Don't Panic When Stock Prices Drop
The key to successful investing is buying quality dividend paying stocks when they are undervalued. A dividend is the company sharing its profits with you the shareholder. In the long-run you can actually receive more in dividends than what you initially paid for the stock.
Suppose a company is paying $1 each year per share, and you own 1000 shares, you will then receive $1000 every year as long as the company continues to pay the dividend and as long as you continue to own those shares. The dividends are yours to keep, you can choose to spend the money or re-invest it.
Dividends are paid out regardless of the share price, have a look at Walmart from the last 15 years:
| Walmart | ||
| Year | Share Price | Dividend |
| 2003 | $59.17 | $0.30 |
| 2004 | $52.50 | $0.36 |
| 2005 | $47.14 | $0.52 |
| 2006 | $45.36 | $0.60 |
| 2007 | $48.31 | $0.67 |
| 2008 | $50.74 | $0.88 |
| 2009 | $47.12 | $0.95 |
| 2010 | $55.60 | $1.09 |
| 2011 | $51.90 | $1.21 |
| 2012 | $74.43 | $1.46 |
| 2013 | $72.98 | $1.59 |
| 2014 | $87.54 | $1.88 |
| 2015 | $57.24 | $1.92 |
| 2016 | $73.02 | $1.96 |
| 2017 | $66.74 | $2.00 |
Did you know notice a trend in the dividend from the last 15 years? The dividend has been increasing consecutively for the last 15 years, even though during the same period the share price has gone up and down.
Here's another example from Chevron:
| Chevron | ||
| Year | Share Price | Dividend |
| 2003 | $36.44 | $1.43 |
| 2004 | $53.64 | $1.53 |
| 2005 | $52.00 | $1.75 |
| 2006 | $64.40 | $2.01 |
| 2007 | $93.58 | $2.26 |
| 2008 | $83.25 | $2.53 |
| 2009 | $70.52 | $2.66 |
| 2010 | $67.86 | $2.84 |
| 2011 | $109.44 | $3.09 |
| 2012 | $98.31 | $3.51 |
| 2013 | $122.75 | $3.90 |
| 2014 | $111.63 | $4.21 |
| 2015 | $102.53 | $4.28 |
| 2016 | $83.44 | $4.29 |
| 2017 | $117.50 | $4.32 |
Also with Chevron, the dividend has been increasing consecutively for the last 15 years, even though during the same period the share price has gone up and down.
Imagine you invested $5028.72 in Chevron in 2003 and bought 138 shares, since 2003 you would have received a total of $6156.18 in dividends alone! Regardless of the share price over the last 15 years you would have received $6156.18 in dividends.
Today Chevron's share price is $117.80, your investment in Chevron would be worth:
138 shares x $117.80 = $16256.40
now add in the dividends received $6156.18
Total = $16256.40 + $6156.18 = $22412.58
$22,412.58 represents a return of over 445% in 15 years.
Don't be afraid of short-term fluctuations in share price, remain patient and get paid (via dividends) while you continue to own your shares. Quality dividend paying companies have a history of consecutively increasing dividends and that just means more money in your pocket. But don't buy any dividend stock, it has to be a quality stock and it has to be undervalued.
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