CLASSES%20TO%20GO

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CLASSES TO GO

• Compound Growth Rates and Yield

Jim Thomas National Volunteer
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Disclaimer

• The information in this presentation is for
  educational purposes only and is not intended to
  be a recommendation to purchase or sell any of
  the stocks, mutual funds, or other securities
  that may be referenced. The securities of
  companies referenced or featured in the seminar
  materials are for illustrative purposes only and
  are not to be considered endorsed or recommended
  for purchase or sale by BetterInvesting National
  Association of Investors Corporation (BI) or
  the BetterInvesting Volunteer Advisory Board, its
  volunteer advisory board (BIVA). The views
  expressed are those of the instructors,
  commentators, guests and participants, as the
  case may be, and do not necessarily represent
  those of BetterInvesting or BIVA. Investors
  should conduct their own review and analysis of
  any company of interest before making an
  investment decision.
• Securities discussed may be held by the
  instructors in their own personal portfolios or
  in those of their clients. BI presenters and
  volunteers are held to a strict code of conduct
  that precludes benefiting financially from
  educational presentations or public activities
  via any BetterInvesting programs, events and/or
  educational sessions in which they participate.
  Any violation is strictly prohibited and should
  be reported to the President of BetterInvesting
  or the Manager of Volunteer Relations.

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NAIC Principles

• Invest Regularly
• Reinvest All Earnings
• Invest in Quality Growth Companies
• Diversify to Reduce Risk

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What are Earnings

• Proceeds from companies you sell
• Earnings produced by companies you own, which are
  either
• Paid to you as dividends, or
• Retained by the company and reinvested your behalf

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Why Reinvest Earnings?

• Compound Growth!
• Money (earnings) not invested doesnt grow
• Reinvesting means taking money produced by an
  investment and investing that money too (not
  necessarily in the same thing!)

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Example

• 100 investment with 6 price growth and 4
  dividend yield
• Investment worth 106 after one year
• Plus 4 received as dividends
• Reinvesting the 4 allows 110 to grow (rather
  than just 106)

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Example Results Over Time

• 100 investment
• 6 price growth
• 4 dividend yield
• Dividends reinvested vs. putting them in a
  mattress

Years D i v i d e n d s D i v i d e n d s
Years Reinvested Mattress
5 161 156
10 259 232
15 418 333
20 673 468
25 1,083 649
30 1,745 891
40 4,526 1,648
50 11,739 3,003
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What about the SSG?

• How do Dividends, Reinvesting and Compound Growth
  relate to the SSG?

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Percent Payout

• Annual dividend
• as a percentage of annual earnings
• 0.15 dividend (paid during a year)
• 1.00 earnings (during that year)
• 15 payout (i.e., 15 of earnings were paid as
  dividends)

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SSG Section 3G Payout

• Annual dividend (F) as a percentage of annual
  earnings (C), or F C.

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Dividend Yield

• Annual dividend
• as a percentage of dollars invested to produce
  that dividend
• 3 dividend (paid over a year)
• 200 invested
• 1.5 annual dividend yield (i.e., 3 200
  1.5)

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SSG Section 3H High Yield

• Annual dividend (F) as a percentage of annual low
  price (B), or F B.

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SSG Section 5A Present Yield

• Dividend expected to be paid next year
• as a percentage of the current stock price.

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SSG Section 5B Avg. Payout

• This is a judgment itemyou may want to change
  it.
• How does it compare with the average from section
  3G?

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SSG Section 5CCompound Annual Total Return

• Potential Avg. Annual Yield
• combined with
• Potential Annual Price Appreciation.

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SSG Section 5CCompound Annual Total Return

• The computer calculates compound return.
• Your job is to provide the judgments that flow
  into this calculation.

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