Power of Dividend Income: How Rs 1,000 becomes Rs 8 CRORE and generates a multibagger return of 81,17,355 per cent!

Rakesh Deshmukh
Power of Dividend Income: How Rs 1,000 becomes Rs 8 CRORE and generates a multibagger return of 81,17,355 per cent!

If an investment of Rs 1,000 can grow to Rs 8.11 crore, imagine the potential returns on an investment of Rs 1 lakh!

Are you looking for a way to become a crorepati from the stock market? I will not disappoint you by saying there is no way to become a crorepati from the stock market. Of course, there are ways to make a huge amount of money from the market. One way we have figured out to become a crorepati is through holding stocks tightly and, most importantly, having patience. This is the most important factor for making crores of money from the market.

Corporate actions are well-known, and investors keep track of these actions announced or taken by the company from time to time. These include stock splits, dividends, buybacks, bonus shares, consolidations, and so on.

Today, we are exploring one of these options: dividends, which are considered to be one of the most important announcements confirming a company’s financial health.

First things first, dividends are portions of profits made by the company that are distributed to the company’s shareholders. Dividends are paid on a per-share basis. It is not mandatory to pay dividends every year. If the company feels that, instead of paying dividends to shareholders, they are better off utilizing the same cash to fund a new project for a better future, it can do so.

Typically, companies in the growth phase (young companies growing fast) choose not to pay dividends but rather to plow back the profits into the business for more growth. However, when the company’s growth opportunities slow down and it holds excess cash, it makes sense to reward its shareholders via dividends. Cash with shareholders makes more sense than retaining the cash on the company’s books, and distributing the dividends may be the best way forward for the company.

In this article, we are going to explore one stock, namely Vedanta Limited. If you are an active participant in the market, you probably know about it. Vedanta is a diversified natural resource group engaged in exploring, extracting, and processing minerals and oil & gas. It is a Large-Cap company boasting a market capitalization of Rs 1,70,750 crore. The company is famous for its huge dividend distribution. 

Let's discover the power of dividend income and examine what would have transpired if you had invested Rs 1,000 on January 1, 2001, when the share price was approximately Rs 1.95 per share, and reinvested all the dividend income to purchase more shares of the company continuously until today, without any breaks. Would you have become a crorepati by now? Without further ado, let's delve into the calculation part.

Date

Dividend (Rs)

CMP

(Rs)

Qty

Dividend Income

(Rs)

Add Qty Bought from Dividend Income (Rs)

Total Qty

23-07-2001

              3

       1.35

            513

           1,538

                       1,140

        1,652

20-06-2002

              3

       2.75

        1,652

           4,957

                       1,803

        3,455

09-09-2003

              3

       6.85

        3,455

           8,638

                       1,261

        4,716

12-02-2004

              2

    16.25

        4,716

           9,432

                           580

        5,296

28-06-2004

              8

       9.75

        5,296

        42,372

                       4,346

        9,642

06-01-2005

              5

    23.90

        9,642

        48,211

                       2,017

     11,660

11-07-2005

           20

    34.85

     11,660

    2,33,190

                       6,691

     18,351

13-03-2006

           15

    55.35

     18,351

    2,75,261

                       4,973

     23,324

04-12-2006

           25

    63.00

     23,324

    5,83,097

                       9,256

     32,579

19-02-2007

           15

    95.10

     32,579

    4,88,691

                       5,139

     37,718

21-09-2007

           25

 116.05

     37,718

    9,42,952

                       8,125

     45,843

06-02-2008

           15

 158.80

     45,843

    6,87,652

                       4,330

     50,174

11-07-2008

           30

 150.30

     50,174

 15,05,213

                    10,015

     60,188

31-07-2009

              2

 241.00

     60,188

    1,35,424

                           562

     60,750

02-07-2010

              3

 346.90

     60,750

    1,97,439

                           569

     61,320

30-06-2011

              4

 282.00

     61,320

    2,14,618

                           761

     62,081

01-02-2012

              2

 222.00

     62,081

    1,24,161

                           559

     62,640

08-06-2012

              2

 188.45

     62,640

    1,25,280

                           665

     63,305

31-05-2013

              0

 161.50

     63,305

           6,330

                             39

     63,344

06-11-2013

              2

 196.50

     63,344

        95,016

                           484

     63,827

04-07-2014

              2

 305.00

     63,827

    1,11,698

                           366

     64,194

03-11-2014

              2

 262.50

     64,194

    1,12,339

                           428

     64,622

06-07-2015

              2

 163.40

     64,622

    1,51,861

                           929

     65,551

30-10-2015

              4

    99.95

     65,551

    2,29,429

                       2,295

     67,846

07-11-2016

              2

 215.75

     67,846

    1,18,731

                           550

     68,397

11-04-2017

           18

 252.75

     68,397

 12,10,623

                       4,790

     73,187

20-03-2018

           21

 287.10

     73,187

 15,51,555

                       5,404

     78,591

06-11-2018

           17

 207.75

     78,591

 13,36,043

                       6,431

     85,022

13-03-2019

              2

 171.60

     85,022

    1,57,290

                           917

     85,938

05-03-2020

              4

 117.00

     85,938

    3,35,160

                       2,865

     88,803

28-10-2020

           10

    95.40

     88,803

    8,43,629

                       8,843

     97,646

08-09-2021

           19

 298.95

     97,646

 18,06,453

                       6,043

 1,03,689

17-12-2021

           14

 332.55

 1,03,689

 13,99,798

                       4,209

 1,07,898

09-03-2022

           13

 371.25

 1,07,898

 14,02,675

                       3,778

 1,11,676

06-05-2022

           32

 360.50

 1,11,676

 35,17,803

                       9,758

 1,21,434

26-07-2022

           20

 241.40

 1,21,434

 23,67,971

                       9,809

 1,31,244

29-11-2022

           18

 301.85

 1,31,244

 22,96,766

                       7,609

 1,38,853

03-02-2023

           13

 314.30

 1,38,853

 17,35,659

                       5,522

 1,44,375

06-04-2023

           21

 273.20

 1,44,375

 29,59,688

                    10,833

 1,55,208

30-05-2023

           19

 285.60

 1,55,208

 28,71,356

                    10,054

 1,65,262

27-12-2023

           11

 252.40

 1,65,262

 18,17,884

                       7,202

 1,72,465

24-05-2024

           11

 460.80

 1,72,465

 18,97,110

                       4,117

 1,76,582

 

As per the above table, if you held the shares until today, you would have a total of 1,76,582 shares. As per Monday’s closing price of Rs 460 per share, your Rs 1,000 investment would have grown to Rs 8,11,74,547 or Rs 8.11 crore, representing a mind-blowing multibagger return of 81,17,355 per cent.

Turning your attention to the Quarterly Results, the company’s revenue decreased by 6.38 per cent in Q4 FY4 while PAT decreased by 27 per cent during the same period.

You might be wondering if it is possible today. The answer is yes. You need to find a good stock with the potential to deliver strong performance and returns on your investment, as well as a good dividend-paying history. Just hold tight, sit tight with the shares, and let them showcase their magic. In the above analysis, not only did dividends play a crucial role, but also the stock price and investment duration were equally important factors to consider.

Disclaimer: The article is for informational purposes only and not investment advice.

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