterating this point, but let’s imagine that you owned $2,000,000 worth of Campbell Soup Company common stock. Regardless of what the stock price did, you would receive $64,000 a year in cash dividends mailed to your home or office, or directly deposited into your bank account depending upon your preference. That works out to $5,333 per month. Dividends are taxed at 15%, meaning you would only pay $800 to the government, resulting in $4,533 per month in cash income.
This money should come as long as Campbell’s products are still popular and generating profits, even if you don’t get out of bed in the morning. It is your reward for not spending the money and instead investing it in companies that create jobs and grow the economy. (After all, you could have taken the whole investment and gone to Vegas, or redecorated your kitchen, or bought new cars, installed a swimming pool, etc.)
Since We Know That Most Wealth Isn’t Inherited, How Do You Get the Money to Invest?
We know, from virtually every study ever done on wealth in the United States, that 90% of American millionaires did not inherit their money. They are first generation rich, with a vast majority coming from the middle class or lower class. Most put themselves through college, and most are married. Since they all started out exactly like you, how did they get the money to buy the $2,000,000 worth of Campbell stock? It isn’t like the tooth fairy just showed up and dumped a pile of cash on their doorstep. (more…)
