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.