This Is How Much You Can Make With an 8% Dividend Stock In 10 Years

High-yield dividend stocks are a staple asset class category that is routinely sought and desired by income based investors, especially retirees. In one’s golden years, the desire for investment profit gains usually lag behind the higher priority for maximum and reliable income. The investor support behind Dividend Aristocrat (25 years or more of consecutive annual dividend increases) and Dividend Kings (50 years or more of consecutive annual dividend increases) attests to this premise, and the search for high-yield (over 5% APY) dividend stocks is an ongoing one for many. 

The mathematical principles that underscore compounding have long been practiced by investors for savings accounts and other investments that have a scheduled savings investment plan, where the investor contributes additional funds for investment on a weekly, monthly, or annually on a regular basis. A growing faction of Gen-Z and Millennial investors who relish the DIY ethos and subscribe to the FIRE (Financial Independence Retire Early) philosophy have given high-yield dividend stocks a fresh look, and have been embraced by them of late, with a recent poll showing that over 52% of them preferred high-yield dividend stocks over high gain tech stocks. 

The convenience of having processes run on autopilot extends to the current digital generation’s investment practices. Dividend Reinvestment Plans (DRIP) are programs that can automatically reinvest a percentage or the entirety of one’s dividend income into the same or specified other  securities. The compounding effect, along with dollar cost averaging, will inevitably boost overall returns significantly. A dividend stock with a monthly payout can leverage this principle to even greater effect. 

To serve as an example, this article will compare two (2) high-yield stocks: one that pays quarterly, and the other, which pays monthly.  The leverage solely from compounding and a DRIP program will become readily apparent, and the return on investment sums will substantially outpace the basic dividend funds in cash form.  The sample investment amount will be $10,000 for 10 years, for the sake of calculation convenience. Yields based on market quote  at the time of this writing. 

Ares Capital Corporation

Ares Capital Corporation (NASDAQ: ARCC | ARCC Price Prediction)

Yield: 8.74% (pays quarterly)

Shares for $10,000: 438

Annual Dividend Income: $874.00 

Ares Capital Corporation is the Business Development Company BDC) of alternative asset management titan Ares Management. It operates throughout the US regionally from its New York, Chicago, or Los Angeles offices. Its $15.84 billion market cap and $27.1 billion AUM portfolio rank it as one of the largest US BDCs on the market.

Ares typically makes combined debt and equity investments between $20 million and $200 million, with a maximum of $400 million per deal. Qualifying companies with an EBITDA between $10 million and $250 million. It makes sole debt investments between $10 million and $100 million. 

The financings and investments can take the standard variety of equity and debt manifestations, but Ares is also more adventurous, innovative and risk tolerant than its peers. For example, Ares will sometimes deploy revolving credit lines for financing its client companies. Additionally, Ares will consider third-party senior and subordinated debt financings and heavily discounted distressed debt, which carries commensurately higher risk. Ares is also not a passive investor. It prefers to be the primary agent or lead on any deal in which it commits to, and will demand proportional board representation once engaged. 

58.6% of the company’s portfolio are First Lien senior secured loans, with Second Lien senior secured loans at 5.7%. Industry-wise, Software and Services is the largest sector with 23.6%, followed by Healthcare at 13.4% and Commercial & Professional Services at 9.5%.

An annual dividend total of $874.00 would equate to $8,740 accumulated over 10 years, making the gross total $18,740.00. If one reinvested the entire amount on an annual basis, that $18,740.00 would amount to $23,114.97 total balance and $13,114.97 in interest. Compounding more frequently, say, the entire dividend every quarter on a DRIP program, delivers the following: $23,740.29 with $13,740.29 in interest.  

Apple Hospitality REIT

[fwp_calculator type=”compound-interest” principal=”10000″ rate=”8.23″ time=”10″ compound_frequency=”

Stock: Apple Hospitality REIT (NYSE: APLE)

Annual Yield: 8.23% (pays monthly)

Shares for $10,000: 810

Annual Dividend Amount: $823.00

Monthly Dividend Amount: $68.58

When it comes to rental fees, the hospitality industry probably has some of the quickest turnovers, since room rentals are measured in days and hours. Among the REITs involved with the hospitality and hotel sector, Richmond, VA based Apple Hospitality REIT is one of largest players. 

Boasting a portfolio of 221 hotels with over 29,900 rooms in 85 markets and 37 states (plus District of Columbia), Apple Hospitality REIT hotels are primarily operating under the Marriott (97) or Hilton (118) brands, along with 5 under the Hyatt name. 

The company continues to grow through acquisition, with its latest announcement on the purchase of the 126 room Homewood Suites by Hilton Tampa-Brandon in June for $18.8 million. By strategically keeping debt low and acquiring properties below market rate, Apple continues to add to its value, reflecting in its $2.75 billion market cap. Since going public in 2008, Apple Hospitality REIT has never missed a dividend payment. 

Since Apple Hospitality pays monthly, the power of compounding to boost returns shows that the amount of interest generated above the cash dividend total of $8,230.00 swells to $12,053.45 if compounded annually, $12,583.80 if compounded quarterly, and $12,709.33 if compounded monthly.  That is a nearly 65% increase without adding any additional funds from savings. 

The attraction of dividend stocks for Gen-Z and Millennials makes sense when taking the preponderance of freelance work and side hustle jobs that their DIY careers engage in.  The generation of substantial passive income that can be put on a DRIP protocol for leveraging higher gains during fruitful employment periods that can then revert to essential bridge money during lean times makes them a flexible tool. The dividend income enables their ability to pursue their various freelance gigs while affording them the time to develop their other career aspirations.