I did an interesting little calculation the other day. You see, I own shares of Motley Fool Income Investor recommendation Johnson & Johnson (NYSE:JNJ), which I bought for about \$43 each back in 2002. The stock has recently been trading for around \$60 per share. If you look up the dividend yield for the stock, it's approximately 2.5%, which is pretty respectable. That's the yield you'd get on your investment if you bought the shares at the current price.

That's not me, though. My dividend yield for Johnson & Johnson is approximately 3.5%. And what's better is that I suspect it might be 13% or more in just 10 years.

Let me explain
Remember, my purchase price was roughly \$43. If you take the current annual dividend amount of \$1.50 (which is paid out in quarterly installments, like most dividends), and divide it by my purchase price, you get a dividend yield of 3.5%. Divide it by the current price, and you get 2.5%.

So one reason my yield is bigger is because I bought the dividend for less. There's also a one-two punch in effect here, though -- the dividend is growing, too. When I bought back in 2002, the annual dividend was just \$0.82.

Here's a quick look at J&J's quarterly and annual dividend amount in past years, plus the increase of each amount over the previous amount:

Date

Quarterly

Annual

Increase Over Previous

5/06

\$0.375

\$1.50

14%

5/05

\$0.33

\$1.32

16%

5/04

\$0.285

\$1.14

19%

5/03

\$0.24

\$0.96

17%

5/02

\$0.205

\$0.82

14%

5/01

\$0.18

\$0.72

13%

Over the past decade, the dividend has grown by an average of about 15% annually. (Stay tuned -- I'll soon tell you how you can earn great returns from this steady dividend growth.)

Future shock
The reliability of J&J's dividend and the strength of the company's business lets me project my dividend yield into the future. (The company sports 44 consecutive years of dividend increases!) I'll assume 14% dividend growth per year over the next 10 years. If that happens, the current annual dividend of \$1.50 will turn into \$5.50. Given my \$43 purchase price, that gives me an effective 13% yield!

So my modest initial investment of not much more than \$4,000 will be kicking out more than \$500 per year to me at that time.

Fast-forward 20 years instead of 10 now, and let's assume that the dividend has "only" grown by an annual average of 12%. That would put it at \$14.47, and would give me a yield of 34%! It wouldn't be unreasonable to imagine that at that time (in 2026), the stock will be trading with a current yield of 2% to 4%. That means I'll have more than 700% capital gains to go along with my 34% yield.

How you can do it
These kinds of incredible gains can be yours, too, as long as you seek out solid, growing dividend payers and hang on for the long haul. Here are a few candidates:

Company

Current Yield

10-Year Average Dividend Growth

PepsiCo (NYSE:PEP)

2%

10%

Chevron (NYSE:CVX)

3.5%

7%

Pfizer (NYSE:PFE)

4.0%

17%

Citigroup (NYSE:C)

4.0%

29%

General Electric (NYSE:GE)

2.9%

13%

Abbott Labs (NYSE:ABT)

2.8%

9%

Are these all good prospects for investment? Well, some are better than others, of course, and there are probably even better prospects out there. Still, these are all solid companies with dividends we should be able to rely on and earn huge effective yields from down the line. Not a bad deal, eh?

We'd love to introduce you to an even better group of dividend payers via our Motley Fool Income Investor service, which you can try for free. The picks are beating the market to date and offer an average current yield of more than 4%. And if Johnson & Johnson has taught us anything, it's that it pays to buy our dividends now. Click here to learn more.

Selena Maranjian owns shares of PepsiCo, Pfizer, and Johnson & Johnson. Pfizer is an Inside Value pick.The Motley Fool is Fools writing for Fools.