Last month I asked you all for some help with getting some of my relatives interested in dividend growth investing. The idea of this comes from my desire to help and teach and also the simple fact that time in the market is extremely important. My wife and I have a child on the way and I have 1 cousin that's a freshman in college, 2 in high school, and 4 more that are elementary school age or younger. With at least a decade of compounding for the majority of them that's a huge advantage. Even if it's just $100 dollars that's plenty to show the power of compounding and dividend growth investing.
My plan is to sit down with the 2 oldest, when I get the chance, and ask them about investing and help guide them. I won't pick the company for them but I do plan on steering them towards the dividend growth companies that are available. The biggest issue that I see is that dividend growth investing is a long term process so the right company is of utmost importance. The company needs to make a product that they know, use, and see on a daily basis. There's more established and more stable dividend growth companies out there but in order to keep their interest it has to be something that they will be interested in. Unfortunately that probably eliminates companies like Chevron, ExxonMobil, Johnson & Johnson, Procter & Gamble, or Realty Income. Unfortunately those companies aren't exactly the "sexiest" ones out there.
With the younger kids my plan is to essentially make the decision for them and let compounding work its magic. When they're old enough to understand more about investing, most likely high school age, I'll then start sitting down with them and kind of recapping how the investment has done.
Anyways, let's get back to the original post. I asked 2 questions from you all to figure out what ideas you had for companies that would be great dividend growth investments for in each scenario, the older kids and the younger kids. First let's look at the older kids.
There's no doubting the compounding power that Coca-Cola has been. Heck, they've increased their dividend for 50 years and made countless millionaires. I didn't expect Coca-Cola to be the highest voted and one other big surprise was Realty Income taking 10% of the votes. One company I was kind of surprised to see not get any votes was Nike. Since the older kids are fairly athletic I think that's still an option for them. Like I mentioned before, for the older kids I'll just kind of steer them towards a dividend growth company and let them essentially make the decision. We'll sit down and look at some of the financials and discuss future growth opportunities but ultimately the decision will be in their hands. There's no greater teacher than experience.
Now let's look at the options for the younger kids.
This one went a long closer to what I expected. Disney is a great company that the younger kids will be able to relate to and understand how they make money when we revisit once they reach high school age. They operate in movies, theme parks, television, radio. They're everywhere and there's no doubting the quality of Disney. It's a truly remarkable brand with a huge stable of movies they can constantly recycle, such as the Maleficent movie from this year and the upcoming rehash of Cinderella. The theme parks are a must do activity for just about any parent and I can't wait to take our own children to the theme park.
One company that I was really surprised wasn't higher on both lists, but especially the older kids, is Apple. Most people have at least one of their products (iPod, iPad, iPhone) and I figured for that reason it would have received more votes.
Thanks again to all of you for voting and helping me come up with some ideas. I need to check with my aunt who's a CPA to figure out what, if any, tax consequences there are by doing this but that's essentially the only thing that will keep me from moving forward on this. For the younger kids I think Disney will be the route to go for the majority of them, there's one that's kind of on the fence between the younger/older so I'll have to figure out how I want to play that one although I'm kind of thinking Nike because he's very much into sports.
I'll report back to all of you once I figure out the specifics of doing this and any issues with setting things up and of course what companies the older kids decide on. I look forward to getting all of them started on their own path to financial independence and sparking their interest in dividend growth investing.