What could happen with your money if you would invest a couple years ago?
On the end of previous year (2018), after a lot of researches I made a decision to invest in shares of companies which, very likely, will pay dividends in the future. What is it exactly? Well, in general idea is very easy. If you’re a shareholder of company “X” and this company will decide to pay a divident for each share, then you’ll be rewarded for trustment and get a dividend multiplied by number of shares which you own.
I read many articles and books about it and, in my opinion, it’s one of the best investment opportunity. Why? Because if you will build your portfolio smart, then you can force your money to work for you and generate passive income which will give you financial freedom and better life. It has both, positives and negatives sides. For luck, negatives one rely only on our impation and greed. If you will manage all things clever, then it’s not likely that you will fail. In this post, I would like to reveal some real numbers. All of them are historical, but completely real.
Before I purchased my first shares, it was very difficult to make a decission which one I should buy. In the future I’ll write more about whole process, but now would like to redirect your attention to opportunity. So here we are. Exactly 2nd of January I bought:
British American Tobacco PLC (BAT): 18 stocks x £25 each one
Imperial Brands PLC (IMB): 22 stocks x £24 each one
Like I said earlier, in the future posts will be discovered more and more informations, but let’s have a look on second company from this list: Imperial Brands PLC. Based on historical results we have some interesting facts. First of all, price of shares. When we will come back to beginning of 2006 year, we could notice, that price of each share oscillated around £17.33 (it’s a price for 3rd of January 2006). For easier calculation let’s assume that you bought 1000 shares of this company and paid £17330 for them (I skipped commission cost to treat it hassle-free). After 2006, the worst moment (the lower price of each share) happened 14th of April 2009: £14.30. The highest price company achieved 16th of August 2016 and it was £41.39. Like you see, the difference between the lowest price, the highest price, purchase price and actual price (£24.87) are not spectacular.
Now let’s check how much money you would receive every year (since 2006) if you wouldn’t touch those shares. In 2006 you invested £17330 and in 1000 shares and did nothing later on. Here is a table represents each year:
2006 –> £0.539 per share (£539 for 1000 shares)
2007 –> £0.604 per share (£604 for 1000 shares)
2008 –> £0.631 per share (£631 for 1000 shares)
2009 –> £0.730 per share (£730 for 1000 shares)
2010 –> £0.843 per share (£843 for 1000 shares)
2011 –> £0.950 per share (£950 for 1000 shares)
2012 –> £1.056 per share (£1056 for 1000 shares)
2013 –> £1.164 per share (£1164 for 1000 shares)
2014 –> £1.281 per share (£1281 for 1000 shares)
2015 –> £1.410 per share (£1410 for 1000 shares)
2016 –> £1.552 per share (£1552 for 1000 shares)
2017 –> £1.7072 per share (£1707.2 for 1000 shares)
2018 –> £1.8779 per share (£1877.9 for 1000 shares)
If you will add each amount, the result would be quite impressive: £14345.1 And it’s very, very likely that you will get over £2000 in dividends in 2019. Let’s summarize all major facts:
Your investment: £17330
Your return: £14345.1 (82.78% of your investment)
Dividend in 2006: £0.539
Dividend in 2018: £1.8779 (increased by 248.40%)
Value of your shares: £24870 (21st of January 2019)
Potential annual passive income: £2000+
Yes, it’s not a mistake: you invested £17330, have withdrawn £14345 and still own shares worth almost £25000! It’s why I think that investing in shares of companies who are paying regular dividends it’s very lucrative decision. Of course, I skipped commissions and taxes here, but even with them (by the way, I’ll touch this thread in the future) it looks great. In this post I analyzed only one company: Imperial Brands PLC. It’s not smart to put all your money into one basket. But if you’re going to split your money for 10+ companies, then your investment should be even safer.
And one more thing… I didn’t calculate here what could happen if you would compound your dividends and bought next shares after each dividend is paid out. Well, here the magic starts, but let me leave this topic for future posts. I hope you this case study allows you to see this potential much wider than previously.