The Wisdom Of Building A Very Large Coca-Cola Position Right Now

Every now and then, I come across some slight spin on an investing truth that I already think I know that makes me see everything in a new light all over again, afresh. Take something like reinvested dividends. I’ve known for about, oh I don’t know, five years now, that the reinvestment of dividends at low prices is one of the reasons why compounding works so well, and has historically had an outsized effect on the returns of companies like Exxon, Chevron, Altria, and Philip Morris International because the dividend payments mixed with attractive valuations give you total returns in excess of what you would otherwise calculate by examining a company’s growth rate and adding the dividend yield.

What I failed to appreciate is that the reinvestment of dividends, provided they are on an upward long-term trajectory, can also provide you with additional compounding benefits while the performance itself is Read the rest of this article!