#6 – Big Game Economics, Dividend History

Connor Miller [00:01:33]:
Definitely. Getting together with some friends, maybe some family. Can’t say. I have a huge rooting interest in the game. Yeah, I don’t know. Maybe the 49 ers since the Chiefs have won it most recently.

Wes Moss [00:01:45]:
Yeah, it’s time for someone new, kind of new. I don’t know. But I’m excited for the commercials, as usual. To me, the commercials that come out in the Super bowl are usually somewhat as fascinating as the game. So I’m looking forward to that. I think you’re going to see, I have some contacts within the brewing industry, and let’s watch for some major beer commercial ads in the Super bowl. Now, that’s always a thing in the Super bowl, but there’s been a lot of turmoil in the beer industry over the last year or so, and you’re going to see a lot of that. At least that’s my prediction.

Wes Moss [00:02:26]:
All right. With that, we might as well go into some Super bowl statistics. However, there’s a lot happening here over the last week or so. We’ve got one of the preeminent technology companies that you would never think in the history of world would ever pay a dividend just announced that they’re about to start paying a dividend or they’re starting to pay a dividend, and that’s Facebook who would ever have thought? Facebook is a dividend paying company? That has changed as of this week. And now they’re going to be paying a 50 cent dividend. Now that dividend is per quarter, so it’s actually a $2 per share dividend, which is a pretty big first step. And for a company that big, fifty cents a quarter, two dollars a share, they’ve got to pony up an awful lot of money in order to do that. What is this? Let’s say the dividend cost is going to be $5 billion.

Wes Moss [00:03:18]:
So they’re going to be paying out $5 billion in dividends or share per quarter. When it comes to just the economics of the Super bowl, the numbers just are crazy. You’ve got Super Bowl 58. There’s so much happening on and obviously off the field. So if you look at Christian McCaffrey, who’s the 49 ers, all world running back touchdown machine, and then you’ve got, we started football season on our house. My eleven now twelve year old talking incessantly about Mr. Irrelevant Rock Purdy. So you get the best guy, perhaps in the league, maybe not the best guy, but arguably one of the very best and one of the lowest paid guys ever on the same team.

Wes Moss [00:04:12]:
And it makes really just kind of an amazing dynamic if you look at those two individuals. So you’ve got McCaffrey, Purdy, but we’ll see how many people watch the Super bowl. It could be the biggest Super bowl ever viewership. And it’s not just because of the Chiefs. We know why. Connor Miller, you took the words right.

Connor Miller [00:04:31]:
Out of my mouth. It’s the Taylor Swift effect, of course. Right? Dating Travis Kelsey, you got Patrick Mahomes. This could be the most watched television event of all time. I think right now leading is the Apollo moon landing. Right? Isn’t that the most watched tv event of all time? Yeah. 125,000,000 people, something like that.

Wes Moss [00:04:53]:
That record may be broken just for this past, if we go back to 2023, this is per Nielsen, the NFL accounted for 93 of 2020 three’s top 100 most watched tv broadcasts, an improvement over 2022 when it was only 82 out of the top 100. So think about this. 93 of the top 100 television events last year were just NFL games. That’s it. That’s what America watches. What else was in that group? So it continues to get more and more popular. Five years ago, it was only 61 out of 100 of the top most watched events. So the world has not just slowly or gradually shifted their attention to live NFL games.

Wes Moss [00:05:45]:
It’s gone from 60 of the top hundred to 80 of the top hundred to now 93 of the top 100. That’s essentially you could say that the only thing that people really want to watch on television is the NFL, and that’s not really an understatement. And now you throw in the global superstar Taylor Swift. Of course this is going to be off the charts. What else was on that top list? Three college football games. So really 96 out of the top 100. Most watched events are football. That’s what America loves.

Wes Moss [00:06:18]:
By the way, two were UGA games, SEC championship versus Alabama and the national championship versus TCU. Again, we’re talking about 2023 numbers. So that was way. That’s actually a long time ago for that game, and I think we remember that game. It wasn’t much of a game. 65 to seven, uga versus the horned Frogs. The only non football. Connor, if you didn’t have these notes, would you be able to guess what these were?

Connor Miller [00:06:46]:
I just cheated looking at the notes, but I would not have guessed that the state of the union, that’s top 21 came in.

Wes Moss [00:06:54]:
State of the union, number 21, top non football event.

Connor Miller [00:06:58]:
And then moving down the list, the Academy Awards coming in at 60. I personally didn’t watch that. Did you?

Wes Moss [00:07:05]:
I didn’t even know it was on.

Connor Miller [00:07:06]:
Okay.

Wes Moss [00:07:07]:
And then this one really does surprise the Macy’s day Thanksgiving parade. That surprises me because I can’t imagine people tuning in to see the slow floats just slowly going by the streets like a bad episode of Ferris Bueller’s day off without twist and shout. But it’s because I guess everyone’s standing around and everybody’s at the house and the tv’s just on. That’s got to be what that is. That’s just the Thanksgiving family effect. And then I love this non football, the Super bowl lead out show. So it wasn’t an actual sporting event, but it came in at number 92. That’s just the show.

Wes Moss [00:07:47]:
That was not a live game about the football game. It’s all football. It’s all football. Was this, let’s see, 100 most watched tv broadcast. 2023. Super bowl obviously was number one on Fox and it was 115.1 million. What’s your over under this year? Where do you think we end up?

Connor Miller [00:08:07]:
I think we’re going to be in the 125 range. I think the Taylor Swift effect is real and I think there’s going to be people who maybe don’t normally watch the Super bowl are going to be tuning in.

Wes Moss [00:08:18]:
All right, how much does it cost to go to the game about a month ago. Or maybe, I guess it couldn’t have been a month ago. A couple of weeks ago, a friend of mine texted me and asked, hey, how much do you think it’s going to be to go to the game? I said it shouldn’t be more than about five grand. And then I think a day later, I realized on Twitter that tickets were going for over 9000. But if you look at the price chart over the past decade, ten years ago, you could go to the Super bowl for a couple of grand. And then it’s just slowly it’s gone up $1,000, another thousand, and here we are. Yes, we’ve seen inflation and everything from cornflakes to avocados, but we’ve had massive inflation when it comes to going to the Super bowl. This year, according to Subhub, the average ticket is going to be $9,300.

Wes Moss [00:09:04]:
The cheapest ticket currently available to get into. I guess it’s agilent stadium is $5,500 or 54. 77. So that’s just one single ticket. Probably the worst seats possible for one game.

Connor Miller [00:09:21]:
Well, and the thing you have to think about this year is probably the greatest Super bowl venue there could be.

Wes Moss [00:09:29]:
Oh, Vegas.

Connor Miller [00:09:30]:
City of Las Vegas.

Wes Moss [00:09:31]:
It is. It’s true.

Connor Miller [00:09:32]:
With how much sports betting has grown over the last few years, who doesn’t want to go out to Vegas and watch the Super bowl?

Wes Moss [00:09:38]:
All right, do we have a sports betting statistic? I don’t know if we. Yes, we do. This is number four on my list, 23.1 billion. 23.1 billion. That’s how much the American Gaming association is estimating Americans are going to wager on just this one game. $23.1 billion. Does that move us gdp, Connor? They actually move gdp. So betting, of course, continues to grow.

Wes Moss [00:10:11]:
Again, turning the AGA, American Gaming Association, 68 million Americans are expected to bet on today’s game. There’s more than one in four Americans, 26%. That’s up from last year when a little more than 50 million people bet on the Super bowl. Now, does it count that we did squares at the office, Connor? Does that count as betting? It’s not even really about who’s going to win the game. It’s a totally random.

Connor Miller [00:10:38]:
I don’t think that one’s going to hit the radar.

Wes Moss [00:10:40]:
Yeah, you buy a $10 square and you don’t even know what the score is going to be. So I don’t even know if you would count that. This is through, I guess, through Vegas and through the big betting apps. Like draftkings, et cetera, which by the way, you can’t even do that here in the state of Georgia.

Connor Miller [00:10:57]:
And we’re one of the few or 20 or so states remaining now. I think it’s north of 30 states either have online betting as legal or actually have a physical casino in their state.

Wes Moss [00:11:10]:
There’s some other bets too. Remember, it’s not just on the game. You can bet on, well, individual statistics, of course. How many passing yards for a quarterback. How about this? You can bet on what color Gatorade will be dumped on the winning coach. What color Gatorade will be dumped on the winning coach. You can bet on heads or tails at the beginning of the game. So who gets the kickoff? So how long the national anthem will go? Isn’t that amazing?

Connor Miller [00:11:39]:
Who do we have singing the national anthem this year?

Wes Moss [00:11:40]:
I don’t know. We should know that. We should know that. We’ll know that. And producer Mallory is on it. Have you ever known of a non orange Gatorade color that gets dumped on a coach? Almost always. I can’t think of. It’s always orange, some blue.

Wes Moss [00:11:56]:
I don’t know. The Duke’s Mayo bowl. Don’t they dump mayonnaise?

Connor Miller [00:12:01]:
That’s just gross.

Wes Moss [00:12:02]:
It really is. But it is the best mayonnaise. Duke’s mayonnaise is by far the best mayonnaise. Let’s see, who do we have on the national anthem? Reba McIntyre.

Connor Miller [00:12:12]:
Okay.

Wes Moss [00:12:13]:
Reba McIntyre singing the national anthem. 400 million. Here’s another statistic. That’s how many Google results you get. If you google Taylor Swift Super bowl. If you google the Kansas City Chiefs Super bowl, you only get 164,000,000. If you google the Niners Super bowl, you only get 98 million. So Taylor Swift Super bowl collectively is more than both teams actually in the Super bowl combined.

Wes Moss [00:12:40]:
And then if you just google Taylor Swift alone, you’re going to get over 1 billion results. Pretty fascinating. Connor Miller, how much will it cost for a 32nd spot for the Super bowl? Just a guess. You don’t have it in front of you. That’s why I asked. You know what it’s up to at this point?

Connor Miller [00:13:02]:
I’m going to say 5 million.

Wes Moss [00:13:04]:
It’s close. It’s seven. $7 million for 130. 2nd ad can you remember the oat milk commercial from a couple of years ago? For some reason that one stands out. I think it’s because it was a little company and they bet big that hey, we’re going to do one Super bowl ad and it’s going to get momentum.

Connor Miller [00:13:27]:
Was this oatly?

Wes Moss [00:13:28]:
I don’t even know. I guess it didn’t work all that well. But I do remember it. Is oatly a milk? Yeah, maybe it did work.

Connor Miller [00:13:36]:
I mean, I’ve seen them at the grocery store.

Wes Moss [00:13:38]:
I think it worked. Yeah.

Connor Miller [00:13:39]:
You can have an oat milk late.

Wes Moss [00:13:42]:
You know what’s really hard, though, is to create a viral commercial. You can spend all the money in the world, but to have a commercial take on a life of its own where people start talking about it, you can’t just buy that. So we’ll see. We’ll see if there’s any viral commercials. We already talked about the number of people, 115,000,000. Connor Miller predicts 125,000,000 for this Super bowl because of the Taylor Swift, Travis Kelsey effect. And I love that there’s so much discussion around if she’s going to make it or not. Of course she’s going to make it to the game.

Wes Moss [00:14:19]:
There’s still this ridiculous speculation because she’s.

Connor Miller [00:14:23]:
Flying in from Japan doing a concert.

Wes Moss [00:14:26]:
Taylor Swift can time travel. She can time travel.

Connor Miller [00:14:31]:
She’s there.

Wes Moss [00:14:32]:
Absolutely. She’s going to be there. I’m sure the NFL’s probably paying for her to be there. What we’re going to talk about, though, as we move away from fun Super bowl statistics. Fascinating today, is this past week to somewhat a seminal moment for income investors and the fact that a giant tech company that has been one of the most rapidly growing tech companies over the past 20 years or so went from growth, growth, growth, to. Wait a minute, I think we should start paying a dividend. That’s a big deal. It’s a big change.

Wes Moss [00:15:06]:
I remember when Apple started paying their first dividend, it was kind of, wow, technology company starting to pay out dividends to shareholders. And then we saw that from Facebook this week, and they’re going to be paying out $5 billion to shareholders. Now, in relation to a company their size, it’s still not all that much. It’s a company with 3 billion or so users. It’s around a trillion dollar company. So $5 billion is not an avalanche of dividends, but at least it’s something. And that, I think, is what’s important here is that if we’re looking for companies, we’re going to go back and compare history on companies who kept their dividend, the same companies that didn’t pay a dividend, companies that initiated a dividend. And this is one of the, I would say, relatively rare dividend initiators.

Wes Moss [00:15:59]:
And then relative to companies that are able to grow, grow every single year or over time. How do those companies as a group do historically? We’re going to go over those numbers. Remember, we’re not pounding the table to buy or sell any of these individual companies we’re talking about. But the trends of these companies in groups, I think is really important. And we’ll talk about that when money matters returns. Thinking about retirement in 2024? Well, you’re not alone, and I’ve got just the thing to help guide you on your journey. What the happiest retirees know my most recent book that shares the ten habits of the happiest retirees, meant to help you land at a place where work becomes optional for a limited time. Get 25% off@westmossbooks.com.

Wes Moss [00:16:46]:
Simply use the promo code. Our treat, all one word at checkout. That’s westmossbooks.com. I save documents, and I always have my own tag so that I can go back and find them. And I use this tag called Yak. Yac, let’s call it. Every six months or so I write about yak. What is that? If you’re watching football, it would be yards after catch.

Wes Moss [00:17:11]:
It’s your receiver. If you’re a possession receiver, your job is to really just catch the ball and try to hold onto it. And that’s usually as many yards as you get if you’re a receiver. Like a CD lamb, I think he had 700 yards after the catch. These are the guys that catch and then keep running. But I use Yac, and I noticed it a bunch this year. I think it was Troy Aikman that kept using that term. Maybe it’s because I’ve been writing about yield at cost, which it’s somewhat analogous to this.

Wes Moss [00:17:48]:
We’ll talk about what is yield at cost? When we think about dividends, we think about current dividends. If I own a stock, what is it paying me today at its current price and a way to easily find the current yield, you just take the dividend, divide it by the price. So if you were looking at a company paying one dollars a share and it was $20 a share, you’re buying a $20 basket, if you will, or a $20 per share asset, it’s paying you a dollar a share. That, of course, is just five. That’s, that’s a 5% yield. But what happens if and when over time? That $1 goes to 110, and then it goes to 120, and then it goes to $2 over time. That would be how we’re looking at not yards after the catch, which is great because we make a catch and then we extend the play and we make it even better. It’s very similar when it comes to dividend investing.

Wes Moss [00:18:43]:
The yielded cost looks at this and says, well, wait a minute, this company used to pay a dollar, now pays $2. It may be ten years later, but if you’re taking that $2 relative to what you paid for back, call it in this example here. Now, if that same company is at $2 when I bought it, still my basis stays the same, or at least I paid $20. Now I have a 10% yield at cost. And we don’t really think investors, because dividends do rise very slowly. It’s almost this hidden power in equity markets because they rise very incrementally, a few cents at a time. You really don’t think about what the dividend maybe used to be. So if you have a company that’s paying a dollar and ten years ago, now it’s $2, and you look at what you originally paid at the time, oh, it was only a 5% current yield, but today it’s really 10%, at least on the original money you invested well.

Connor Miller [00:19:47]:
And a lot of times you’ll see the stock price will kind of move along with that dividend. So it’s kind of like this glacial effect where both are moving up at the same time and you don’t see the full effect of what you’re actually getting paid relative to what it cost you.

Wes Moss [00:20:02]:
Well and often. Again, if you plot dividend payments and the increases, to your point, Connor, the price line will often measure that. So that even though dividends get raised and they get raised and they get raised for certain companies, because the price is also going up along with the dividend, the yield will stay around a similar level. So if you look at utility companies, even though many utilities you look at will have raised dividends for 20 years, 30 years, 40 years, their yield seems to always their current yield. If I’m putting new money to work today, it seems like it’s always around three and a half percent, three and a half, low threes. Maybe it gets to four, but it stays in that range. And that’s why we have to put on our glasses of patience and history and look at what could be this yielded cost over the next five years, ten years and 15 years. Now we bring this up because meta, which is the company now that owns Facebook, just initiated a dividend.

Wes Moss [00:21:08]:
The market went kind of wild around this because it was somewhat, it’s kind of the last company that you would think is a dividend paying company. I think dividend paying companies. I think consumer staples, energy, healthcare, utility companies, not technology, not high growth technology companies. And this week they said, we’re going to start paying out a dividend, we’re going to start paying $5 billion out. And again, the reason that you don’t typically see technology companies pay out dividends is that their anticipation is that they’re less mature businesses. They want to take all the profits that they’re getting in any given year so that they can keep growing really fast. We want to take all that profit, put it back into growing as fast as we can. We don’t want to grow at 6% a year.

Wes Moss [00:21:54]:
We don’t want to grow at 8% a year. We want to grow at 20 or 30% a year. So that’s why you rarely see technology companies pay out a whole lot to cash flow to investors as opposed to a much more mature company. When I think consumer staples, I think soda and potato chips, I think diapers and soap, these are companies that have difficulty achieving double digit growth rates because it’s hard to move the meter on selling more bars of soap. Maybe up 2% is a good year, 4% is a good year. How many more pringles can we sell? Well, we had a great year. Pringle sales are up 2.3%. So in order for investors to be attracted to those companies, they have to do something else.

Wes Moss [00:22:42]:
If they’re not growing as fast, they have to oftentimes pay out dividends or attract shareholders. And that’s why you’ll see it’s not completely rare, but you just don’t see it as much within tech.

Connor Miller [00:22:53]:
Well, and for meta in particular, this really has been a seismic shift in just their overall company operations. Remember two years ago, this was Facebook, and they changed their whole name and their whole brand. They invested a ton of money into the metaverse. That’s where you get the name Meta from. And the market really punished them for this because they just felt like they were spending money willy nilly. And so that’s where last year you got this year of efficiency, cost cutting. Fast forward to this year. And now they’re paying a dividend, just trying to be a lot more prudent with their capital.

Wes Moss [00:23:29]:
Well, and again, we’re not recommending we buy or sell, or you buy or sell meta here, but it is an interesting analog or study to see how the market reacted. So the day they announced this dividend, the stock was up. At one point, I know, it was up 20% in the day for a day. And this is an already very big company. So it added, Meta added in one day $196,000,000,000 in market cap in one single day, which is the biggest one day market cap gain in the history of the market. We’ve never seen anything this seismic, if you will. Now Apple’s had actually Apple did come close. Apple and Amazon had two days where they added about 190,000,000,000.

Wes Moss [00:24:15]:
Tesla had a day like that. Microsoft had a couple of days on the list. And Nvidia, that’s the whole top ten. So it’s all tech when it comes to these big one day gains. But if you look at that in context, this is just the additional size of the company. Put that in context, that’s like adding an entire Nike. The whole entire size of the company, Nike all in one day for meta, it’s an entire intel, it’s an entire pfizer, it’s an entire Morgan Stanley or ConocoPhillips. So we’re talking about other giant companies.

Wes Moss [00:24:57]:
Meta did this. I think you get the point. I can keep going here.

Connor Miller [00:25:01]:
It’s almost easier to name the list of companies that are bigger than that because there’s just not that many of them. Maybe 30 or 40 companies in the S and P 500 are actually bigger than the move that meta experienced in one single day.

Wes Moss [00:25:15]:
It’s pretty incredible now, which makes for this year at least for the year 2024. This will be the year that meta became a dividend payer. So it’s an initiator. And we wanted to look at different categories of stocks when it comes to dividends. So dividend growers, dividend initiators, payers that just keep a steady level dividend. And then of course, dividend cutters or eliminators, companies, once they start paying a dividend, they don’t have to keep paying it. It is at their discretion. They can’t pay out too much so that they don’t have cash on hand.

Wes Moss [00:25:50]:
So companies have to be very careful about that. And of course companies run into trouble and they can stop the dividend, they can cut the dividend. That does happen. So let’s look at these in different categories. Or so, going back to, let’s call it the 1970s, we’ll go back to 1973 through year end 2023. And we’ll start with just the S and P 500 total return. So which one of these categories, how do they do relative to each other s and P 500 total return during that period? Of time. We were going 1973 through the end of last year and we had the total return, which, by the way, counts the dividend of the S and P 500.

Wes Moss [00:26:31]:
Reinvested. Reinvested over time. And that annual rate of return is 10.2%, little north of 10%. So again, a strong long term rate of return. Remember, the rule is 72. That means your money would have doubled every seven years or so. Now, if we look at non growers, these are just level payers. They pay a dividend, but they don’t continue to increase the dividend.

Wes Moss [00:26:59]:
That group, over the course of history, up about 10.7%. That’s about a half a percent better than just the S and P 500. Then. If you look at cutters and eliminators now, this doesn’t do as poorly as you might think. It’s often not the end of the world when a company has to cut or eliminate a dividend. They have averaged around 9%, so certainly less than the S and P 500, but not dramatically. Enter dividend growers and initiators. And this is, I think, where the research gets pretty interesting.

Wes Moss [00:27:34]:
How did that group do? This was the best group annual rate of return of almost 13%. So 12.9% is significantly better than the market itself. Connor, let’s run the rule of 72 on that number, on 12.9. So we have 72 divided by 12.9. If you’re growing money at 12.9%, your money doubles every five and a half years. It’s pretty remarkable.

Connor Miller [00:28:08]:
That’s really where compound interest really is, the 8th wonder of the world, because you hear those numbers and you’re like 12.9%. Yeah, that sounds a lot better than ten and a half percent, but not to the tune of the actual nominal value. When you look at growth of $100 since 1973, the difference is dividend growers and initiators grow to $43,000, where the S and P 500 still great, but a much less $12,600.

Wes Moss [00:28:40]:
Right. That’s what’s so interesting. When you start thinking about compounding, you’ve got 10.2. Doesn’t sound all that different from 12.9, but you run it out over 50 years or so. And it’s the difference between 12,040 3000, which is extremely significant. Taking a look at history, we’re looking at different categories. We know the S and P 500 has done well. It’s a little over 10% over the last almost 50 years.

Wes Moss [00:29:08]:
1973 until 2023. Well, that would be 50 years. So we have this benchmark of around 10%. Well, what’s done better or done worse? We found that companies, as a group, and Connor, you’ve been able to do this data over and over the years as we’ve tracked this, but if you’re looking at cutters as an example, or eliminators, companies that were paying a dollar a share and then they went down to $0.50, you’re automatically just pulling that company out as soon as it does it, or at the end of that year. How do we do this research?

Connor Miller [00:29:44]:
Yeah, there’s a rebalancing element probably twice a year pulling those names out based on their policy.

Wes Moss [00:29:51]:
So we see that, not surprisingly, dividend eliminators and cutters don’t do as well. Now, I would have guessed that they would have done maybe even a little worse, but down, up about 9% is still pretty respectable. But then you look at a category like dividend growers, and you see a much bigger impact over time. And I don’t know if this is because investors are attracted to dividend payments and then growing dividend payments, or is it just a reflection? The companies that are able, over time, to ratchet up dividends then inherently have a better price performance on top of that. So you get this double whammy. We know that we’re all after the same thing when it comes to investing it’s total return. We want our money to grow. There’s only two ways it can grow.

Wes Moss [00:30:43]:
It can go up in price, or we can get a dividend from that asset. So if you put those two together, not only are you getting dividend growers, that the I in the equation, total return equals growth plus income. The I keeps going up over time, and then it also points to some strength in the company, so we get more appreciation as well. Is that your take on this?

Connor Miller [00:31:07]:
That’s how I look at it. So I like to compare. If a company is able to pay and grow a dividend over time, that’s really like the fruit of a tree. It’s a sign of a healthy company, that they’re profitable and continuing to grow their earnings, and then they’re just returning that capital to shareholders in the form of a dividend. So really is proof, on average, of a healthy company.

Wes Moss [00:31:31]:
And we know that once a dividend policy is in mean, I think this was maybe two weeks ago or so, but I noticed that ups had a rough year. They had labor contracts and union issues and big new costs, new expenses. Yet they, because they’ve raised dividends for many years, said, we’re going to raise it. It’s only going to be $0.01, but they wanted to stay on that raising track. I thought that was interesting. With that, we do have some happy retiree updates. We chronicle here the lifestyle that’s half of it and the financial the other half of it. There are really five core tenets to that.

Wes Moss [00:32:10]:
We’ve written books about it, but as times change, we have to also update as things may continue to evolve. And we’ve had a ton of inflation, so we’re going to update one of those numbers for inflation here on today’s episode being Super Bowl Sunday, a big reveal. One of our financial checkpoints is going to get updated for all the massive inflation that we’ve seen over the last several years. With that, I want to go back and revisit this concept very simply of when we’re sitting here trying to make investment decisions and we’re looking at, we’re all trying to grow our money. It’s the same formula. Total return equals growth plus income. You could go out and buy a money market today and that’s paying approximately 5%. You’re going to get zero appreciation there and you’re just going to get income.

Wes Moss [00:33:03]:
So that’s the equation is zero plus five equals five. But if you’re buying anything that’s equity related or stock related, you’re hoping to get a little of both. You may buy a growth company that’s 100% growth and it’s going to appreciate and get no dividend, and that’s fine, too. But as we look back over the course of history and we see the category that we have gravitated towards for many, many years, and that’s this thought around income investing. If a company is able to grow the dividend, the combination between that dividend, that may start at a dollar and slowly go to a dollar and cetera over time, that plus the price appreciation, because the company is the financial health, to be able to raise the dividend, you end up with these total return numbers, at least going back to the early seventy s. Nineteen seventy three through last year, that category of stocks that are dividend growers has done well. It’s done even better than the general market. But as we’re sitting here in any period of time looking to make a new investment, you’ve got to consider, and what kind of income am I looking for? And you can sit there and you can look at a company, let’s say, that’s paying out 3%, and a 3% dividend may not sound all that exciting.

Wes Moss [00:34:20]:
Maybe a little bit exciting. 3% plus some growth, I don’t know, but we also have to think of it out into the future. So what is the amount of money I’m trying to put to work today? One hundred thousand dollars to three percent would pay $3,000 in a dividend. It’s not so much about what I’m going to be able to do this year, because for equity investors that are looking for companies that are growing the dividend, you go out ten years, it may very well be more like 6% dividend on what you originally invested, not the entire amount, but on what you originally invested. And that’s this concept of yield at cost. The world looks at current yield. What is it yielding today relative to the value? But I think a really powerful concept is to look at what your yield at cost is to show dividend growth over time. So this is the first time I’ve seen this and this is why I wanted to bring it up this week.

Wes Moss [00:35:18]:
Connor Miller on looking at just the S and P 500 when it comes to yielded costs. So maybe walk us through what it was, what the dividend would have been back in four versus today yielded cost. Yeah.

Connor Miller [00:35:34]:
So when you think of the S and P 500, you don’t really think of it being a dividend focused index, right. You’re buying the 500 largest companies in the US, but you’re not necessarily buying it with as much income focus. But when you look at this data and you go back 20 years, back to 2004, if you would have bought the S and P 500, your current yield at the time would have been about one and a half percent, very similar.

Wes Moss [00:36:03]:
Which, by the way, that’s about what it is right now.

Connor Miller [00:36:05]:
So I was just going to say it’s exactly pretty much where it is today. The difference here is many of the, actually the majority of the companies in the S and P 500 have been raising their dividend each year for the last 20 years.

Wes Moss [00:36:22]:
So that.

Connor Miller [00:36:22]:
Fast forward to today. Yeah, the current yield is one and a half percent your yield at cost. So the current dividends that you’re getting paid relative to what it cost you 20 years ago is over 6%, 6.2%.

Wes Moss [00:36:34]:
So it’s fair to say now, when I’m looking at this study, it’s saying an adjusted SP 500 dividend yield. But really what they’re doing here is we’re looking at what the dividend today is relative to back then on what the S and P 500, whether you put in $100, $10,000 on a percentage basis, your yield at cost going back to four would be over 6% today.

Connor Miller [00:37:00]:
Yeah, that’s right.

Wes Moss [00:37:01]:
Let’s look at some other examples here. This is one that I’ve done every year or so here on money matters. But again, and we’re not saying, I’m not pounding the table to buy or sell any of these particular companies, these are just educational examples to show this concept. We’re going to go back ten years. So we’re going to go back to 2014. And look at Lockheed Martin. Back then, the price was about $155. Annual dividend was five dollarsthirthirty two cent.

Wes Moss [00:37:29]:
So back then, 532 divided by the price of 155, yield was about 3.4%. Flash forward to today. Now the current stock price is about $427, approximately. Annual dividend, though, is $12.60 per share for a current yield of a little less than 3%. So today’s current yield is less than it was if I were putting money to work back in 2014. Well, what’s the yield of cost? So if I had put money to work back then, that same amount, dollar amount, would be paying 8.1%.

Connor Miller [00:38:10]:
This is one of those great examples like we were talking about earlier, is if you’re just looking at the current yield over time, you don’t really notice because the current yield is actually lower than it was ten years ago. That’s because the stock price has almost tripled. But when you look at the yield of cost, 8% versus 3%, 3.4%. When you actually purchase the stock, you.

Wes Moss [00:38:30]:
Call it yield to cost. Or do you say yield at cost?

Connor Miller [00:38:34]:
I like yield at cost. Okay, you do yak yards after catch yield to cost. It doesn’t really sound as good as yield to cost.

Wes Moss [00:38:44]:
Apple, as an example, let’s go back to 2014. Per share price a little over $18. Dividend was forty four cents a share. Again, another technology company that’s paying out dividends. Flash forward to today price about 188. The annual dividend is ninety six cents a share. So the current yield is only about a half a percent. The yielded cost, though a little over 5%.

Wes Moss [00:39:11]:
So on what money I would have originally invested back in 2014, relative to that, the payout is now 5.2%. So it’s not as high of a yield as Lockheed Martin, but it still went up significantly. Well, doubled. It was about a little over 2% back in 14. The yield at cost now is double that. Even though the current. What you’re getting paid today is still only about a half a percent.

Connor Miller [00:39:39]:
And Apple is one of those companies because they are so big. Second biggest company in the world just lost that to Microsoft. Even though they only pay a yield of half a percent, they actually pay out some of the highest dividends in the market in terms of value, the overall aggregate amount. Exactly.

Wes Moss [00:39:57]:
Another example, Johnson and Johnson go back to 2014, $90 a share. Today it’s at 155. They were paying $2.64 back then. Today they’re paying out $4.76. So you’ve got this yield at cost. Again, similar story to Apple, about 5.3%. So it’s not just about what a stock is paying today. When it comes to, for income investors, if you’re looking for yield, you’re looking for income.

Wes Moss [00:40:31]:
Of course, there’s a big variable on what it’s paying today. But if we can start to think longer term, like we should in most investing that we do, there’s this real component of a growing dividend over time is a really powerful item. So it’s the long game of dividend investing and dividend appreciation. Today’s two and 3% yielders could be tomorrow’s five and 6% yielders. When you look at yield, as Connor Miller would say, at cost, more money matters. Straight ahead. We spend a lot of time talking about the habits of happy versus unhappy retirees. There’s almost an equal number of them.

Wes Moss [00:41:16]:
There’s almost, again an equal number of lifestyle habits and financial habits. But it’s money matters. And I think that it’s always important to make sure that we get the financial or economic foundation set so that we can lower and reduce our overall anxiety when it comes to money, because there’s a whole lot of fear and emotion related to that. I don’t know if we’ll have time to go through all five habits, but I have a big update for one of them. And if I were to boil down the many different financial habits that I’ve found over the years through research of happy versus unhappy retirees. Let’s go over kind of core tenant number one. I think of it as a financial checkpoint, and we need to update it. And we’re going to update the number because we have had so much inflation so rapidly over the last several years.

Wes Moss [00:42:11]:
If you go back to March of 2013, and I’m just looking at CPI data here on the Federal Reserve website, if I go back and I look at the level of CPI, March of 2013 through February, right before COVID or as Covid was hitting in 2020, that entire seven year period, we only saw 12% inflation total seven years in a total of 12% inflation. During 2022, we were clipping at over 9% in one year, so it was virtually nonexistent. And we shared this in our 2024 outlook, that the inflation monster that was frozen in a glacier for nearly a decade was unleashed through the torrent of fiscal stimulus because of the pandemic. And now all of a sudden, we had a bunch of inflation. But what are the numbers then? We had almost 20% in just three years. So if you put that all together, over the past decade or so, we’ve had a little over 30% inflation. One of the keys on the financial side of getting to a place where we have some economic stability and enough liquid money to also produce more income in addition to our other income streams, which is another secret, starts us at habit number one, and that’s this. Hrobs have a minimum of.

Wes Moss [00:43:39]:
This is a median number where we cross from the unhappy to the happy camp of now $700,000. That’s our new median data that’s adjusted for inflation. The average, which was also higher, is at one and a quarter. That’s the mean data on liquid retirement savings. And again, Connor Miller, more is fine. You’re not going to reduce your happiness if we’re at more. But from a liquid retirement savings standpoint, as far as the research we’ve done over the years, we’re updating what was 500,000 now to 700, and that’s an adjustment of 40% inflation. Now we’ve had about 31, 32% since.

Wes Moss [00:44:22]:
And this gives us a cushion for several more years when it comes to inflation. So liquid retirement saving, as a reminder, those are funds. This is not just our net worth. So this doesn’t count the value of the home necessarily, unless you’re planning on selling it and turning that money into a liquid, meaning funds that are easily accessible, anything that’s in a stock, a bond, a mutual fund, anything that you can turn into cash, as my kids would say, it’s, quote, in the bank. You can actually use it, turn it into cash and pay for something.

Connor Miller [00:44:56]:
Well, to me it’s so relevant to today because you look at the stats of how many people are dissatisfied with the economy right now. We’ve been talking a lot about how the economy looks great, right? The consumer has been resilient. GDP was two and a half, 3% last year.

Wes Moss [00:45:16]:
Things are pretty good on paper.

Connor Miller [00:45:18]:
On paper. But yet 70% to 75% of Americans are displeased with the economy. At least I think the reason for that is how much increase we’ve seen in prices and wages haven’t caught up with that as much over the last.

Wes Moss [00:45:36]:
If you were to look at inflation. So everything we have to buy going up relative to our wages going up. What has that relationship been over the last couple of years?

Connor Miller [00:45:45]:
So I pulled it going back to the end of 2020 because 2021 was really when we started seeing that pandemic post. Exactly. Prices are up 18% as measured by the consumer price index. Wage growth has only been 15%. And so the average worker hasn’t kept up with inflation. And to them, it doesn’t feel like the economy is that great because they’ve actually lost a little bit of purchasing power.

Wes Moss [00:46:15]:
My number was 19 here. I went from May, you went from January, a few months later. It’s important. We’ve had almost 20% inflation and wages are only up, call it 15. And so even though people have gotten raises, those raises haven’t been able to keep up. There’s an article in the Wall Street Journal this week. The title was why Americans are so down on a strong economy. And it’s more than just this.

Wes Moss [00:46:42]:
They had several real life examples of people that they interviewed. And I think it was a woman from Arizona said that just because inflation is lower, it’s a lot like, gosh, you’re bleeding, but now you’re just bleeding a little less. That was a quote. I look at it as this is that I think ever since, and this chart is, again, this is really telling. If you go back and look at the percentage of Americans who say they trust the government always or most of the time. This is from Pew Research center, national election studies by Gallup, ABC Washington Post CBS Wow. Back in the 1960s, over 75% of Americans really tried. America loved their government.

Wes Moss [00:47:32]:
In the 19 producer Mallory’s heard she’s doing the mind blow emoji. What? You’re not old enough to remember this. There was a time, yeah, it was happy days. Connor Miller this is when the Fonz was jumping around. These were good days. 75% of Americans said that they trusted the government always or most of the time. Then it slowly went down and then it rose as we went into 911. And that’s when we hit a high.

Wes Moss [00:48:01]:
So if you go back post 1970 high, that 60% of Americans trusted the United States government post 911, it was October of 2001. And then it’s just slowly cratered. Ever since then, the great financial crisis hit that was rough on Americans. And now here we are at 16%, which it dipped that low during the GFC. But now we’re back to that point. So that’s part of it, is that you’ve got this political polarization. I think that there is something to a PTSD, of something bad that could happen again. Something bad happened September 11, 2001, to Americans.

Wes Moss [00:48:42]:
And confidence has never been the same, at least in our government. And this is just from a confidence perspective. And if you look at the confidence measures, the Michigan consumer sentiment index or the Bloomberg Comfort Index, a variety of different sentiment indicators which measure how they feel, not just how Americans feel towards their government. Those numbers are as lower than they were during the pandemic. So it is a variety of things, but I think it boils down to the last 20 some years we’ve had this event. We have event PTSD. Things can look pretty good, and then something wham. Can happen.

Wes Moss [00:49:17]:
We’ve got social media amplification and feeling of just that, which I think leads to a feeling of vulnerability. And inflation is probably culprit, number one.

Connor Miller [00:49:30]:
And the events really do put it in perspective. When you think of someone who’s 40 years old, born in 1984, by the time they were graduating high school, you had 911. You fast forward a few years, they’re out of college, getting their first job, you had the financial crisis. Fast forward another 13 years, and you had Covid. And so it’s just been one major event after another.

Wes Moss [00:49:55]:
So we’ve updated our happy retiree financial checkpoint on liquid retirement savings to 700. Is the median one and a quarter, 1.25 million is the average or the mean. And yes, there are happy retirees with less than $700,000 in liquid savings. Absolutely. But we see significant improvements in happiness levels from zero to 700,000 more is fine. But due to what we call the plateau effect, happiness does tend to level off once we get to a certain point with increased accumulation. So sufficient money getting to a point where it’s going to take care of you long term gets us to a place where we feel secure, and that leads to higher levels of reported happiness. But once we get to a certain point over, call it 700,000, we get what I would call diminishing marginal return.

Wes Moss [00:50:50]:
So diminishing marginal happiness per new dollar, it still rises, but doesn’t rise at the same pace. And of course, everyone’s economic needs are going to be very different. Some people will say 700,000 is crazy. I’ll never be able to get there. And then you’ll have people that say that that’s crazy low. I can’t live on $700,000. This is just what our research has shown us over the years. And now adjusted for the significant inflation that we’ve seen in the last three plus years or so, however, I will say this.

Wes Moss [00:51:26]:
It works in practice. That number works in real life. If we’re starting to think about, well, I’m going to use the 4% rule. I’m going to use the 4% rule and that’s going to generate, well, let’s do the math here. $700,000 at four and a quarter percent, we’re in the 4% range. So we’re around $30,000 on 700. Add that to $30,000 in Social Security for you, potentially another 20 or 30,000 from a spouse, and now you’re at 60, 70, $80,000. And if we have no mortgage, all of a sudden these happy retiree money checkpoints start to add up to the real world.

Wes Moss [00:52:11]:
This may not allow for extravagance. It’s certainly not viking cruises around Alaska and spending a month in Europe. But it can pay the bills and it can pay the bills in America, in a lot of cities now, maybe it’s not New York City, maybe it’s not Naples, where I think I saw this week. There’s a house for sale for $265,000,000 on some island right off of Naples. But it gets the job done in the vast majority of cities and small towns around the United States. And to me, that’s something that happy retirees absolutely love. And I do, too. Connor Miller, you can find Connor Miller.

Wes Moss [00:52:53]:
You could find me and the whole money matters team. It’s easy to do. So you can find us@yourwealth.com that’s your wealth. Have a wonderful rest of your day.

Mallory Boggs [00:53:09]:
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Mallory Boggs [00:53:57]:
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