One Share of Stock Now Worth $9.8 Million -- Is It Really Possible?

Coca-cola
The back of Coca-Cola's (KO) proxy statement recently stopped me in my tracks.

It declared that just one $40 share of the company's stock bought in 1919, with dividends reinvested, would be worth $9.8 million today.

Yup, $9.8 million. That's quite a feat. But could an investor today replicate a similar scenario?

The answer is yes, but with caveats.

The Keys to Hypercaffeinated Returns

Let's put our lucky Coca-Cola stock holder's returns in perspective.

First, while $40 in 1919 may sound like a lot, it's the equivalent of about $531 today. It's a somewhat significant sum of money, but with some concentrated cost-cutting over a few months -- of cutting cable or skipping dining out for a while -- it's an amount that's not all that difficult for the average American to save up.

Obviously, the time frame (93 years) is more than a decade longer than the average American's life expectancy, so it's unlikely any one person lived long enough to toast their $10 million good fortune. But their heirs certainly were around to thank grandpop for his savvy investment. A similar time frame could be achieved by buying stock today for a newborn child or grandchild.

So we've accounted for two main factors for the Coke investor's long-term success -- a decent-sized initial investment and the wherewithal to hold on to that stock for a lifetime.

However, the most difficult part of achieving this scenario today is that very few companies last as long as Coke has.

Stocks with Staying Power

As you can see, the Dow Jones Industrial Average (a representation of the major companies of the time) in 1920 looked quite different than it does today:

1920 Dow Dow Today
American Can 3M
American Car & Foundry Alcoa
American Locomotive American Express
American Smelting AT&T
American Sugar Bank of America
American Telephone and Telegraph Boeing
Anaconda Copper Caterpillar
Baldwin Locomotive Chevron
Central Leather Cisco Systems
Corn Products Coca-Cola
General Electric DuPont
Goodrich ExxonMobil
Republic Iron and Steel General Electric
Studebaker Hewlett-Packard
Texas Company Home Depot
U.S. Rubber Intel
U.S. Steel International Business Machines
Utah Copper Johnson & Johnson
Western Union JPMorgan Chase
Westinghouse Electric Kraft Foods
McDonald's
Merck
Microsoft
Pfizer
Procter & Gamble
Travelers
United Technologies
Verizon
Walmart
Walt Disney

Believe it or not, only six companies from the 1920 Dow are still around and public today. Most were either bought out or taken private, with the remainders either being liquidated or going bankrupt. And of those six, only two have consistently paid dividends since 1920.

So perhaps the most limiting factor in replicating Coca-Cola's example is the ability to successfully pick a company that will have 90-plus years of staying power, will remain publicly traded, and will continue paying dividends over that time period.

Don't Dismiss the Possibility Just Yet

Even though you may not have psychic abilities, nor 90 years to wait, there's still a clear lesson in this example.

The lesson is that investing in companies that pay dividends can be a remarkably effective long-term investing strategy. Especially when you reinvest the dividends, thanks to the compounding effect that adds to your money's growth.

Wharton professor Jeremy Siegel's academic research backs this up. Beyond providing investors with a regular stream of income, he says that companies paying dividends typically provide their investors with the best returns -- in the long run. Even better, on average, they also do so with less risk.

So whether you're saving for retirement, saving for the college fund of a child or grandchild, or simply looking for your money to compound quicker than the 1.5% per year you'd be lucky to get with a 5-year CD -- investing in companies that pay dividends could be the better bet.

For a good place to start, check out this pair of dirt cheap stocks with huge dividends.

This article was written by Motley Fool analyst Adam J. Wiederman. He owns no shares of the companies mentioned above.
Coke Bottle Could Sell for $200k

Increase your money and finance knowledge from home

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Add a Comment

*0 / 3000 Character Maximum

19 Comments

Filter by:
Wheres George

My grandfather bought Coca Cola stock in the 1930s. When he died 10 years ago, he was worth millions. While my mom and her sisters benefited greatly from his investment, he never enjoyed a penny of that money.

May 28 2014 at 8:22 AM Report abuse rate up rate down Reply
Annika

Coca Cola is still a good stock option because every few years the stock splits, giving you twice the amount of shares you had at the beginning. Over time the value of those stocks doubles as well (currently about every five years). Coca Cola is selling a lot in Asian markets, so we will see the stock steadily gaining value.

August 14 2012 at 6:04 PM Report abuse rate up rate down Reply
vlady1000

About a 12% return annually. But how many companies would you have lost on too (that are no longer). Easy to have 20/20 hindsight. In general, I do not think US equities will perform no where near as good as they have in the past.

August 14 2012 at 5:32 PM Report abuse rate up rate down Reply
jimekon

yes your stock would be worth 9.8mil but you would be dead

August 14 2012 at 4:55 PM Report abuse rate up rate down Reply
rssmray

Is that why a case of Coke sells for $10 and Pepsi for $6? Every Two Weeks, the US gov't, spend millions of dollars into the stockmarket, through employees. billions per year. Some Day, and everyone knows it, this will all come to a crashing halt!!! Perhaps after the elections, but certainly before the next elections. I think the entire market is False-Bottomed by over 8,000 points. good luck

August 14 2012 at 4:37 PM Report abuse rate up rate down Reply
alfredschrader

In 1929 Coca-Cola shares were 25 cents each. During that time my uncle Henry was the king of the soft drink business in the US. It wasn't too long after the crash that my dad invented Yoo Hoo. The Yoo Hoo people credit Yoo Hoo to a man in New Jersey around then. For a time, my uncle Henry lived at 52 Fisk Street, Jersey City, New Jersey . You see, everyone wanted to sell a chocolate bottled drink, but nobody could because the milk would curdle. My dad (Alfred Senior) figured out how to do it. My uncle gave my dad a thousand dollar bonus and two weeks vacation for inventing Yoo Hoo. How can I prove this ? Easy, I'm the only one left living that knows how he did it. The beverages that I can make ? Would blow your mind.

August 14 2012 at 3:56 PM Report abuse rate up rate down Reply
ahanning

average of 11.14% real return over 93 years. Not bad, but not exceptional either.

August 14 2012 at 3:54 PM Report abuse +1 rate up rate down Reply
Tara Friendly

In reality that $9.8 million is worth just $720,000 today when adjusted for inflation. Theres 1000's of stocks would have yielded higher. Looks good on paper period.

August 14 2012 at 3:18 PM Report abuse rate up rate down Reply
bdgrizcp

I heard--from a college professor years ago that the stock price took a dump during the '29 crash and was selling for pocket change. He indicated then that the stock price had inflated to around $15,000 (in 1969). So this isn't probably far off the mark.

August 14 2012 at 3:11 PM Report abuse rate up rate down Reply
robertstone1robert

Do you think they would honor my backorder since I wasn't around 1919? It's beyond my ability .

August 14 2012 at 3:06 PM Report abuse -2 rate up rate down Reply