Power of Dividend: A fantabulous example of ICICI Bank!

“NEVER DEPEND ON SINGLE INCOME. MAKE INVESTMENT TO CREATE A SECOND SOURCE.”

- WARREN BUFFET

Forget about second income!! How many people in the world barely manage a first income just about for survival of the family?

Is Buffet wrong? Impossible!! He cannot go wrong! He is as astute an investor that world probably shall ever receive. Is he talking in metaphors? 

NO!!!

HE IS TALKING ABOUT THE POWER OF DIVIDEND!! The dividend which received over a long period of time has capacity to overtake even the primary source of income.

First of all, what is a dividend?

Well, dividend is nothing but profit distributed among the share holders of a company!!!

But you may say that the dividend declared by a company is usually a meagre 1 to 1.5% . Coco Cola distributes dividend around those percentages , a couple of dimes more or less .

How can these few dollars become your primary income or the second source of income after a point of time?

Thankfully we have data to substantiate our point.

Dividend Declared by ICICI Bank ,India.

Period (2001-2016)

Announcement Date	Effective Date	Dividend Type	Dividend (%)	Remarks
29-04-16	16-06-16	Final	250.00	Rs.5.0000 per share(250%)Dividend
27-04-15	04-06-15	Final	250.00	Rs.5.0000 per share(250%)Dividend
25-04-14	05-06-14	Final	230.00	Rs.23.0000 per share(230%)Dividend
26-04-13	30-05-13	Final	200.00	Rs.20.0000 per share(200%)Dividend
27-04-12	31-05-12	Final	165.00	Rs.16.5 per share
28-04-11	02-06-11	Final	140.00	Rs.14 per share
26-04-10	10-06-10	Final	120.00	Rs.12 per share
27-04-09	11-06-09	Final	110.00	Rs 11 per share
28-04-08	10-07-08	Final	110.00	Rs.11 per share
30-04-07	14-06-07	Final	100.00	Rs.10 per share
29-04-06	06-07-06	Final	85.00	Rs.8.5 per share
02-05-05	04-08-05	Final	85.00	Rs.8.5 per share
30-04-04	02-09-04	Final	75.00	Rs.7.5 per share
25-04-03	04-08-03	Final	75.00	Rs.7.5 per share
03-05-02	03-09-02	Final	0.00	-
22-01-02	21-02-02	Interim	20.00	Rs.2 per share
24-04-01	08-05-01	Final	20.00	Rs.2 per share

Here is the data of dividend distributed by one of the largest private sector lending bank, ICICI Bank.

And have you noticed something interesting?

The amount of dividend distributed has increased over 10 folds in last 15 years!!!!

So while one share of ICICI Bank received a dividend of Rs 2/share in 2001, it has increased to Rs25/share in 2016.

That is the power of share market!!!  And staying invested for a long period of time. 

Now let us look at the stock quotation of ICICI Bank on those specified ex- dividend dates of  ICICI Bank.

Ex-dividend date          Price of ICICI BANK                               Dividend  Received           

16-06-16                                    -                          Rs.5/share (post-split and  on face value of Rs.2)

04-06-15                                    290.10                 Rs.5/share (post-split and  on face value of Rs.2)

05-06-14                                    292.63                  Rs.23 per share

30-05-13                                    236.56                 Rs 20 per share

31-05-12                                    156.65                 Rs.16.5 per share

02-06-11                                    209.78                  Rs.14 per share

10-06-10                                    165.81                 Rs.12 per share

11-06-09                                    150.06                 Rs 11 per share

10-07-08                                     123.38                Rs.11 per share

14-06-07                                     181.17               Rs.10 per share

06-07-06                                      97.11                Rs.8.5 per share

04-08-05                                      102.66              Rs.8.5 per share

02-09-04                                      52.49                Rs.7.5 per share

04-08-03                                       31                   Rs.7.5 per share

03-09-02                                       28.08              -    

21-02-02                                       25.66               Rs.2 per share

08-05-01                                       29.79               Rs.2 per share

So what is the fantabulous discovery?

It shows that a person who had bought 1000 shares of ICICI Bank at the total cost of  Rs. 29790 

would have received a total amount of  203.5*1000= Rs 203500 only as part of profit on the amount is Rs 29790 , an astronomical return of over 900 percent!!! and what about the stock price appreciation?

A share of ICICI Bank bought in 2001 at the price of Rs. 29.7 is quoting at Rs 223.75 another 800 percent jump over a period of 15 years.

Another amazing fact?

Look at the dividend yield today in 2016!! it is a splendid 25/29.79= 83.92% !!!!!!!!!!!!!!!! 

If you had fixed your money you would still be getting a lame 7.5% which cannot beat  real time inflation  anyhow!!!

LET US BELIEVE THAT WE CAN!!! YES WE CAN!!!