We all have those things that we've been meaning to do for a while, but we just cannot bring ourselves to deal with the pain. It's taken me about 13 years, but I think I am finally ready to do this.
Have a look at these screenshots. They come from my Computershare account, where I keep a few Dividend Reinvestment Plans (DRIPs).
From those screenshots, you can tell that I opened a McDonald's (NYSE:MCD) DRIP in January of 1998 when I was 21 years old. I started with 1.965 shares and, in nearly two years, after several dividends and a stock split, I ended up with roughly 59 shares. I got rid of the last handful in September of 1999.
I am not sure why I sold. I moved to San Francisco that month. I probably needed the money. Or maybe I took it out to buy something. I really do not know. What I do know is that I should have never sold. And the fact that I did serves as a testament to the power of buy-and-hold, dollar-cost-average investing in dividend-paying stocks.
I am going to do an approximate estimate of what my shares were worth around the time I sold them and what they would be worth had I stayed the course I set in the late 1990s.
I was buying on a regular basis - one or two times a month - at a rate of $100 to $200 per transaction. To make things easy on myself, I will just assume that I continued to put in $100 a month up until the end of 2011. Because it would take a team and too much time to come up with precise numbers, I will assume a $1200 annual investment in MCD at its price on July 1st of every year between 2000 and 2011. That's 11 years and $13,200 worth of cash.
If we use June 15, 1999 to figure it, my 59 shares of MCD were worth $2,456.17 at the time. At the end of 2011, without even factoring in dividends and more purchases, they would have been worth $5,919.47. That's more than a double had those 59 shares stayed 59 shares.
And now here's an incredibly rough calculation of where things could actually stand today. I purposely round down to understate what these shares would be worth today.
$1200 Invested Per Year In MCD (2000 to 2011)*
2000: 37 shares purchased
2000: November dividend reinvest, 0.5 shares (96.5 shares)
2001: 43.8 shares purchased
2001: November dividend reinvest, 1.0 shares (141.3 shares)
2002: 42.7 shares purchased
2002: November dividend reinvest, 2.0 shares (186 shares)
2003: 54.7 shares purchased
2003: November dividend reinvest, 3.5 shares (244.2 shares)
2004: 45.6 shares purchased
2004: November dividend reinvest, 5.0 shares (294.8 shares)
2005: 42.9 shares purchased
2005: November dividend reinvest, 6.0 shares (343.7 shares)
2006: 35.3 shares purchased
2006: November dividend reinvest, 9.0 shares (388.0 shares)
2007: 23.4 shares purchased
2007: November dividend reinvest, 10.0 shares (421.4 shares)
2008: February dividend reinvest, 2.8 shares (424.2 shares)
2008: June dividend reinvest, 2.7 shares (426.9 shares)
2008: 21.0 shares purchased
2008: August dividend reinvest, 2.7 shares (450.6 shares)
2008: November dividend reinvest, 3.9 shares (454.5 shares)
2009: February dividend reinvest, 4.2 shares (458.7 shares)
2009: June dividend reinvest, 3.8 shares (462.5 shares)
2009: 20.6 shares purchased
2009: August dividend reinvest, 4.2 shares (487.3 shares)
2009: November dividend reinvest, 4.2 shares (491.5 shares)
2010: February dividend reinvest, 4.1 shares (495.6 shares)
2010: May dividend reinvest, 4.1 shares (499.7 shares)
2010: 17.9 shares purchased
2010: August dividend reinvest, 3.8 shares (521.4 shares)
2010: November dividend reinvest, 4.0 shares (525.4 shares)
2011: February dividend reinvest, 4.2 shares (529.6 shares)
2011: May dividend reinvest, 4.0 shares (533.6 shares)
2011: 14.0 shares purchased
2011: August dividend reinvest, 3.7 shares (551.3 shares)
2011: November dividend reinvest, 4.1 shares (555.4 shares)
*$1200 invested annually, using MCD closing price on July 1 of each year
Let's call it 555 shares. I had 59 when I sold in 1999. I conservatively considered ongoing $100 per month investments. I rounded everything down. Alongside MCD's dividend, which the company increased every single year, I did not even include what would have happened, income-wise, had I been writing covered calls.
My lowball estimate of 555 shares of MCD equals a value of $55,683.15 at the end of 2011.
End point - Don't let anybody ever tell you that buy-and-hold investing is dead or that you should not focus on dividend-paying stocks. That's where my focus sits today and where it has been now for several years. In about 10 years, I plan on writing this article all over again, except with multiple examples and retirement on the horizon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.