How to Create Your Own Legacy of Wealth
|•||Gold grew to $32.84|
|•||Treasury bills grew to $5,061|
|•||Bonds grew to $18,235|
|•||Stocks grew to $12.7 million.|
|•||Balance of $2,042,605 in Kraft Foods|
|•||Balance of $1,774,384 in R.J. Reynolds Tobacco|
|•||Balance of $1,263,065 in Exxon Mobil|
|•||Balance of $1,211,456 in Coca-Cola.|
A company like Coca-Cola has been selling the same product since 1886. It spent money inventing its core product more than 100 years ago. Today, it spends very little money on research and development. It also has low manufacturing costs, since the machinery required to make Coke rarely needs updating.
That allows Coca-Cola to invest its profits in building its brand. It’s the reason why, in both the U.S. and the rest of the world, Coca-Cola is the leader of the liquid-refreshment beverage industry. As the world’s largest beverage company, 94% of the global population recognizes its brand.
The Coca-Cola brand has a 26% market share in the U.S. Worldwide, Coca-Cola is also No. 1 in the carbonated soft-drink category, with a 53.1% market share. Coke, the beverage, is the leading soda, with 18.3% of the entire liquid-refreshment beverage industry. In other words, Coca-Cola is No. 1 in its business.
For example, Coca-Cola has increased its dividend 51 years in a row. From 2003-2012, it has increased its dividend at a compound average growth rate of almost 9%. It’s safe to say that Coca-Cola will continue this streak because it has consistent profit margins, and it generates billions of dollars in free cash flow each year.
Let’s say you bought 100 shares of Coca-Cola in September 2013; you would have invested a total of $3,900. And then let’s assume that Coke’s stock price does not move for 10 years.
If you reinvest your dividends and Coca-Cola continues to increase its dividend by 9% per year, your balance would still grow to $6,202. If Coca-Cola’s stock price stays flat for 20 years, your initial investment of $3,900 would still grow to $17,971 by the end of the 20th year.