Just out of curiosity I made a table with results to see how such investments looks. Lets say company "A" with yield - 3% and 10% dividend grow rate per year vs company "B" with dividend yield 5% and 5% dividend grow rate per year.Depreciation or appreciation are excluded and all dividends being reinvested.Yields are based at yield on cost.
Lets see what happens:
Company "A" value Yield Year Yield Company "B" value
1000$ 3% 0 5% 1000$
1030$ 3.3% 1 5.25% 1050$
1063$ 3.63% 2 5.51% 1105$
1102$ 3.99% 3 5.78% 1166$
1146$ 4.39% 4 6.07% 1233$
1196$ 4.83% 5 6.38% 1308$
1254$ 5.31% 6 6.7% 1391$
1321$ 5.84% 7 7.03% 1484$
1398$ 6.43% 8 7.38% 1589$
1488$ 7.07% 9 7.75% 1706$
1593$ 7.78% 10 8.14% 1838$
1717$ 8.55% 11 8.55% 1988$
1864$ 9.41% 12 8.97% 2158$
2040$ 10.35% 13 9.42% 2352$
2251$ 11.39% 14 9.89% 2579$
2507$ 12.53% 15 10.39% 2828$
2821$ 13.78% 16 10.91% 3122$
3209$ 15.16% 17 11.46% 3462$
3696$ 16.67% 18 12.03% 3859$
4312$ 18.34% 19 12.63% 4324$
5103$ 20.17% 20 13.26% 4870$
As you can see it took 20 years for Company "A" to reach the higher value than company "B".
What are your thoughts about this? where would you invest? is it worth to wait 20 years and invest in Company "A"?.
Interesting fact: Yields became the same after 11 years
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