Truth be told, I thought I had covered Grace Groner on the site already. She fits the dividend millionaire profile to a tee, and hers is one of the better known stories out there. I imagine many of the site’s readers have already come across at least one version of it already. That said, it would be a crime not to have one on the site, not least of all because it is one of my favourites.
As mentioned above, Grace fits the bill perfectly in terms of our buy-and-hold millionaires. She was born in 1909, and lived to the ripe old age of one-hundred. She never married, and she did not have any children. From what I can see, she lived her whole life in and around Lake County, Illinois, though it seems she travelled extensively. (One thing I have not commented on before is housing. Like a lot our buy-and-hold millionaires, it appears Grace Groner never needed to buy or rent her own home. That makes compounding a whole lot easier for obvious reasons).
Grace had already lost both of her parents by the age of 12. Along with her twin sister, Gladys, she was taken in by a man named George Anderson. The Anderson family paid for both sisters to attend the nearby Lake Forest College, from which Grace graduated in the early-1930s. Entering the world of work in the early-1930s doesn’t sound like ideal timing, though she managed to land a job as secretary. Her new employers turned out to be one of the greatest wealth creating machines in America – Abbott Labs.
It looks as though Grace spent her entire working life as a secretary at Abbott. She worked there for forty-three years, but it was the fourth year that ultimately proved the formative one. Why? Because in 1935 she purchased three shares of Abbott Laboratories stock for sixty dollars apiece. In today’s inflation adjusted terms, that $180 outlay is probably the equivalent of around $3,240 or so.
Now, Abbott Labs stock has been an absurd wealth creator down the years. It first listed in 1929, and according to its website it has notched up 385 consecutive quarterly dividend payouts going back to 1924. Oh, and it has increased its dividend payout for almost fifty years in a row. Impressive.
By my count, Abbott’s annual dividend has compounded away at a rate of 7% per annum over the past thirty years. Note that this does not include the rather large effect of the AbbVie demerger, which occurred just under ten years ago. Prior to that, Abbott had spent the previous three decades compounding its dividend at an average rate of circa 12% per annum. AbbVie has also done well for shareholders since it first listed. Anyway, this all occurred after Grace Groner passed away, so we can largely ignore the impact of the demerger.
Now, Grace Groner held onto this asset for around seventy-five years. A couple of years before she died, she set up a foundation to handle her estate. Its value came in at around the $7m mark when she passed away, so I make her returns from Abbott stock equal to somewhere in the region of 15% per annum. Suffice to say, it totally annihilated the broader stock market.
This figure seems absurdly high, maybe even too high to be real. That said, it does match the data I have to hand. For instance, according to Jeremy Siegel’s book – The Future For Investors: Why The Tried And The True Triumph Over The Bold And The New – Abbott stock turned a $1,000 investment in 1957 into over $1.25m by 2003. That works out to annual returns of around 16.5%, and was second only to Philip Morris stock over that timeframe. Oh, and Grace Groner had already held Abbott stock for over two decades prior to the start of that period!
Let’s assume the entirety of Grace Groner’s estate consisted of Abbott Labs stock. On that basis, we would be looking at circa 280,000 shares back in 2010. Abbott’s quarterly dividend amounted to 40¢ per share at the time – call it $1.60 per share on an annualized basis. That means Grace Groner’s foundation – set up for the benefit of students at her alma mater, Lake Forest College – would have been pumping out around $450,000 in annual dividend cash when she died. All of that stemmed from a $180 purchase made in the Great Depression.
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