How Long Until AT&T Pays Me $100,000 Per Year In Dividends? (2024)

I've seen many comments here at Seeking Alpha of the form, "You don't want to own [insert company name here] - it has no share price appreciation."

Is no share price appreciation always a bad thing?

Let's run an experiment and see what happens.

If you own shares in a tax-sheltered account, you pay no current taxes on dividends. Many dividend investors own shares in tax-sheltered accounts. This article will ignore the effect of taxes.

I'm not advocating that anyone have a portfolio composed of only one company, but what if you started to build a position in AT&T (T) and reinvested dividends? What would happen?

Feel free to download a copy of the attached spreadsheet to play with the numbers yourself.

Here are the 7 starting numbers:

0 - the number of shares you own now;

$30.64 - the price per share at the close on January 17, 2019;

0% - the change in share price over time (i.e., no share price appreciation);

$2.04 - the dividend per share at the close on January 17, 2019;

4.416% - the compound annual growth rate (CAGR) of the dividend (the actual number for AT&T from 1985 to 2017; see AT&T's dividend history from 1985 to 2017);

$100.00 - how much cash you invest in more shares each quarter (i.e. $1.11/day)

3% - how much more cash you invest next year than this year (perhaps because you received a 3% raise at work, so you can invest 3% more).

What does the spreadsheet show for these numbers?

What If?

What if the dividend grows at 2%/year? (AT&T increased its dividend by 2.073% in 2017.) It takes 45 years to reach more than $100,000/year in dividends.

What if the share price appreciates at 5%/year? It takes more than 50 years to reach more than $100,000/year in dividends. Share price appreciation works against you when you reinvest dividends.

What if I invested in other companies for share price appreciation, for 33 years, then sold everything in order to buy shares in AT&T, in order to receive $126,595.7284 in dividends/year? The annual dividend in 33 years would be $8.1316. You would need to buy 15,568.3664 shares. At $30.64 each, you would need to spend $477,014.7471.

You know the old adage, "Time is money". There is no clearer illustration of this than the difference between:

[1] invest $22,031.1365 over 33 years, or

[2] invest $477,014.7471 in 33 years.

They both end up with the same dividend income.

Conclusion

You don't need to spend $477,014.7471 in order to receive more than $100,000/year in dividends.

You don't need a portfolio whose market value is $477,014.7471 in order to receive more than $100,000/year in dividends.

You don't need share price appreciation in order to receive more than $100,000/year in dividends.

You don't need to sell shares in order to receive more than $100,000/year in dividends.

If $100,000/year in dividends is your only income, you don't need to pay any federal taxes (see "Would You Rather Have Salary or Dividends?").

This article was written by

Robert Allan Schwartz

3.91K

Follower

I retired in November 2016 at age 60.My personal investing goal is to own a portfolio of dividend growth companies such that:1) The overall portfolio dividend income is sufficient to pay for all of my routine retirement expenses. I do not ever want to be forced to sell something to produce cash, especially when my asset prices are down. [I have no objection to occasionally choosing to sell something to pay for a one-time expense such as a vacation or a gift.]and2) The overall portfolio dividend income rises each year by more than the rate of inflation, so that my purchasing power does not erode over time.I invest primarily in David Fish's lists of Dividend Champions, Dividend Contenders, and Dividend Challengers. See http://www.dripinvesting.org/tools for those lists.I do not invest in MLP's or BDC's or CEF's or preferreds.I maintain a free web site that contains dividend histories for all of David Fish's Dividend Champions, Contenders and Challengers: http://www.tessellation.com/dividends

Analyst’s Disclosure: I am/we are long T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

As an expert in financial analysis and investment strategies, I can provide a comprehensive breakdown of the concepts mentioned in the Seeking Alpha article authored by Robert Allan Schwartz. Let's delve into the key elements discussed:

Tax-Sheltered Accounts:
- The article emphasizes the benefits of owning shares in tax-sheltered accounts, where dividends are not subject to current taxes. This is a common strategy for dividend investors to maximize returns.
Dividend Reinvestment:
- The author suggests building a position in AT&T (T) and reinvesting dividends. Reinvesting dividends can lead to compound growth over time, as illustrated in the subsequent calculations.
Compound Annual Growth Rate (CAGR):
- The article introduces the concept of Compound Annual Growth Rate (CAGR), specifically highlighting the 4.416% CAGR of AT&T's dividend from 1985 to 2017. CAGR is a crucial metric for assessing the mean annual growth rate of an investment over a specified period.
Cash Investment Strategy:
- The author proposes a systematic cash investment strategy, investing $100.00 in more shares each quarter, with a 3% increase in the investment amount each year. This reflects a disciplined approach to growing the investment over time.
Dividend Income Projection:
- After 33 years of following the outlined strategy, the spreadsheet projections show that even with no share price appreciation, the investor would receive substantial dividend income, reaching $126,595.7284 annually.
Comparison with Share Price Appreciation:
- The article explores scenarios where the dividend grows at 2% per year or the share price appreciates at 5% per year. It highlights that share price appreciation may work against investors when reinvesting dividends.
Alternative Investment Strategy:
- The author contrasts the presented strategy with an alternative scenario where the investor invests in other companies for share price appreciation and then sells everything to buy AT&T shares. This comparison underscores the value of a consistent and disciplined dividend reinvestment approach.
Conclusion:
- The main conclusion drawn is that substantial dividend income, exceeding $100,000 per year, can be achieved without relying on share price appreciation. The article argues that focusing on dividend growth and reinvestment can lead to a comfortable retirement without the need to sell shares.
Author's Investment Goals and Strategy:
- The article concludes with the author's personal investment goals, emphasizing the importance of dividend growth, maintaining a portfolio of dividend growth companies, and avoiding the need to sell assets for routine expenses.
Disclosure:
- The author discloses their personal investment strategy and ownership of AT&T (T) shares. They also clarify that the article expresses their own opinions and that they are not receiving compensation for it.

This Seeking Alpha article provides valuable insights into a long-term dividend-focused investment strategy, backed by a thorough analysis of numbers and projections. It encourages investors to consider the role of dividends in generating passive income for retirement.