What John D. Rockefeller Knew About Getting Rich with Dividends

Just take a walk through your darn home. Look in your kitchen, look in your pantry, in your ensuite, look in your garage, your garden shed. Think of all the products that your parents were using, that you use now, that your grandma and grandpa were using, that you're using now. Our kids are going to still need those goods and services. But the fact is this, you can get rich and create wealth with dividend reinvestment planning. Absolutely. You can. You can do that. Okay, so we're going to talk about how to get rich with dividends. And now this is a topic that our community requested because I shared some details regarding what I do with dividend reinvestment planning. What on earth is dividend reinvestment planning? Well, I'm going to chat about that. I'm going to share details around it. Where this all originates from is having ready access capital on demand, on your terms so that you can take advantage of high caliber opportunities. Makes sense. Serblo 100% so Nelson Nash, who developed and pioneered this process of becoming your own banker, the infinite banking concept, you wrote the book titled Becoming youg Own Banker. It's sold more than 550,000 copies. It's self published. There's a link in the show notes to get your own copy. Take you less than an afternoon to read it. One of the things that Nelson talks about in the book is he says, when you have ready access, capital opportunities of high caliber will track you down. So I want to cover two things. One, how to take advantage of a high caliber opportunity that tracks you down. And two, to share with clarity what happens if you give compounding time. What actually happens if you give compounding time. So we're going to look at that. But before I do, I want to share this with all of you. Just a really quick resource that's going to be helpful to you. And I want to start with sharing something that John D. Rockefeller said many, many decades ago. John D. Rockefeller was an American business magnet, a philanthropist, one of the wealthiest people of that time and still in the Rockefeller family, the, the wealth that's been passed from one generation to the next, which we'll also talk about. But John D. Rockefeller said, do you know the only thing that gives me pleasure to see my dividends coming in. And so I'm going to show you what exactly what that looks like. Let me begin with this. So let me set the stage. I'm going to set this stage as a parent, a plan to save money for a child. But if that's not you, keep listening because you can just replace what I'm describing with your own circumstance. Ok, but just to set the stage, let's say you have a parent, they decide they want to set aside 200 bucks a month. Now they want to implement the process of becoming your own banker. But they also have a desire to help their child and themselves get rich with dividends. That's another one of their objectives. So we want to achieve both. So the first thing the parent does is begins by putting $200 a month into a dividend paying life insurance policy that is contractually guaranteed to accumulate cash value, that is contractually guaranteed to grow death benefit, that is contractually guaranteed to provide the policy owner with ready access to capital on demand, on their terms in this scenario. So the policy that we're looking at is very simple. It's a wealth accumulator. We got 2,400 bucks a year going into this policy. And I'm going to take you to real quick here. Let's go to just the table of values. Now what I'm showing is premium going into this policy for a grand total of seven years. So the child was born, the policy was put into place. Now we're going to put 2,400 bucks a year into the policy and we're going to do that for a grand total of six years. How much capital is that?

So 2,400 multiplied by six is 14,400.

So the, the outlay cumulatively is 14,400. Now the child turns seven. The parent has discovered how to purchase dividend paying stock. Now I'm talking about stable companies. These are blue chip businesses. If you were to just examine kind of your own pantry, your own refrigerator, your own en suite and see the products that you're in, goods that you're consuming each and every day, these are companies that are going to be here long after we're gone. They're still going to be producing the goods and the services that we all need. And the parent says, look, I want to create a dividend reinvestment plan that I'm going to pass along to my child at some point later in life. This is all part of my plan to create something for my, my child that he or she could create for themselves. Going back to the outlay, what was the total premium again?

14,400.

14,400. Now this parent is going to purchase 1,000 shares of a stock for 10 bucks. The parent is going to get a policy loan from the life insurance company to buy the stock. Whose money is the parent using to buy the Stock insurance company's money, Life insurance company's money. Now, following this notion, if I just bring up the policy again at age 7, what's the cumulative cash value in the policy?

$14,915.

And the total premium that was paid again?

$14,400.

Now we're going to request a policy loan for $10,000. The insurance company is going to directly deposit that $10,000 into the parent's checking account. The $14,915 in the policy continues growing uninterrupted by that policy loan. The total death benefit of the policy started at 174,000. It's now 287,000. And what was our total premium outlay again?

14,400.

You think Dave Ramsey or Suze Orman understands any of what I'm talking about right now? No, but yet Dave Ramsey says you can go and earn 12% in a mutual fund. Right. So let's just hop on the Dave Ramsey wagon. Does it sound good? Yes, but we're not going to buy the mutual fund. We're just going to go and buy the stock in the company because we know it's a great blue chip, great company. And I'm using simple math here. I'm not naming any particular companies. Sound good?

Sounds good.

The simple interest rate on the policy loan is 6.5%. So on an annual basis, that is $650. Would you agree with that math, Sarblo?

Yeah. Minus $10,000.

So I'm going to share my screen now to show you what happens. You see the premium of 14,400.

See it?

You take a policy loan for 10,000, go and buy the stock. This stock in the first year is going to pay a dividend of 40 cents on every share. Is that a reasonable dividend?

Absolutely it is.

So in the first year, the income is $400. You see how we arrived at that?

Yeah. Because you got 10,000 shares, 1,000 shares.

40 cents a share, that's 400 bucks. The return on that original investment of 10,000 is 4%. Agreed. And the cash value we already identified was 14,915. That's the amount of cash value that we started with in the policy. Now we're going to service the interest, this policy loan each year, because remember, our child is seven. Our child's not getting that income. We are receiving that income. Agreed. So from the 400 of yearly income, we're going to apply that toward the simple interest on the policy loan, and we're going to come out of pocket another 250 bucks to service the interest. Now we're going to keep doing this and look at what happens at age 13. How much is that yearly income from the stock?

$709.

And what is the simple interest on the policy loan?

$650,000.

So how much outlay do we have to service the interest on the policy loan?

Nothing from a pocket.

And then we have a gain right of gross income. And what is the total cash value of the policy now?

It's increased to 17,008, 78.

Okay. How are we doing so far?

We are in the game.

And what has happened with the death benefit? It's gone down because we're not paying premium in the policy anymore. Well, what happened to the cash value of the policy? Has it gone down one penny?

No, cash value hasn't gone down.

Now I'm going to take you right to the 20th year. Here are some assumptions. The stock price stayed flat. It didn't do a darn thing over the 20 year period. Okay.

So no appreciation in the stock.

No appreciation in stock price at all. Just stayed flat. We took that dividend as income every year for 20 years. So over that 20 year time frame, we received $22,910 in dividend income. And I'm assuming a very modest increase in the dividend each and every year. This is not unusual for a blue chip dividend paying stock. It's not unusual for a modest increase in dividend payout each and every year. $22,910 in dividend income. What was the original investment in the stock?

$10,000.

Whose money did we use to buy the stock?

Insurance company's money.

How much did we actually come out of pocket to service the interest on the policy loan? In total?

$813.80.

And what was the total dividend income?

$22,910.

How much cash value is there in the policy now?

$25,869.

And what's the total death benefit?

$208,000.

And how much premium did we put in?

$14,400.

How are we doing so far?

Doing pretty good from the gain standpoint.

Yeah, but didn't I just talk about at the beginning of this that we're talking about dividend reinvestment planning, not dividend income planning.

That's right.

We can take dividend income later in life and so can our child. Agreed.

Yeah.

So let's examine what happens if we had actually reinvested the dividends into more stock. This would change our outlay. Wouldn't it.

Yes, it would. Then we're servicing the interest.

Yeah, we would be servicing the interest. So now the outlay needs to be modified. It needs to be changed because it would actually be 650 each and every year. Would that be, would that be a fair statement?

100%. We'll be paying it from our pocket.

So let's just change this outlay. Let's copy this. Let's put it into here. So now our total outlay is $13,000 over that 20 year period. Right. Plus the premium, $14,400. We still have all the cash value. We still have the death benefit of the policy. But look at this. If we had reinvested the dividends after 10 years, we would have 1881 shares of that stock. Not a thousand shares. That's an 88% return. After 20 years, that original investment of 10,000 would be worth $94,880, which is a return of 849%. That's a compound annual growth rate of 11.91% on a stock whose price did not change. All we did was reinvest the dividends. Way bigger impact. And so if you only wanted to do this for the purposes of dividend income, could you imagine just for a moment, because at this point, Your child is 26 years young. If you started this at age 40, you're 66. Your child can take this over. But what if you paid the premium in the policy the entire time because you wanted to contribute that? If you paid the premium into the policy for that entire window of time at age 26, how much cash value is in the policy now?

111,300.

And the death benefit?

$714,000. So death benefit just kept growing. It never went down.

It never went down. And if you put 2400 in for 26 years, that's $62,000, isn't it? So here's what I want the viewer and the listener to be thinking about. Could you not have replicated that $10,000 investment exercise a number of times over? And can you find very stable companies that are going to be here long after you and I are gone, that are yielding more than 5% in dividends a year? So regardless of what happens to the stock price, can you create a very solid dividend income stream? And can you use the life insurance company's capital to do that? So what jumped off the page for you? If I go back to this table, what jumped off the page for you almost instantly when you start to look at what Am I putting in? What am I getting out?

Well, what we're getting out is way more than what we put in. I'm not just talking about the policy itself. I'm talking about the use of the policy for a very specific purpose, which is to in this case have the dividend reinvestment plan or just what you shared, which is the using the dividend to also pay back policy loans. So either way the outcome was much better, but one created a bigger, better outcome is just based on some, some delayed gratification goals that we can get accomplished so we can do it for the kids. But then once we have that, let's just say portfolio of stocks producing dividends 20 years later, that can also supplement our retirement income. And when we are gone, it'll continue supplement our spouse's retirement income or the next generation's retirement income. It's going to be more than what we put in to begin with. And there's additional death benefit, tax free death benefit that's going to pay any disposition based on taxes that will be triggered on that portfolio.

And if you're doing this for yourself, can you make this much larger than just a $10,000 investment?

Oh, 100%. And so, so, so, so Jason, one, one question that, not a question, but a thought that comes up in, in meetings is, and people just tie everything to child's policy. Okay, I'm going to take this policy that I'm going to start on my child and once my child reaches 18, I'm going to use this policy for these things. You know, that's very typical conversation, but we have to go back and remind them it's not about just that particular policy that you're going to start with your child. You can do the same thing with your policy also that you have on yourself. It's a system of policy. So if you can do this with a $2,400 per year that you're looking to get set up for your child, imagine what it'd be if the Premium is not 2400 per year, but 24,000 a year.

Right.

Do you want to do for yourself?

Right. And look at it from this vantage point as well. If you're doing this for the kid or children, like in my case, four kids, because I started my journey with learning about dividend reinvestment planning when I was 12. So when I was 12, I mailed away for this money paper. Now look at this, this particular image that I found on Amazon, this is the 25th edition. So I would have ordered like the first second edition of this money paper. And when I got it in the mail, the reason I did this is because Warren Buffett was talking about the power of buying solid companies and holding them. And at 12 years young, I'm conceptually thinking, well, gosh, I drink Coke. And he was talking about being such a big fan of the Coca Cola company. It's like, well, I drink Coke, maybe I should own Coke. And I'm thinking about this at 12, I get this paper and I start reading about dividend reinvestment planning. Well, my children, they don't understand obviously what we do now as adults. So to start this for the kids and when they get to the point where they're going to be able to access and do this for themselves with the plans that I put together for them, can I charge them a management expense ratio? And am I going to charge that on the account value or the dividends that get paid every year?

Well, you could be both.

I'm going to charge it on the account value and so I'm going to be earning what the Wall street broker would have been earning. I'm just going to charge my kids for it. Hey, if you want dividend income from a portfolio that I created and that I effectively managed, which wasn't really any management involved, you sign a form, you check the box. That's all you do. Really, what I'm going to charge, gosh, I hope my kids aren't shaking their heads looking at this when they're watching this video 20 years from now. But I'm going to charge them a management expense fee to manage these accounts. And so think about it for a second. A, you can definitely get rich with dividends. That's not a some pie in the sky ridiculous statement to make. Look no further again than all of the companies, the products that you use. I even shared in that post. If I go back to that post, I shared what I have in my dividend reinvestment planning. I have companies, all the major banks, all the major telecom, all the major transportation railway, all the major health care, all the major technology, like these are businesses that are going to be around when my kids are my age and when my kids become grandparents and so on. But the point that I'm trying to make is that I am utilizing life insurance companies money to go and create these dividend reinvestment plans. The outlay for me is servicing the interest on the policy loans. If that's all I did, at minimum. But because we practice the family banking system, there's so much capital flowing back into our family money pool. It's just circulating through our system of policies. So my outlay is really, in fact nothing I'm actually paying to look after things for personal financial overhead and all that. But my outlay for this process is just flowing money through my system like it's not a siloed transaction right where I'm, oh, I've got to take out 250 bucks out of my pocket for that. There's money flowing through our banking system every single month. So when my children are my age, late 40s, is, is that dividend income, that dividend reinvestment at that time, if they wanted to take dividend income at that time, is it going to be enormous and regardless of the stock price, is it going to continue coming? As long as those companies continue to declare dividends and I'm not gifting them that income, it's not going to be a present. Here you go. It's an asset that has value. They're going to have to pay for that if they want the policies that created the ready access capital to take advantage of high caliber opportunity. The kids are going to have to pay me the premium that I put into those policies. If they want the dividend income, they want to take over that dividend reinvestment plan, they're going to have to pay me a management expense fee because I managed the damn thing when they couldn't do it for themselves. And they're probably going to ask me to keep managing it when they can do it for themselves. So am I going to be collecting a pretty significant management expense fee every year?

You will, yeah.

How we doing?

It's pretty good. So, you know, it's just about what we talk about in terms of, you know, family banking systems. And this is just an expansion on what the family just family banking system can do. But the family banking system is not just about whole life policy. It's about creating strategies using the system of policies and using those strategies to create a fulfillment for the family and keeping money in the family, including the management expense fees, because someone would have received those.

That's exactly it. And can you keep that going?

You can keep it going intergenerationally?

You sure can. Because these companies are going to outlive each generation and not to do a commercial for any one particular business. But I'm sure these companies with the YouTube algorithms, I'm sure they wouldn't mind being mentioned. But you know, companies like Johnson and Johnson, companies like Microsoft, companies that provide consumer goods and services, Think about, you shave, you brush your Teeth, you shampoo, hair, Hydro one, laundry or clothes. Yeah, like all these businesses that are just going to still continue to be here. And when you build this, this portfolio of companies that you just reinvest, the dividends with, it becomes enormous. When I bought my first share at age 19, my very first share of stock was in Intel. That was my, the very first company that I purchased. I still have the certificate. I'll never discard it. It's obviously old and you know, weathered. The point being is that I then I began to invest money because I learned from Peter lynch who wrote this amazing book titled One up on Wall Street. Anybody who's watching this video, you should read that book. And Peter gave that advice that I share with others. Just walk into your pantry, walk into your ensuite, take a look at all these goods and services that you're consuming. These are the companies that you should have some level of ownership interest in for clarity. Sarblo, I'm not talking about speculation. I'm not talking about gambling in the stock market. That's not what I'm referencing. I'm talking about dividend reinvestment planning, Big difference. And anybody in the ultra high net worth category that I have the pleasure of knowing and serving as clients. This is one of the fundamental components of, of their wealth planning because much like John D. Rockefeller or John Rockefeller, they feel the same way. They just love those dividends coming in. I've got a great resource for folks you can go to drip investing, that's dripinvesting.org dividend reinvestment plan investing.org and when you get there there's a, like a champions list that you can reference. These are a list of amazing companies that have a really strong dividend track records for, I'm talking for decades and strong dividend yields and stable, they're in very stable industries and so on. But any other questions? Herbal the one thing I want to mention, I'll invite your questions but then I want to mention what happens if we had done nothing other than the income, never mind the dividend reinvestment. I'll touch on a few key points there. But before I do, any questions?

I think not, not a question, Jason, but just something else in my mind. So yes, this will work, but, but this only works if, if an action is taken. I think that was the key with you being 12 year old and your fellow friends being 12 year old. But maybe you're the only person who actually ended up doing it because you took action. Yeah. The information that you received and your Action was based on logic, reasoning and research. It wasn't based on an opinion that someone had.

That's exactly it. How would I have cared what anyone's opinion was when I was 12 years young? While you should, you know, be looking at this sector, that sector, you should be diversified. I was a kid who loved to drink Coca Cola and I saw Warren Buffett talk about. So you never know what that domino is that's going to tip over for you. At that very early age, I was talking to friends and saying, oh yeah, you know, I'm going to, I'm going to be something in business and I'm going to go to Harvard and I'm going to. And everybody laughing and giggling at me. That's not going to happen. This is the digital copy Harvard Business School. And it should be no surprise that that's the area of specialization, because I love finance and I love how businesses, you know, work with capital. And what I'm trying to do for my kids is to show them that, look, you can create a pretty significant income. And let's presume we just take, take out the dividends as income. I want you to see something. So at year nine, take a look at year nine. See that dividend of $0.86 a share? That's 115% of the original dividend. In year one, after 10 years, you've collected $6,374 of income. That's 64% of the original investment. And you didn't use your own money to invest. You used the insurance company's capital. After 20 years, you've amassed $22,910 of income. That's more than double the original investment. The total return is 129%. But that's not entirely accurate because we didn't use our own capital to invest. I'm basing that 129% if it was your own capital that you put in. Now, here's the other way, because remember, everything begins with the way that we think. Agreed. Could we use this yearly income to knock out the policy loan balance? And then once the policy loan balance is fully erased, it's all gravy for that. Is that just all gravy? And we still have all the cash value in the policy. We still have all the total death benefit. And this assumes that we stop paying the premium after year six. No more premium outlay. Now, of course, we would never suggest that, but I just wanted to show this is what, this is what's possible. And is there any speculating going on? No, no, but you need to know what companies to pick. And that's not throwing darts at a dart board. Just take a walk through your darn home. Look in your kitchen, look in your pantry, in your ensuite, look in your garage, your garden shed. Think of all the products that your parents were using, that you use now, that your grandma and grandpa were using, that you're using now. Our kids are going to still need those goods and services. But the fact is this, you can get rich and create wealth with dividend reinvestment planning. Absolutely. You can, you can do that. And you can use ready access capital on demand, on your terms to achieve it.

This is great, Jason. You know, this can be done just the conventional way, which some people will be okay with it.

Yeah.

And then the process of becoming a banker, the infinite banking concept, which is financially radically improve the outcome of what you were originally going to do. So if you like the idea of financially radically improving everything that you're doing presently, then click the link below and take a deep dive into the process of becoming a banker. And like Jason mentioned, order the book read. It will take you less than an afternoon to read it. And when you read it, you're just going to know more about it, which presently you may not know anything about it. So what's the worst that can happen?

That's exactly right. And I think what we'll do too is we'll, we'll put together just a really simple. It might even just be quarterly. Like we can just do a quarterly subscription, you know, out of pocket. It'll probably be somewhere in the range of 80 bucks a year. And you can just subscribe and I'll just share my insights with you. I'll share the companies that I look at and the reasons why I look at them. And then people can do what they want to do with that. But you can absolutely get this going for the benefit of your children, for the benefit of your grandchildren, for your own benefit and your own future income planning, not even taking into account all of the continued accumulation inside of your system of policies. What you're doing is you're creating an enormous compounding factor. And when you give, compounding, time becomes compounding's best friend. Okay, Sarbo, this was fun.

Yes, it was. Thank you.

For everybody who watched this video, you're going to see another video pop up. That's courtesy of our editing team. We've handpicked that video especially for you to continue your journey of learning. Because there's no such thing as having arrived in knowledge. Leave your comments, your insights, your questions. We'd love to hear from you and make the rest of your week outstanding. And like I said, I don't know what the link is at the time of this recording, but check the show notes or check the video note. There's going to be a unique URL there for you to click on to go and discover more about all of this and to have a conversation with the right person on my team. Have a great rest of your day.