Dividend Reinvestment: The Bear Protector And Total Return Accelerator

The old Philip Morris is such an important case study that offers so many lessons for investors into the nature of successful compounding because the company went over fifty years of delivering 17% annual returns while only growing the business at a rate of 11% annually. This spread is something I think about quite often because it lasted for so long. It wasn’t simply a case of a stock changing its P/E ratio from 5 to 10 during a short-term measuring period, doubling an investor’s returns. No, this was an example of some permanent condition existing in the equity markets that turbo-charged the company’s returns on a sustained basis over what can be expected from just reading the annual reports and monitoring the annual growth of the tobacco company.

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