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After work today, I went to fill up my fuel tank. I went to a Mobil (NYSE:XOM) station as it is the only place in town still selling 93 octane. Anyway, I was standing in line to pay and noticed a man two spots ahead of me purchasing $20 in Quick Picks. I can't help but think: Does this man buy $20 in Quick Picks a week?

Let's assume this is his weekly ritual. This man spends $1,040 a year on lottery tickets. Now, unless I've been living under a rock, the only reason to buy lottery tickets is the hope that your numbers will hit and you will be an overnight millionaire. The man in question looked to be in his mid-40s. Data suggests that poor and lower middle class households are the ones buying lottery tickets. After all, if you had a sizable amount of wealth, you wouldn't have a need to win it big.

Every year I like to look of Forbes' richest people list. Not only to see if I made the list this year -- maybe next year -- but also to see who are considered the richest and look into how they obtained their wealth. After all, they are doing something right that most of us -- including myself -- are not.

Aside from individually going down the list, the trend that is most prevalent is that the people who are the richest in the world are such simply because they started and/or own the company they are associated with. In some cases, they are part of a family fortune such as the Waltons (NYSE:WMT). The other trend I noticed is that most of the people on the list are old, and in some cases ancient.

From this I can conclude a simple fact: Old rich people like to start businesses. In all seriousness, the conclusion is that in order to build wealth we should start a business and grow the business, and this takes time -- no overnight successes here. I know the previous statement is quite obvious, but why is a man in his mid-40s going to a gas station and spending $20 a week on lottery tickets?

I realize not everyone has the ability to start and grow a business from scratch, but almost everyone does have the ability to take a few dollars every week and set it aside to invest in a solid company that pays a solid dividend. These are companies that are considered to be dividend aristocrats, paying out and increasing dividends for at least 25 years.

  • Proctor & Gamble (NYSE:PG) -- 56 years
  • 3M (NYSE:MMM) -- 54 years
  • Coca-Cola (NYSE:KO) -- 51 years
  • Johnson & Johnson (NYSE:JNJ) -- 50 years

And that's just to name a few solid blue-chips that do not appreciate in value much. No multi-baggers here -- instead, they pay a solid dividend and, when reinvested over time, slowly but surely create wealth.

On Coca-Cola's website it states the following:

The Coca-Cola Company's common stock began trading in 1919. Since its original listing, the stock has split 10 times -- first in 1927 and most recently in 1996. With all dividends reinvested annually, one share of common stock purchased for $40 in 1919 would be worth approximately $9.8 million today.

Now, let's assume this man has been purchasing $20 in lottery tickets a week since he was 18. He is now, say, 45. We can also assume that since he is still purchasing tickets at 45, he has not hit a sizable jackpot. Let's take the same parameters and see what it would be if every year he purchased a stock that had a 2% dividend and that dividend grew at an average of 8% a year.

Dividend Income Calculator - Initial Portfolio of $1,040

Year

Yield on Cost

Dividends Paid Without Dividend Reinvestment

Portfolio Value Without Dividend Reinvestment

Dividends Paid With Dividend Reinvestment

Portfolio Value With Dividend Reinvestment

1

4.32%

$45

$2,080

$45

$2,125

2

7.00%

$73

$3,120

$74

$3,239

3

10.08%

$105

$4,160

$108

$4,387

4

13.60%

$141

$5,200

$148

$5,574

5

17.63%

$183

$6,240

$194

$6,809

6

22.22%

$231

$7,280

$249

$8,098

7

27.42%

$285

$8,320

$313

$9,451

8

33.32%

$346

$9,360

$388

$10,879

9

39.98%

$416

$10,400

$477

$12,396

10

47.50%

$494

$11,440

$580

$14,016

11

55.96%

$582

$12,480

$702

$15,758

12

65.47%

$681

$13,520

$846

$17,644

13

76.15%

$792

$14,560

$1,016

$19,700

14

88.12%

$916

$15,600

$1,218

$21,959

15

101.51%

$1,056

$16,640

$1,459

$24,458

16

116.48%

$1,211

$17,680

$1,747

$27,245

17

133.20%

$1,385

$18,720

$2,093

$30,378

18

151.85%

$1,579

$19,760

$2,511

$33,929

19

172.63%

$1,795

$20,800

$3,018

$37,987

20

195.76%

$2,036

$21,840

$3,638

$42,665

21

221.49%

$2,303

$22,880

$4,400

$48,105

22

250.08%

$2,601

$23,920

$5,344

$54,489

23

281.83%

$2,931

$24,960

$6,521

$62,050

24

317.06%

$3,297

$26,000

$8,001

$71,091

25

356.12%

$3,704

$27,040

$9,880

$82,011

26

399.40%

$4,154

$28,080

$12,285

$95,336

27

447.33%

$4,652

$29,120

$15,397

$111,773

At the end of the 27-year period, if the man invested the $1040 every year with a 2% dividend and a dividend growth of 8% he would have $111,773. The dividend payout would be $15,397, increasing 8% a year.

If we extend the age from 45 to retirement age of 60 we get the following:

Dividend Income Calculator - Initial Portfolio of $1,040

Year

Yield on Cost

Dividends Paid Without Dividend Reinvestment

Portfolio Value Without Dividend Reinvestment

Dividends Paid With Dividend Reinvestment

Portfolio Value With Dividend Reinvestment

1

4.32%

$45

$2,080

$45

$2,125

2

7.00%

$73

$3,120

$74

$3,239

3

10.08%

$105

$4,160

$108

$4,387

4

13.60%

$141

$5,200

$148

$5,574

5

17.63%

$183

$6,240

$194

$6,809

6

22.22%

$231

$7,280

$249

$8,098

7

27.42%

$285

$8,320

$313

$9,451

8

33.32%

$346

$9,360

$388

$10,879

9

39.98%

$416

$10,400

$477

$12,396

10

47.50%

$494

$11,440

$580

$14,016

11

55.96%

$582

$12,480

$702

$15,758

12

65.47%

$681

$13,520

$846

$17,644

13

76.15%

$792

$14,560

$1,016

$19,700

14

88.12%

$916

$15,600

$1,218

$21,959

15

101.51%

$1,056

$16,640

$1,459

$24,458

16

116.48%

$1,211

$17,680

$1,747

$27,245

17

133.20%

$1,385

$18,720

$2,093

$30,378

18

151.85%

$1,579

$19,760

$2,511

$33,929

19

172.63%

$1,795

$20,800

$3,018

$37,987

20

195.76%

$2,036

$21,840

$3,638

$42,665

21

221.49%

$2,303

$22,880

$4,400

$48,105

22

250.08%

$2,601

$23,920

$5,344

$54,489

23

281.83%

$2,931

$24,960

$6,521

$62,050

24

317.06%

$3,297

$26,000

$8,001

$71,091

25

356.12%

$3,704

$27,040

$9,880

$82,011

26

399.40%

$4,154

$28,080

$12,285

$95,336

27

447.33%

$4,652

$29,120

$15,397

$111,773

28

500.37%

$5,204

$30,160

$19,465

$132,278

29

559.04%

$5,814

$31,200

$24,843

$158,162

30

623.88%

$6,488

$32,240

$32,040

$191,241

31

695.53%

$7,234

$33,280

$41,793

$234,074

32

774.65%

$8,056

$34,320

$55,191

$290,306

33

861.97%

$8,965

$35,360

$73,862

$365,208

34

958.31%

$9,966

$36,400

$100,280

$466,527

35

1,064.54%

$11,071

$37,440

$138,263

$605,830

36

1,181.64%

$12,289

$38,480

$193,812

$800,683

37

1,310.67%

$13,631

$39,520

$276,524

$1,078,247

38

1,452.77%

$15,109

$40,560

$402,040

$1,481,327

39

1,609.22%

$16,736

$41,600

$596,365

$2,078,732

40

1,781.41%

$18,527

$42,640

$903,641

$2,983,413

41

1,970.85%

$20,497

$43,680

$1,400,454

$4,384,907

42

2,179.20%

$22,664

$44,720

$2,222,753

$6,608,700

After 42 years of taking the money spent on lottery tickets and buying a couple shares of a solid dividend-paying company, our man will have over $6 million and an annual dividend payout of over $2 million a year. All from a total investment of $44,720.

Conclusion

From looking at the wealthiest people in the world we can reasonably conclude that their wealth was created by starting and owning their business, and that those businesses had grown over time. We then took these two simple factors -- business ownership and time -- and applied it to the average person.

Obviously, this does not mean that anyone will make it onto the Forbes list. However, what it does show us is that a simple redirection of money that people spend can create wealth, even with a simple $1,040 a year. While someone is chasing the American Dream of becoming rich by playing the lottery, the same person could be putting aside the same amount and can become a multi-millionaire over time with an income from dividends of well over $2 million a year. All it took was looking at the richest people in the world, realizing they accumulated wealth by owning a company over time, and then adjusting it to meet the opportunities of the average person.

Disclosure: I am long KO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: How Forbes' Richest People List Can Build Wealth For The Average Person