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The 4th of July, my anniversary, my birthday, and Christmas light up my year, but Easter might just be my favorite day of the year. On a monthly basis, though, payday steals the show—that spark of adrenaline when dollars hit my bank account is hard to beat. Four times a year, dividend paydays bring a similar thrill, maybe even more. This is why I’m hooked on dividends.
Dividends have trade-offs, but their potential to grow over time makes them irresistible. For example, imagine I buy a stock for $100 with a 2.5% dividend, earning $2.50 in the first year. If the stock price climbs to $150 and the dividend remains 2.5% of the current price, I’d receive $3.75 annually. This simplified illustration shows how my original $100 investment now yields 3.75%—a growing payday without selling a share. In reality, dividends typically increase based on a company’s earnings, not its stock price, but this example highlights how dividend growth boosts returns over time.
My small-scale example pales next to the dividends Warren Buffett collects from Coca-Cola. In 1988, Buffett began buying Coca-Cola shares at a split-adjusted price of approximately $3.2475 per share. Back then, the annual dividend was $0.15 per share, yielding about 4.62%. Through four 2-for-1 stock splits and consistent dividend increases, Berkshire Hathaway’s 400 million shares now earn $2.04 per share annually in 2025, delivering a jaw-dropping 62.8% yield on cost. That’s the power of holding a quality stock with growing dividends for decades.
This is why dividends are my kind of payday—they reward patience with ever-growing returns. Until they don’t. 🙂
My research was aided by AI.
Income growth v. total return: the never ending debate over which is better. My take is that this is an issue driven mostly by personal preference.
In a tax deferred account, my focus has always been on long term total return. While income generation is not unimportant, long term total return drives my investment choices. In taxable accounts, generating current income that may be taxed at higher rates will generally be less important than managing net capital gains.
I would also note that I primarily use large, well diversified ETFS and index funds, which makes investing for dividend growth more difficult. A focus on dividend growth might be better accomplished via individual issues, but this would require greater analytical effort than what I am capable of at this point in my life.
Doesn’t it depend on one’s stage in life?
Before I retired it was total return that mattered, growth in assets. Upon retirement it moved gradually to some income and preservation of assets.
My rollover IRA is all growth still. My brokerage account of about the same value includes bond funds of different types, an inflation protected fund and still some equity.
However, between all accounts I am 27% bonds and 8% cash, but that is because the funds are not used for income and I don’t plan on ever using the principal, but possibly will use the income generated.
The end result of the passage of the Billionaire Welfare Bill is gonna be a bigger federal deficit, increased national debt and rising rates of return of TBills. My guess is that longer term Bills will yield at least 5% and maybe even get to 6% in 2026. My advice: be prepared, especially in retirement accounts with no immediate tax consequences, to sell equities and buy federal debt. Or in other words, turn the current administration’s chaos into your cash flow. With no capital risk.
This is personal Finance. We all like ways we learned are successful. My plan is to have most my investments in the S&P, say 70%, and 15% in QQQ type stocks, and the rest in cash. I am an Electronic Engineer and believe in our AI future. I do not favor Bonds. I never sell in a downtrend. I am satisfied with the Dividends from these investments, overall, say 1.3% or so. I reinvest those my way, buy more S&P. I feel higher gains overall, because of the invested stocks, than with dividend stocks. I use my RMD as my income, and I can take it quarterly, or yearly, whatever I choose. This all works for me at age 79. I really enjoy all the ideas of our readers, and authors. Thanks.