I'm sure we all know someone that could benefit from embracing the dividend growth strategy whether that's a family member, close friend, coworker or anyone else. With the first cousin that was born after me graduating high school a few months ago and starting college in just a few weeks I figure he's prime to take advantage of the power of compounding. Even if he starts now at 18 that'd be about 10 extra years of compounding and dividend growth to get him started down the right path to financial independence if he so chooses.
Obviously there's a lot behind investing in individual companies. There's a lot more risk than investing through index funds/ETFs and in order to mitigate that risk and keep from selling just because of share price movements he would need to commit to research and learning how to invest properly. I'd point him in the right direction with a few books and of course a lot of the wonderful dividend growth investing blogs for starters. And any help mentoring or being a sounding board or anything else. If you're going to get someone started then I think you have to be available to help guide them along until they are ready to go on their own.
With a new child on the way in our own household, one cousin in college, two in high school, and 4 in elementary school or younger I think there's a great opportunity to really make a difference in the lives of my family and their financial future. What I've thought of doing is purchasing either one share or $100 worth of stock in a company for each of them. At $100 positions I'd be out $800 but it would set them up well for their future and I think it'd be more than worth it to help give them a real life example of dividend growth investing at work.
When it comes to selecting the company there's lot of options. There's the tried and true such as Johnson & Johnson (JNJ) (Full Analysis Here), Coca-Cola (KO) (Full Analysis Here), PepsiCo (PEP) (Full Analysis Here) or Realty Income (O). These options might not provide double digit dividend growth for years to come but what they lack in organic dividend growth they make up for with higher current yields. Reinvesting a higher yield would give higher compounding and more immediate gratification of the positives of delayed gratification. The other companies that I thought of would rely much more on organic dividend growth due to the lower starting yields but I expect double digit dividend growth for years to come out of most of them. Think companies like Starbucks (SBUX), Visa (V) or Disney (DIS).
The common theme between all of these companies is that they have ubiquitous brands, strong moats and proven business models. My plan would be to discuss a few companies with the older kids that could have more interest and ability to grasp the information and then we'd settle on a company to buy. So my question to you is:
What one company would you recommend for a high school/college age person to get them interested and started on the path towards dividend growth investing?
Have you ever purchased a company to get someone else started investing? Were you the beneficiary of such a gift?