Transcript: Money minute – The power of time and dividends
CIO, North American Equities
CIBC Asset Management
“Imagine this: behind door number one, you have one million dollars. Behind door number two, you have a penny. You get to pick one - but if you choose the penny, you can double it every day for 30 days. What's the best choice? If you guessed the one penny, you are correct. After 30 days of doubling, that penny turns into five point three million dollars.
This highlights why investors should look at more than just the short term potential - choosing door number one - and focus on the long term perspective, where you may be able to leverage the power of compounding. Take dividend paying companies for an example. They aim to pay out some of their earnings (being dividends) to their investors in a predictable, stable income stream - often quarterly. And companies that pay dividends have historically outperformed the market as a whole. One reason for that is businesses that can generate excess cash flow for dividends tend to show other positive attributes like innovation, overall growth and managing costs.
So combining the power of compounding over time with investing in well-managed dividend paying companies can be a reliable, successful way to grow investors’ wealth.”
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