Dividends aren’t only shareholder reward

Motley Fool

Q. If I own 1 percent of a company’s stock and the company earns $ 100 million, do I get 1 percent of that, or $ 1 million? — P. G., Hickory, North Carolina

A. Not quite. If you own stock in a public company, you do own part of it, but corporate earnings typically don’t get automatically sent to shareholders — at least not in full.

A company can do a bunch of things with its profits. It might, for example, pay down some debt, pay dividends to shareholders, buy back ( and essentially retire) some of its own shares, or reinvest in its business by building factories, hiring more workers, buying advertising and so on. It might do a combination of those things, and may just bank the money, too, waiting for opportunities.

All these options can reward shareholders, sometimes even more powerfully than if the money were just distributed as dividends. Shareholders are also rewarded when the company grows and its stock value rises accordingly.

Fool’s School: Retirement guidance

If you’re planning or hoping to retire within, say, a decade, there are some actions you might want to take to ensure that your golden years are as shiny as possible.

If you’re worried that you’re way behind in saving for retirement, know that you probably still have time to bulk up your nest egg. You may want to sock away as much as possible each year — and perhaps even work a few more years than you’d planned to. If you can save and invest $ 10,000 per year for 10 years and it grows at an annual average of 6 percent, you’ll amass close to $ 140,000. It’s not a king’s ransom, but it will be helpful. After all, your investments are going to have to support you, significantly or completely, during retirement.

If you’re within 10 years of retirement, consider cutting back on stocks and adding some bonds to your portfolio. Stocks do tend to feature much higher returns than bonds, but they can be volatile, and you don’t want a market crash just before you retire.

If you don’t expect much or any pension income, consider creating your own pensionlike income via immediate or deferred fixed annuities from highly rated insurance companies. Avoid index annuities and variable annuities, though, as they can have some major downsides, such as steep fees.

Dividend income is another good choice. Park a significant chunk of your portfolio in at least a handful of healthy and growing dividend- paying stocks, and you can enjoy regular income along with a good chance of stock- price appreciation.

Name that company

I trace my roots to 1965, when I was founded as a mail- order veterinary supply company in San Diego. I debuted my first store in 1980, in Oregon, and expanded over the following years, acquiring related companies and opening new stores. I went public for the first time in 1994, and launched my website in 2001. Today, a privately held company again, I operate more than 1,500 stores across the United States ( including Puerto Rico) and Mexico, and my brands include PetCoach and Doctors Foster and Smith. I help find homes for more than 400,000 animals each year. Who am I?

Last week’s trivia answer

I trace my roots to 1900, when my founders bought 900,000 acres of timberland from a railroad. I helped start the forestfire protection movement. World War I airplanes were built with my spruce wood. After the Mount St. Helens eruption, I salvaged enough wood to build 85,000 homes. Based in Seattle and valued near $ 20 billion, I’m one of the world’s largest private timberland owners — I own or control 12.4 million acres, mostly in the U. S. I’m one of the largest makers of wood products, and I’ve planted more than a billion trees in the past decade. Who am I? ( Answer: Weyerhaeuser Co.)