Dividend Reinvestment: How $10K in 3 Stocks Could Have Turned into a Million
Dividend stocks offer a unique advantage of generating both capital appreciation and passive income simultaneously. Investors who own them can choose to harvest their periodic distributions or reinvest them to accelerate compounding. In this article, we will explore the potential returns of investing $10,000 in three popular dividend stocks over the past 10 years, and how reinvesting dividends can magnify gains exponentially.
First up is Nvidia (NVDA), which has been Wall Street's number one growth stock darling of the last decade. While companies focused on growth tend to reinvest their profits instead of distributing them as dividends, Nvidia began paying modest dividends in mid-2013. If you had invested $10,000 in Nvidia in mid-2015 and harvested your dividends, your investment would have grown to $2,684,906 over the last 10 years. However, reinvesting your dividends can magnify gains even further. With an approximate average dividend yield of 0.25% over 10 years and considering stock splits, your investment would have grown to an approximate ROI of $121,770,716 with dividend reinvestment.
Next is Texas Pacific Land Corporation (TPL), a land-holding company that issued several flat-rate "special" dividends over the last 10 years on top of the standard yield. If you had invested $10,000 in TPL in 2015 and harvested your dividends, your investment would have grown to $220,000 over the last 10 years. With an approximate average dividend yield of 2.2% over 10 years and considering stock splits, your investment would have grown to an approximate ROI of $1,265,000 with dividend reinvestment.
Lastly, we have Broadcom Inc. (AVGO), a semiconductor and infrastructure software solutions provider that also delivered stellar gains. If you had invested $10,000 in AVGO in 2015 and harvested your dividends, your investment would have grown to $181,865 over the last 10 years. With an approximate average dividend yield of 2.23% over 10 years and considering stock splits, your investment would have grown to an approximate ROI of $2,366,400 with dividend reinvestment.
In conclusion, investing in dividend stocks can be a smart way to generate both capital appreciation and passive income. However, reinvesting your dividends can magnify gains exponentially over time. The examples above show how a relatively modest investment of $10,000 in these three stocks over the past 10 years could have turned into a significant fortune with dividend reinvestment.
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