Congratulations on owning Costco Wholesale (NASDAQ: COST) shares since early last year! You made some substantial gains, genuine or not. Better yet, if you're a multidecade shareholder, this stock has likely become a huge and lucrative portfolio element.
Another well-known name has quietly made more investors wealthy. It does so for a separate but crucial purpose. That company? P&G (NYSE: PG). The reason P&G being so shareholder-friendly remains. Costco may differ.
Comparing these two consumer-focused corporations is difficult. One is much older than the other, and they're in different industries. They also have different shareholder reward goals. If investors understand that each stock has unique qualitative and quantitative qualities, we may reasonably compare these names.
From a price standpoint, Costco does better. Its stock has risen almost 8,000% since going public in 1985. Wow. Procter & Gamble has been publicly traded for decades and around for over two centuries. P&G stock has increased less than 5,000% since the mid-1980s. Both are good, but one is better.
These numbers miss a dimension. Those are dividends. Costco pays them little. Procter & Gamble serves them more seriously. It's increased its dividends every year for 67 years.
End result? Reinvesting Procter dividends in more shares has offered a market-beating average annualized return of roughly 13% since 1985. If dividends were reinvested, a $10,000 Procter & Gamble investment would be worth over $1.1 million today.
Are you surprised by how slowly and dull Procter & Gamble did it? Be not. Current investors seem to prioritize growth potential, although dividend income remains a large element of market returns.
Hartford mutual fund business reports dividends accounted for 41% of S&P 500 returns between 1930 and 2022. Reinvesting in the index boosts the numbers even further. Hartford claims that reinvested dividends accounted for 69% of the S&P 500's returns between 1960 and 2022.
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