Right now, Royal Dutch Shell trades at a 5% dividend yield. For every $70 share you purchase, you get $3.60 in annual income. Although I expect the dividend to rise in the next year, let’s assume that the quarterly dividend stays static at $0.90 per share (in the interest of conservatism).
Under those assumptions, each share of Royal Dutch Shell purchased today stands to collect $7.20 in total, cumulative dividends over the next two years. Why is that important from a principal protection standpoint? Because it only takes a few years of collecting solidly high dividends to severely mitigate the risk that falling stock prices can have in making you feel as if you are moving backwards.
This year, the stock hit a high price of $74.95. It hit a low of $65.02. Depending on the reinvestment price, it would only take a little over two years of dividends to … Read the rest of this article!