The Butterfly Effect And Dividend Investing

Bill McClellan is a long-time writer for the St. Louis Post-Dispatch. I’ve been reading his editorial work since I was twelve years old. He is a great storyteller with a knack for capturing the big picture and summing up a particular situation or the totality of someone’s life.

Today, he wrote an article titled “Flip Side of Success For Youth Football Star” that highlights the parallel tracks of two young football stars from Kirkwood, MO.

One of them—whom you might know—is named Jeremy Maclin. He was a superstar football player as a young kid, high schooler, college student at Mizzou, and is currently a professional athlete playing for the Philadelphia Eagles.

McClellan compares Maclin’s life to that of his grade school peer, Jason Clark. Fifteen years ago, Jason Clark was a ferociously fast kid that was widely regarded as Maclin’s equal. Upon entering high school, Clark chose drug dealing over football. Today, Clark is in jail for second-degree robbery and armed criminal action after having a shootout with police in the aftermath of trying to rob a woman on the street.

My summary isn’t doing McClellan’s article justice—you should probably just read his piece by clicking here:

Anyway, this column got me thinking about a imperceptible decisions in our life can completely change the trajectory of our time here on earth.

Let’s compare two people who spend their lives living paycheck to paycheck but for one difference.

The first person makes the seemingly small decision to have $50 taken out of his paycheck twice each month and deposited into shares of Exxon Mobil.

Imagine he found this Computershare site as a 25 year-old and chose to have $1,200 purchase shares of Exxon-Mobil each year.

By the time he is 65, what does he have? Well, Exxon-Mobil has actually compounded at 14.72% over the past 40 years with dividends reinvested (that is what happens when you combine healthy dividends with long periods of time with the kind of companies that tend to be chronically undervalued). But, in the interest of conservatism, let’s assume that Exxon has a 10.00% compounding rate over the next forty years.

Without dividends reinvested, that would create shy of $700,000 in wealth for this investor. He would be in the top 0.00001% of global humanity simply due to a one-time decision to have $50 taken out of his checking account twice per month to buy shares of Exxon Mobil. At the time, it would have seemed like the most innocuous decision in the world. We’re talking pizza and beer money here. But, compounded over forty years, that seemingly insignificant decision would have made all the difference in his life. It’s crazy to think about how seemingly small decisions we make in life put us on these tracks that will greatly influence the quality of life that we are able to enjoy during our time on this earth. A small, dogged commitment to setting aside a couple hundred dollars per month today could make all the difference in the quality of life that you have several decades from now.

Originally posted 2013-08-22 00:10:20.

Like this general content? Join The Conservative Income Investor on Patreon for discussion of specific stocks!

3 thoughts on “The Butterfly Effect And Dividend Investing

  1. Edward says:

    I don't know how much the pot dealer or investor is the "Butterfly effect", i.e. the effects of an unknown butterfly flapping it's wings in some unknown place can be the root of a hurricane. In both stories it's deliberate action, selling pot and investing $100/month, that has direct and identifiable link to the future events.

    They are great stories but unfortunately most 25 year olds aren't too concerned with their lives at 60, I know I wasn't:)

    But then we don't teach even basics of a finances in High School. How many 16 to 25 year olds ever calculate the total life cycle cost of buying a car? Maybe and I hope, this current crop of youngsters aren't as car crazy as my generation:)

    Great site Tim

  2. Daniel says:


    I am a relatively recent investor and an avid reader of your blog. I found your always-excllent articles on SA and they, along with much outside reading, have helped convince me that DGI is an investment methodology that fits with my goals and risk tolerance. Along with your very clear and articulate writing style and your blend of philosophy and often-humorous "life observations," I have greatly appreciated and benefitted from your frequent distinction between "trading" and "investing." I also appreciate your awareness that we do not all start with 100k portfolios; as a graduate student in the humanities with a child and a wife who is a minister, I work hard to save %30 of my measly income each month; some of this goes into general and emergency savings (diapers) and the rest I use to build the foundation of my dividend "fortress," as you have called it. Over the past two years I have accrued small positions in ABBV, ABT (pre-split), CL, CVX, F, GE, KO, MCD, MSFT, RDSB, SBUX, and WMT, and have a much smaller but growing Roth IRA with similar positions. I have my eye on many other blue-chips, but am cautious of our all-time highs so I am keeping an eye open for post-earnings drops, etc. Long reply, I know, but I thought it was high time I acknowledge myself as a frequent visitor to your blog and to thank you for your excellent work. Please keep it up, wherever life takes you. Cheers.

  3. Peter says:

    Have you read Phillip Fisher's "Common Stocks and Uncommon Profits? It's worth a read.

    Chapter 7 (The Hullabaloo about Dividends) starts with:

    "There is a considerable degree of twisted thinking and general acceptance of half truths about a number of aspects of common stock investments.

    However, whenever the significance and importance of dividends are are considered, the confusion of the typical investor becomes little short of monumental."

    A long term investor in your "dividend picks" would be quite a bit richer over the long term(say 20-30 years) if those dividends were not paid out. Even a one percent return difference(higher if earning are not paid out but re-invested directly in the business) over a long time makes for a significantly different outcome. That said, the psychological effects of getting cash every 3 months cannot be understated. Makes "staying the course" that much easier. I'm certainly practicing you religion, currently getting almost $9k/year in dividends.

    Keep up the good work.

Leave a Reply