DERIVE AN INCOME FROM DIVIDENDS

AXIAM clients feel secure about the source of their retirement income. They understand the value of increasing dividend income and how that income compounds over time as it is reinvested in companies that also pay increasing dividends.

One of the myths of the investment industry is that dividend payments will always decline if share prices decline. Share prices can fluctuate over the years as illustrated by Coca-Cola’s 20 year share price performance. In 2001 and 2008 Coca-Cola’s share price fell 22,63% and 26,23% respectivly largely as a result of the Dot Com Crash and the Global Recession.

Coca-Cola’s 20 Year Annual Share Price Performance (1995-2014)

In 2001, when the share price DECLINED by 22,63%, the dividend INCREASED from 36c to 40c per share. This means that regardless of the decline in share price, AXIAM clients’ investment income actually grew during the Dot Com Crash.

Coca-Cola’s 20 Year Annual Dividend Growth (1995-2014)

In fact, this income strategy will allow you to get excited when the share prices decline because you can buy more shares at discount prices as we did in 2001, 2004 and 2008 when the shares were cheap. Owning more shares also means a larger dividend payment each year.

AXIAM clients measure investment success by the amount that their annual dividend income increases. This graph shows how the previous year’s reinvested dividends result in ever-increasing dividend payout. There is no reason why this dividend income cannot grow indefinitely.

MCDONALS’S ANNUAL DIVIDEND GROWTH

AXIAM has achieved income growth over four years for this client. The compound annual growth rate of this client’s income over the four years is 37,2%. The above example illustrates how focusing on dividend income creates a tremendous wealth building opportunity. Regular dividends provide an income flow that, when reinvested, unlock the power of compounding, which Einstein reportedly called the “the most powerful force in the universe.”

This investing approach produces an income stream to fund retirement without selling your assets, thus avoiding capital gains tax. This income stream could be the foundation of intergenerational wealth as our clients’ heirs are left a growing income stream for life.

NOTE: While we prefer to buy companies that pay dividends, we do buy companies from time to time that do not currently pay dividends but are likely to in the future.