The Power of Time: How Holding Dividend Stocks Can Pay You for Life

How a regular 9-to-5 employee earns passive income for financial independence

The Power of Time: How Holding Dividend Stocks Can Pay You for Life

If you’ve ever doubted the power of patience in investing, consider one of the simplest yet most powerful wealth-building strategies: holding quality dividend growth stocks over the long term.

A key concept to understand here is Yield on Cost (YOC). Unlike regular dividend yield, which is based on the current stock price, YOC is calculated using your original purchase price. Over time, if the company continues growing and increasing its dividend, your YOC rises—even if the stock price goes up. In other words, your income grows while your original cost stays the same. That’s the magic of long-term dividend investing.

Warren Buffett and Coca-Cola: A Masterclass in Dividend Patience

To see this in action, let’s look at one of the most iconic examples: Warren Buffett’s investment in Coca-Cola (KO).

Back in 1988, Buffett’s Berkshire Hathaway invested approximately $1.3 billion in Coca-Cola shares. He never sold them.

Fast forward to today: Coca-Cola now pays Berkshire over $700 million in annual dividends. That translates into a yield on cost of more than 50%—every single year, based on his original investment.

Let that sink in:

Buffett is now earning more than half of his initial $1.3 billion investment every year, in cash dividends alone. Meanwhile, those shares are worth over $25 billion.

It’s like buying a property, collecting rent for decades, and still owning the property—except the “rent” keeps increasing.

Imagine Doing This on a Smaller Scale

Of course, most of us don’t have $1.3 billion to invest. However, the principle works at any scale.

Let’s say you invest $10,000 into a high-quality dividend stock yielding 3%. That gives you $300 in dividends per year.

If the company increases its dividend by just 7% annually, your annual dividend will grow to $1,160 in 20 years. That’s an 11.6% yield on cost—meaning you’re earning more than one-tenth of your original investment in annual income.

Furthermore, here’s where it gets interesting:

You could choose to sell part of your original investment after some years and let the rest—essentially “house money”—continue working for you. The remaining shares would still pay dividends, and their value may continue to grow over time.

💰 A Decade of Dividends: How 100 Shares Returned Over 30% in Cash

Let’s look at a practical example based on a real U.S. dividend stock.

Imagine you bought 100 shares of a reliable dividend-paying company in 2015 at $83 per share (total investment: $8,300).

Here’s what happened over the next 10 years:

The company increased its dividend consistently.
After accounting for a 30% U.S. withholding tax (as is typical for many non-U.S. investors), you still kept 70% of the dividends.
By June 2025, you would have received approximately $2,900 in total net dividends—that’s over 35% of your original investment returned in cash.
Your yield on cost would have grown from 2.4% to over 3.2%, even after tax.

In short, you’re not just holding a stock—you’re holding a cash-generating asset that pays you more every year while still preserving and growing your original capital.

This Is How You Escape the Rat Race

Many investors chase quick wins—flipping stocks, timing the market, or speculating on trends. While that approach can occasionally pay off, it often leads to inconsistent results and unnecessary stress.

In contrast, dividend investing is about playing the long game. It’s not about getting rich overnight; it’s about planting the right seeds and letting time do the work. This strategy doesn’t just grow your capital—it builds a growing stream of passive income.

Just like Buffett did with Coca-Cola, you let patience, consistency, and quality do the heavy lifting.

Final Thoughts: Time Is Your Greatest Ally

If you’re in your 30s or 40s and consistently invest in dividend growth companies, it may not feel like much at first. But fast forward 10, 15, or 20 years—and your portfolio could be paying you more in dividends than you ever imagined, all while continuing to grow in value.

One day, you might look back and say:

“I’ve already gotten all my money back. And now I’m just getting paid… to wait.”

My Personal Experience: The Power of Yield on Cost vs. Fixed Deposits

I’ve experienced this firsthand.

One of my dividend positions, purchased in 2015, now generates a 12.6% yield on cost. Over the years, I’ve received 57.6% of my total investment back in dividends, and as of June 2025, the stock’s value has increased by 106%.

Now, compare that to a traditional fixed deposit (FD). While FDs offer predictable interest, they don’t grow in value. If you regularly withdraw the interest to cover expenses, your principal remains unchanged—and over time, inflation quietly eats away at your purchasing power.

Dividend stocks, on the other hand, provide the best of both worlds:

A growing stream of income through increasing dividends
Capital appreciation that helps your investment grow in real terms

That’s the power of time, patience, and dividend growth—a strategy that quietly builds wealth, rewards you with rising income, and provides a natural hedge against inflation.