How Dividend Investors Can Protect Their Principal

One of the interesting things about owning a high-quality asset such as an obviously excellent business is that it only takes a few years of dividends and general profit growth to protect the principal amount of your investment.

Take something like Johnson & Johnson, for example.

In 2010, Johnson & Johnson earned $4.76 in profit, and paid out $2.11 in total dividends. The absolute highest price that Johnson & Johnson traded at in 2010 was $66.20 per share. That works out to a P/E ratio of roughly 14x earnings.

But look what has happened in the three years since: you collected $2.11 in dividends in 2010, $2.25 in total dividends in 2011, $2.40 in total dividends in 2012, and $2.59 in total dividends in 2013. That means each share has collected $9.35 in total dividends over the past three years.

If you had purchased some Johnson & Johnson stock at … Read the rest of this article!