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Billionaire Rockefeller's Legacy, And 2 Big Dividends You'll Always Love

Oct. 01, 2021 8:35 AM ETABT, AM, AMZN, AR, BP, BPAQF, CVX, GILD, HQH, MRNA, MRO, XOM130 Comments


  • Rockefeller was a big believer in creating wealth and growing his income.
  • We can learn a lot from his legacy and how to create our own wealth.
  • These two picks can provide countless opportunities via the dividends paid out.
  • Looking for a portfolio of ideas like this one? Members of High Dividend Opportunities get exclusive access to our model portfolio. Learn More »

John D Rockefeller
Hulton Archive/Hulton Archive via Getty Images

Co-produced with Treading Softly

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This article was written by

Rida Morwa profile picture

Rida Morwa is a former investment and commercial Banker, with over 35 years of experience. He has been advising individual and institutional clients on high-yield investment strategies since 1991.

Rida Morwa leads the investing group High Dividend Opportunities where he teams up with some of Seeking Alpha's top income investing analysts. The service focuses on sustainable income through a variety of high yield investments with a targeted safe +9% yield. Features include: model portfolio with buy/sell alerts, preferred and baby bond portfolios for more conservative investors, vibrant and active chat with access to the service’s leaders, dividend and portfolio trackers, and regular market updates. The service philosophy focuses on community, education, and the belief that nobody should invest alone. Lean More.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AM, HQH either through stock ownership, options, or other derivatives. 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.

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Comments (130)

Vandooman profile picture
Rockefeller lived before the age of income taxes. What Bezos, Zuckerman et all do is borrow against their stock holdings and realize cash for buying their toys, with no income tax hit and no sales of stock. In my banker days we had a $1 billion line for Paul Allen secured by $37 billion in Microsoft stock. In Allen's case he used it to buy sports franchises and build stadiums, later refinancing.

Asian real estate investors in California routinely refinance their real estate, realize cash from increased valuations, and buy homes and cars. The rental income covers the debt service and the debt is never repaid. If valuations crash there is no default so long as interest is paid and in any case, under the single course of action rules, lenders can only go after the asset.
Rida Morwa profile picture
@Vandooman Good point, but that is an option most of us retail investors don't have. It does explain why dividends are rather small and rare among the "new money" companies in big tech.
@Vandooman When you say later refinanced it.. you mean against his MSFT stock? I heard a podcast recently that explained this issue once people get to $50 mil the bankers fight over you to give you credit against your holdings thus you essentially get out of the tax system. The people who really get crushed in this country are people between $250k-$2 mil K per year.. that work for a company with no writes off and you likely don't get to $50 mil to borrow against it.. Thus we keep trying to tax the same people more and more rather than fix the system! Thank you for your insights... its frustrating we have the money and income in the USA to tax it we just never do!
@Rida Morwa Its crazy! But some of those tech companies MSFT, CSCO add more and more to the dividend bucket every year!
Rockefeller must have been the true hero of @Buyandhold2012 ‘s mom!

For all the Rock-haters, don’t forget his famous Ledger “A”, the little red book he started on the first day of his first full-time job at age 16. He celebrated that date (September 26) annually as “Job Day” every year of his life until he died at age 97.

In his ledger “A”, he recorded every transaction he made to the penny, a practice he continued for the rest of his life. He kept that Ledger A with him til the end. They may have buried him with it…

Maybe more people today should be like that rather than credit card spendthrifts they are. The nation would be in much better shape today, and wealth “inequity” wouldn’t be the issue it is now, would it? Oh, and he lived way more frugally than most people today, by a long shot.

When it comes to wealth, the comparison of Rockefeller’s $350B (adjusted for inflation) to Bezos’ $175B severely underestimates the Rock’s fortune. Rockefeller’s maximum net worth was calculated in cash (!) after he liquidated his shares. If Bezos did that today, his $177B on liquidation would be far less.
@Current$ea I wouldn't necessarily say that he lived frugally. The Rock estate just north of Manhattan was 4300 acres with a nice mansion and family houses including his own 18 hole golf course. He did not value material things such a art, boats, cars jewels..ect.
btw... the A Ledger is in the family archives
Preferred Research profile picture
@GE watcher Senior was frugal, but willing to spend when he wanted something. NY Central RR had a line which ran through his Westchester County property. He paid 100% of the costs to have it moved, eliminating 3 stations. He purchased every house in the village of Eastview NY (east of Tarrytown) and moved all the residents.
He was vain, and in the picture at his desk he is wearing a wig.
Thank you for the article. What do you think is the ~5% drop of HQH during September?
PendragonY profile picture

A setup for a good time to buy more shares.
Slade_01 profile picture
I like many aspects of $AM outside of its dependence on $AR. I have several midstream holdings (ENB, EPD, and MMP). Why would AR be superior to any of my current positions?
Rida Morwa profile picture
@911Slade I like your various holdings as well. AR is a good capital gains play while AM is an excellent income investment. The focus on dry natural gas with high Natural gas prices bodes well for increased production by AR thus leading to increase revenue for AM
Nice article. Would have preferred some REIT names. These ones seem a bit risky (hence the big yields).
Rida Morwa profile picture
@allenhe Thank you. We have some REIT ideas coming down the pipes, or you can join HDO and get our top weekly picks which are released every Monday to HDO members only.
PendragonY profile picture

I have been hearing that for some time. BUT, I have already gotten about 55% of the money I invested in AM back in distributions, and my average share price is such that if the price falls by half, I will still have about a 60%+ gain over less than 2 years. And while the price might drop to $9 or so, I think dropping back to the $5 range is very unlikely. So even new shares bought now don't have a lot of risk.
Hard pass !!!
PendragonY profile picture

Thanks for reading and commenting.
That was fun to be reminded about the break up of ESSO and what became of all the various branches
Rida Morwa profile picture
@rado403 I'm glad you enjoyed the history lesson
Gates would be worth over $500 billion had he just held msft! Great stay on Rockefeller all time net worth
Rida Morwa profile picture
@MJB007 Gates is too busy buying up all the farmland he can now. In the end, I guess we all love to own a piece of the planet.
littlecubbie2019 profile picture
@Rida Morwa I wonder if there is something more sinister going on as far as gates is concerned. Why does he keep buying farm land?
@Rida Morwa He has done some good with the money and reallocated a bunch for sure. Had he pulled a Buffett and just held his own stock.. can you imagine!
Villi Grdovich profile picture
Not sure what % of Standard Oil the Great Man held, but if he had kept >50%, he would have had access to the company cash flow which would be more than its dividends.
Rida Morwa profile picture
@Villi Grdovich Are you claiming he would just siphon off its cash flow when he was no longer in the active management role but as the chairman of the board.
hawkeyec profile picture
@Villi Grdovich

In those days he didn't need to own 50%. He merely owned all of the shares of the various trusts he set up to obtain voting control of all the subsidiaries he created. Today trusts are an underutilized vehicle for managing the control of large corporations.
Villi Grdovich profile picture
@Rida Morwa No, he could not would.
WelshWB profile picture
"Do you know the only thing that gives me pleasure? It's to see my dividends coming in."

This is so misleading Rockefeller initially reinvested all of the earnings of Standard Oil to grow the company so he did not draw much out of Standard Oil. He was not driven by dividends for the sake of dividends.

In the era of Rockefeller oil extraction was cheap and thanks to the economy of scale there was minimal wastage so the company had a huge surplus of capital. By the time Rockefeller retired Standard Oil dominated the oil industry the company had non growth left and it was forced to breakup therefore it was no longer practical to reinvest the dividend between companies. This is why he took dividends.

On the other hand Amazon is the harbinger of most sector it just seems to grow and grow. Once Amazon has dominated one sector it moves to a new one. This is why Bezos is unlikely to want dividend reinvest earnings in a new business to grow the company. Also Bezos can sell just 0.1% of his net holding per annum to fund his lifestyle and even if he did that for 100 years he would only sell 17% of his stake.
PendragonY profile picture

Standard Oil didn't break up because it was too big to grow anymore. But perhaps a similar fate awaits Amazon.
Don P profile picture
@PendragonY He didn’t say that it did. He stated:”…the company had non growth left and it was forced to breakup…” He stated that both things happened, but he didn’t state that one caused the other… but I can see how you could interpret it that way.
Finici profile picture
First, Don, you are correct in that 'non-growth' was not the cause of Standard Oil breaking up.

Rida is also very correct in that the court caused the breakup...it was a forced break-up in 1911 as a result of a case brought by the federal govt under the Sherman Anti-Trust Act.

I suspect that were that case not brought old JD's successors would still be in business as the holding company (Std of NJ/Exxon) of all the subsidiaries, which was a pretty byzantine arrangement of ownership and trusts.

I gotta say it ... the two best dividend compounders in this blog post are in your graphic ... CVX and XOM. And if you believe the ESGers, the Rockefeller heirs cannot sell the shares fast enough. fun times! long and short both.
Rida Morwa profile picture
@fun times! Thank you for sharing your thoughts
Holding both stocks, doing well, happy with the buy decisions
Rida Morwa profile picture
@bill.ott I'm glad you're happy with your decisions. Thank you for commenting.
Rockefeller could only eat bread soaked in milk towards the end of his life because of his ulcer. He was famous as a skinflint for giving out dimes during the depression from his limousine. He made his son’s life unpleasant because his son did not want to continue piling up money but instead wanted to give it away.
I doubt that John D. was a happy man, and aspiring to be like him by collecting dividends from companies that are actively destroying our future will not make you feel good.
@mlasell You missed the whole point of the article.
@mlasell "He did his way..." and that's OK.
Rida Morwa profile picture
@mlasell Many people struggle to eat near the end of their lives and disagree with the views of their children, if we were to throw away any possible lessons from those people, we would lose the benefit of learning from the experiences of others.
@Rida Morwa These two picks simply don't yield enough after 5% inflation.
Stick with your very great pick OXLC. Yields 6% AFTER inflation and moving up strongly recently. Up 1.66% today.
Rida Morwa profile picture
@TomJeff I like to have a wide diversity of income sources. OXLC is an excellent one I agree.
NYer1 profile picture
@Rida Morwa
Not a big fan of HQH hwere due to over valuation vs. its long term avg. discounts.
I took my profits in it about a month ago when it was trading at 1.5-2.5% premium to NAV.
I moved into BMEZ recently at a discount of over 8% to its NAV ,which I find much more attractively valued currently vs. HQH.
I also prefer the income BMEZ pays (even though it is slightly lower) because it is not dependent on NAV .
I think HQH will have a bigger drawdown when the market tumbles over the next cycle and I also like the fact BMEZ has exposure to private equity in healthcare which has a higher potential for long term profits while being less volatile.
PendragonY profile picture

The income from BMEZ isn't slightly lower, it is only 5.5% while HQH is 7.98%.
I have been thinking to buy this fund for a while, but the expense ratio seem kind high, 2%?
Rida Morwa profile picture
@masterwork The expenses are paid internally for a CEF so you get the entire distribution. I do not let expense ratios alone govern my investments.
PendragonY profile picture

Remember, the yield and the distribution are net of expenses.
Craig69 profile picture
"Humanity has a habit of over-complicating things. We like to assume that simple is ineffective or inefficient. We build complex structures and algorithms when the same issues can be solved with simple logic."

Great quote which I have saved in my memo's😊
Rida Morwa profile picture
@Craig69 That is a very good quote I agree.
PendragonY profile picture

I try to use the KISS principle whenever possible. That is a great quote.
Craig69 profile picture
@Rida Morwa
Check this one out:)

"Thought becomes Idea,
Idea becomes Action,
Action becomes Habit,
Habit becomes Destiny".
If your main pleasure in life is seeing dividends come in, then you might want to keep searching.... Yes, it's nice, but there is a lot more to life. I didn't see him with a u-haul behind him when he died...
Rida Morwa profile picture
@JEUWetzel Uhaul's didn't exist back than, but yes I get your point. I think money is a tool to achieve one's goals, not the best goal in and of itself.
@JEUWetzel It reminds me of a tombstone . Albert Pease III 1902-1992. Ninety years upon this earth.
Rockefeller was an extreme socialist.
Rida Morwa profile picture
@HugoTheImpaler We can often learn valuable lessons from those we disagree with while also rejecting those things we disagree with.
@HugoTheImpaler Not even close to a socialist. He was the perfect definition of a capitalist
@GE watcher Yes. He was a socialist.
It was just regressive socialism.
I think your comparison of Standard Oil to AM and HQH is stretched rather thin. Standard Oil generated a lot of wealth as a market disruptor because of the mushrooming acceptance of the automobile and ultimately airplane travel following WWII. Neither of your picks is in that enviable position. In fact, I would argue that they may face long-term headwinds despite intermediate-term advantages. Long term there will be a shift to green energy away from fossil fuels and we are seeing a stagnant birthrate.

While Standard Oil and its successors have experienced long-term dividend growth I don't see that happening for your picks.
Rida Morwa profile picture
@pauliel "So how can we learn from Rockefeller and get the pleasure of seeing dividends come in? By following his blueprint as a shareholder and owning firms that pay strong dividends to you."

I would say this is not a stretch at all. I respect your difference of opinion.
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