Dividends4Life: Holding Dividend Stocks Is Not A Mistake

Holding Dividend Stocks Is Not A Mistake

Posted by D4L | Monday, March 25, 2013 | | 0 comments »

Over the past couple of weeks, I have spent most of my time focusing on the interplay between valuation and excellent companies, often leaning in the direction of selling companies that are currently overvalued by a moderate to substantial degree. While I stand by my point, there is another element of the decision-making process that I would like to highlight: if you do decide to hold onto your overvalued blue-chip stock, you should still do quite well if you have a 10+ year time horizon.

After all, even though Warren Buffett decided to have Berkshire Hathaway (BRK.B) hold on to Coca-Cola (KO) stock through periods of severe overvaluation in the late 1990s, he still managed to turn his $1.3 billion investment in the soda giant (shares he accumulated from the late 1980s through early 1990s) into just shy of $15 billion today (and that is without reinvesting the dividends along the way). In hindsight, Coca-Cola traded at 30x earnings in 2002, and the company has still managed to deliver total returns of 7.39% since that time.

Source: Seeking Alpha

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