A little library of dividend millionaire case studies is starting to build up on the site. The ones I find most interesting cover folks from the lower and middle-income brackets – the likes of Margaret Dickson, Paul Navone, Ronald Read and Anne Scheiber. The latest one – the story of Agnes Plumb – is slightly different, but let’s start with some background info before getting on to that. Plumb passed away in October of 1995 at the age of 88. If my math is correct, that puts her date of birth at some point in 1907. Like many of our millionaire investors, Agnes Plump never married or had any children. She also lived in the same house in Studio City, California for almost sixty years.
Now, there are two things that make Agnes Plumb’s case special. First, and unlike the folks mentioned before, we are dealing with intergenerational wealth creation here. It looks like our millionaire actually inherited assets from her father. If you have ever wondered about passing stock down to a child, grandchild, niece/nephew or whoever, then read on to see how crazy it could get.
The second point is really staggering: it looks like we are dealing with a single equity investment and nothing else. In the previous cases we would often see dozens of assets in their portfolios. And not just stocks either, but bonds and other asset classes too. In Plumb’s case we apparently have one single stock and that is pretty much it. As for the identity of this stock, it is stodgy old Kellogg Company.
Now, the background of how Plumb’s father acquired his Kellogg stock is a bit hazy. According to one article he actually knew the founder, Will Keith Kellogg, in a personal capacity. Kellogg implored Plumb to invest in his venture, which he then did to dramatic effect. Given the company’s founding in 1906 (with Agnes born in 1907), that at least makes some chronological sense. Unfortunately there is no indication as to how long he held his Kellogg stock. In any case, Agnes Plumb certainly held it for four or five decades, with the end result being orders of magnitude higher than the cases we have seen before.
To pin some hard numbers to that last statement, Agnes had amassed roughly 1.3m shares of Kellogg stock at the time of her death. That was in 1995, two years before the company last split its shares two-for-one. Quick math suggests roughly 2.6m shares of Kellogg stock in today’s terms. Given the stock traded for around $37.50 per share (split adjusted) when she passed away, that means Agnes Plumb was sitting on a near $100m fortune consisting almost entirely of Kellogg stock!
I had a quick look at the company’s dividend history before starting this piece. The firm’s annual dividend was running at 75¢ per share (split adjusted) when she died. Call that 19¢ per share each quarter. Now, Agnes actually held the physical Kellogg share certificates. That almost certainly meant that she was also being mailed physical dividend checks. Imagine opening your mailbox to find a check worth nearly $500k with your name on it. That was happening to Agnes Plumb every three months and hardly anybody even knew about it.
As with nearly all of these cases, the entire estate was passed on to good causes. The Crippled Children’s Society, the Orthopaedic Hospital in Los Angeles, UCLA School of Medicine and the St. Jude Children’s Research Hospital in Memphis each got $22.5m.
Now, let’s imagine for a moment that these four beneficiaries didn’t cash their shares. They each just sit on their respective quarter of Agnes’s 2.6m split-adjusted shares. Today, each Kellogg share pays a quarterly dividend of 54¢ per share, meaning each beneficiary would be sitting on a pile of stock pumping out $350k in quarterly dividend cash. Their respective quarter of Agnes’s original $100m fortune would be worth roughly $45m.
Unfortunately, I am not sure when the Plumb family first acquired their Kellogg stock. What I do know is that Kellogg has increased its annual dividend by 9% per annum on average since 1950. Since 1960, the comparable figure is 8.5%. Since 1970, it is 8%. I am sure you can see the trend here. The point is not that Kellogg will repeat this remarkable story of wealth creation, but as Phil Fisher remarked: “If the job has been correctly done when a common stock is purchased, the time to sell it is almost never”.
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