Vector Group Ltd. (VGR)

deadcat2 (< 20) Submitted: 3/29/07 12:15 PM : Start Price: $15.74 VGR Score: 25.26

This stock is the epitome of a cash generator. I don't expect much in the way of share appreciation but even so, with a dividend of 8.6% based on my start price, and an annual stock split amounting to an additional 5%, prospects are good for a double within five years. Almost like owning a CD with a 14% annual return. And if dividends are reinvested, the returns will be even better. In fact, let's take a look at what would happen to 1000 shares (starting value of $18,610) if the share price remains flat over the next five years and dividends are reinvested:

Reinv Div Stock Split EOY Total EOY
Year Dividend # Shares Addl Shares Shares Value

1 $1.60 85.98 50.00 1135.98 $21,140.59
2 $1.60 97.67 56.80 1290.45 $24,015.27
3 $1.60 110.95 64.52 1465.92 $27,280.77
4 $1.60 126.03 73.30 1665.23 $30,990.02
5 $1.60 143.17 83.26 1891.67 $35,203.90

So, there you have it - with stock splits and reinvested dividends, $18,610 becomes $35,204 in five years. Not bad! But this example assumes that share price never changes and dividends never go up. In fact, VGR has increased their dividends every year for the past 5 years at 5%/year. What if we build in the dividend increase YOY, and assume a very moderate 5% share price appreciation?


EOY Reinv Div Stock Split EOY Total EOY Share EOY
Year Dividend # Shares Addl Shares Shares Price Value

1 $1.68 85.98 50.00 1135.98 $19.54 $22,197.53
2 $1.76 97.67 56.80 1290.45 $20.52 $26,476.63
3 $1.85 110.95 64.52 1465.92 $21.54 $31,580.64
4 $1.94 126.03 73.30 1665.23 $22.62 $37,668.57
5 $2.04 143.17 83.26 1891.67 $23.75 $44,930.09


Wow - the power of compounding! In this example, $18,610 becomes $44,930 in five years, an overall increase of 241% over five years. Conveniently in this example, dividends reinvested in shares remain the same as the first example because dividend rates and share prices both increased by the same percentage each year.

This stock should be relatively safe - beta ranges between 0.82 and 0.95 according to Yahoo and Google. There just aren't that many places you can put your money for a return like this. Buy now and hold for the long haul!

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