Benefits of buying dividend stocks for your kids
For my get rich quick crowd, this topic is probably not for you. I’m going to use all REAL numbers in my example. Too often we neglect to take future generations into consideration. Let’s look at the benefits of setting up a trust account with dividend paying stocks for our children. A trust account enables you to place provisions on the account, such as the beneficiary cannot touch the funds until they turn 21 or the beneficiary can only take out $200 per week etc.
Take Southern Company for example. Let’s say you had a kid in 1994 and you decided to invest $5000 into southern company. Southern Company is a safe utility company that owns Georgia power. We all know they aren’t going anywhere anytime soon. Southern Company was trading at about $11.50 in 1994. This would’ve purchased you 434 shares of Southern company. At the time they were paying $.29 per share in dividends quarterly. Let’s look at what Southern Company paid out in dividends yearly per share since 1994.
This investment would’ve already paid for itself in dividends by the end of 2002. The company paid a total of $30.42 per share in dividends through the end of 2013. This adds up to $13,202 on the original 434 shares you purchased for $5000.
Now your kid is getting ready to turn 20 in 2014 and they have $13,200 cash plus 434 shares of a quality stock that is trading at $45 per share ($19,500 value). PLUS future cash flow and the potential to gain additional value. All for an initial investment of $5000.
This isn’t factoring in what dividend reinvestment could’ve done for you. Imagine if our parents set us up like that. That’s enough equity to start a business, get involved in real estate etc. When I turned 20 I already had charged off utility bills in my name. Let’s not make the same mistake with the next generation. The dominant society has been doing this for years. -purplehayes85, Courtesy of UPA (March 8, 2015)
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