If she can do it, you can do it.
Gladys Holm is the “she” to whom I refer.
The name unlikely rings familiar. Gladys Holm was no Wall Street hotfoot. She was no robber baron heiress.
Gladys Holm was known best as a bon vivant among her small circle of friends. She enjoyed big rings, flashy scarlet clothing, good scotch, and lively dinner conversations.
Ms. Holm’s indulgences were similar to the indulgences most of us enjoy. Unlike most of us, Ms. Holm likely had less to work with.
Ms. Holm worked her productive years as a secretary, never earning more than $15,000 a year. And yet when Holm died in 1996 at age 86, she left an $18 million investment portfolio to the Children’s Memorial Hospital in Chicago.
How was someone of such restrictive means able to build such expansive wealth?
Holm worked most of her life for medical companies. Her first secretarial job was for American Hospital Supply Corp. When the company went public in 1951, she was given stock options. She accumulated and held her American Hospital shares as the company grew into an industry giant. American Hospital was bought by Baxter International (NYSE: BAX) in 1985.
Ms. Holm’s good fortunes were partly the result of fortuitous stock options in a promising start-up. But only partly. Ms. Holm leveraged her knowledge of the health-care industry to buy other stocks.
Just as important, she bought the right health-care stocks. She bought stocks that paid and grew their dividends. She then held her stocks to enable dividend growth and share-price appreciation to work their magic.
It’s magic anyone can master . . . and should.
Few investment strategies are better at compounding wealth than dividend growth. No investment strategy is easier to replicate, as Ms. Holm proved and as I will prove.
I offer a ready and real example.
Cisco Systems (NASDAQ: CSCO), the large router and internet protocol company, began paying a regular quarterly dividend in March 2011. The quarterly dividend has been increased annually since 2011.
Cisco shares traded around $20 when it began paying a quarterly dividend. The quarterly dividend was $0.06 per share. That’s $0.24 per share annually. Cisco’s new dividend offered a 1.2% dividend yield.
Fast-forward to 2019 and we find a wealth-revealing story.
Cisco pays a $0.36-per-share quarterly dividend today – nearly six times the quarterly dividend in 2011. Cisco shares no longer trade at $20, they trade above $50. Cisco shares have appreciated 150% over the past eight years.
That 1.2% dividend yield might appear a trifle, and it was at the time. It’s a trifle no more.
Cisco’s current $1.40 annual dividend on a $20 cost-basis entry price generates a remunerative 7% dividend yield. That’s three times the dividend yield of the S&P 500.
I doubt that Ms. Holm perfectly timed her dividend-growth purchases. No matter, you don’t need to time your purchases perfectly.
I arrived late to the game when I first recommended Cisco Systems shares to High Yield Wealth subscribers in April 2014. Three years of dividend increases were already in the rear-view mirror. Cisco’s share price had advanced on the dividend increase.
It didn’t matter. As the future dividend goes, the future share price is sure to follow. Cisco Systems again proves the point.
Cisco Systems Share Price and Dividends
Buy a few dividend-growth stocks, hold firm, let dividend growth compound wealth. That’s how Gladys Holm did it. That was the secretary’s secret. That’s how I do it. This is how you can do it, too.
You might not end with $18 million; then again, you never know.