You know those dividend payments that show up in your brokerage account? The ones that often seem too small to be useful, yet somehow still manage to cause all sorts of headaches at tax time? Believe it or not, those pesky little payments can become the most powerful force for building wealth in your portfolio.

It's true. In fact, Howard, a reader who contacted me after seeing my article on how to build wealth with dividends, shared his story with me:

"I bought Corus Bankshares (then called River Forest Bancorp) around 1985. My first year's dividends were $196. Now, after 20 consecutive years of dividend increases and seven splits, I'm receiving $14,400 annually in dividends."

That $14,400 in annual dividend payments comes off an initial investment of around $12,000. As long as Corus maintains its current payments, Howard will get back more money every year than he originally invested.

Make Howard's story yours
While Corus has been an exceptional company for Howard, it is not unique among companies that pay and regularly raise their dividends. In fact, solid, dividend-paying companies don't tend to keep their payments static. As businesses grow and mature, stockholders expect and deserve to share in the successes of the companies they own.

The easiest way for shareholders to get their slice of a company's ever-growing pie is through dividends. The larger a company's profits, the larger the dividend payments it can afford to make. In fact, well-run dividend-paying companies often clearly signal their expected growth by upping their dividends in anticipation of rising profits. If you hold on to a strong company that treats its shareholders well, the long-run income growth can give you some absolutely phenomenal total returns.

Patience really pays
The key lesson from Howard's story, however, is the time it took to unfold. His tremendous long-run success was largely because he had the patience to do nothing while the company continued to pay him ever-increasing amounts of cash. If you want a shot at following in his footsteps, you too need to learn the value of such patience. Corus wasn't alone among companies paying out great and rising dividends. As this chart shows, a decent number of companies grew their dividends from a small trickle of cash into a tremendous gusher of income over time:


Price on

2006 Dividends
Per Share

Percent of Original Investment
Received in 2006

PepsiCo (NYSE:PEP)




Wal-Mart (NYSE:WMT)




Bemis (NYSE:BMS)




Bank of Hawaii (NYSE:BOH)




Avon Products (NYSE:AVP)




Compass Bancshares (NASDAQ:CBSS)




Home Depot (NYSE:HD)




All values split-adjusted.

Had you bought any of these companies in early 1985, by 2006, you would be receiving at least about half of your initial investment back to you -- every year! Plus, you'd keep the shares that generated that income -- giving you the potential for even more in the future.

As Howard's success has shown, it's a great way to invest. All you need to do is make your initial purchase of the right businesses. Then sit back and cash the checks, letting your companies do the work for you. If you're looking for a few high-quality high-yielding businesses today, join us for a free 30-day trial at Motley Fool Income Investor. You'll have access to our market-beating lineup of picks (which are averaging a 4.1% yield) with no obligation to subscribe.

This article was originally published on Feb. 16, 2007. It has been updated.

At the time of publication, Fool contributor Chuck Saletta did not own shares of any company mentioned in this article. Wal-Mart and Home Depot are Motley Fool Inside Value recommendations. The Fool has a disclosure policy.