Between 1950 and 2003, IBM grew revenue at 12.19% per share, dividends at 9.19% per share, earnings per share 10.94%, and sector growth of 14.65%. At the same time, Standard Oil of New Jersey (now part of Exxon Mobile) had revenue per share growth of only 8.04%, dividend per share growth of 7.11%, earnings per share growth of 7.47%, and sector growth of negative 14.22%.
Knowing these facts, which of these two firms would you have rather owned? The answer may surprise you. A mere $1,000 invested in IBM would have grown to $961,000 while the same amount invested in Standard Oil would have amounted to $1,260,000 or nearly $300,000 more - even though the oil companys stock only increased by 120-fold during this time period and IBM, in contrast, increased by 300-fold, or nearly triple the profit per share. The performance differences comes from those seemingly paltry dividends: Despite the much better per share results of IBM, the shareholders who bought Standard Oil and reinvested their cash dividends would have over 15-times the number of shares they started with while IBM stockholders had only 3-times their original amount. This also goes to prove Benjamin Grahams assertion that although the operating performance of a business is important, Price is Paramount.