Dividend paying stocks a perfect no-brainer gift for high school grads
By Dian Vujovich
My neighbor’s son, Nicolas, is graduating from high school this week. He’s a good kid and I’ve watched him grow from a skinny, nothing-much-to-say teen into a handsome young man who is thoughtful, polite and a pleasure to share a chat with. That is, if I can catch him when he’s out walking the family dog, Max, or before going off to work.
Trying to figure out what to give a guy heading off to PBSC that might get noticed is no easy task. Unless of course it’s a new Honda or Ford Mustang. But cars get old and traded in. Besides, neighbors don’t buy neighbor kids cars. That’s sorta creepy.
So I wanted to give him a gift he might learn from and find rewarding at some point. Of course, that meant something stock market related.
So I pulled out one of my only-a-few-dozen-left copies of “10 Minute Guide to The Stock Market” that I wrote for Macmillan in 1997 (there’s still some meat in it even though it’s a last century published book). And, tucked a check in between the pages along with note about how long-term investing can pay off.
I suggested Nicholas use the money to buy 1 share of AT&T stock. Yes, that’s not much. No, it’s not a snazzy pick. But the company has a sterling past when it comes to dividend paying, stock splits and blue-chip slowish growth.
I tell everyone who doesn’t know what stock to buy but wants to begin investing to purchase shares of a company that they do business with.
That could mean choosing from any number of company stocks like Verizon or AT&T, Apple, Wal-Mart and Target. Or from a host of other establishments you’re a fan of and where your dollars get spent. Say, Chipotle, McDonald’s, GAP, Ford, etc. etc.
As you can see, there is no shortage of ideas using my invest-where-you-spend investment strategy.
But I picked AT&T for a couple of reasons. Among them are the following:
• When the company went from T to AT&T on July 19, 1984, it ended that day of trading at $59.38 a share.
• Over the past nearly 30 years, it has continued to pay a dividend—and increase it, too. No guarantee that policy will continue on for the coming three decades, but that’s a chance I see worth taking. And at today’s per share price of in the 36-dollar and change range, the dividend yield is over 5 percent. That’s big particularly when most savings and many money market accounts have a hard time squeezing out 1 percent for their investors.
•Even though the per share price has fallen over the past 30 years, the number of shares one owns has grown substantially. Had you purchased 1 share in 1984, you’d have enjoyed a 3 for 1 stock split in May 1987 (now you’ve got 3 shares); a 2 for 1 stock split in May 1993 (now you’ve got 6 shares); and another 2 for 1 split in March of 1998 (not you’ve got 12 shares).
Add the dollar amounts for the growth in number of shares from 1 to 12 —not including dividends, which would boost the long-term value even more—and your initial 1 share value (sans commission) would have grown from about $60 to $432. A 100-share investment would have grown to over $43,200, again not including the growth from dividends.
Of course, there are no guarantees when investing and yes, small stocks have outperformed large-cap ones like AT&T over the long haul.
But no matter how you slice it, when time is on your side and keeping it simple is your style, investing in a company you’re familiar with is a no-brainer when that company pays you for buying it, i.e. pays a dividend.
Happy Graduation and Good luck, Nicholas
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