what's going on everyone loved here when people talk about retiring early the fire movement being financially free it all comes from the fact that active income isn't needed to cover day-to-day expenses but rather it's taken care of through passive income there are loads of ways of making passive income but for today we'll be sticking with saying that when you have a certain amount of money you'll be getting some certain amount of percentage or some specific dollar amount based on your investment back to you every single period whether that's a week a month etc traditionally the stock market is where this income comes from whether that's investments into index funds mutual funds individual stocks etc the income is usually distributed in the form of dividends similar to the stock market you have the cryptocurrency market and as we have dividends in the stock market you have staking rewards in the cryptocurrency market regarding dividends there's a super popular strategy known as dividend growth investing dgi for short and so today we'll be covering dgi in the stock market versus staking rewards in the cryptocurrency market we'll be going over definitions long-term analysis comparisons and more but feel free to check out the timestamps in the description but with that on the channel we talk about stocks credit crypto and this video is one of those crossovers between the stock market and the cryptocurrency markets i'm super excited but with that i'll see you on the other side all right so starting off with dividends overall dividends are nothing but you giving your money to a company in this case in the stock market for this example and basically you're giving some money and they're using that money to make more money and as a thank you quote unquote they give you back some of that money in this case called a dividend a dividend comes from the stock price so if a share let's say of a t is essentially 27.79 you're getting 7.36 a year and what that equates to is annual payout of two dollars and eight cents which divided by 4 is roughly 52 cents says it over here and they're paying you quarterly every three months and they've been growing this dividend for 20 years and for the last five years they've been increasing that dividend by 2.09 and so where this dividend comes from is essentially it's paying you back so if it's 27.79 and let's say it's the dividend payment date 52 cents from this 27.79 would be paid out to you in terms of cash and you would still own one share of a t the dividend is based on the stock price in terms of the percentage that it says it pays out and so for the sake of example we'll say that t aka atnt pays seven percent in dividend every year and so looking at the graph basically we have this max graph and over here it shows 1990 as the earliest point in the graph and you have that it goes 28.45 in the year 97 and the current price is 27.81 and so throughout the years more or less it's been pretty cyclical slash has its ups and downs and t is stuck kind of in that range of low 20s all the way to around 40.

And so if you see this it's around 53 highs over here 47s highs of 40s highs of 40s and you have lows of 23s low 20s over here mid 20s and here we are today at 27.81 so the point of the story here is with t taking this example it's one of the most popular and most famous stocks for dgi dividend growth investing and i'm using it as an example because it's kind of the most famous one and so the assumption here is you have a high dividend payout in terms of per year so coming back here you have seven point three six percent you have a growth rate of two point zero nine percent and with inflation being around two to three percent every year it kind of is matching inflation we could say at least in these last five years as it's grown its dividend and it's been growing the dividend for 20 years so what does this part mean dividend growth so if we look at the dividend history over here this is the last five years and if you go to the all-time graph it's more apparent but here you have it starts off at around 19.54 pennies each quarter and then it goes up it goes up it goes up and today we're at 52 cents and so back here 19 is roughly 20 and 52 cents is roughly two and a half times that so the dividend has increased two and a half fold where in 95 1995 if you had put some amount of money whatever that is in one share of at t the dividend you'd be getting is two and a half times that from back then and so the absolute number has gone up over time and that's where the dividend growth comes in on the other hand the stock can go wherever it goes but if the dividend keeps increasing that's pretty much what we're looking at the dividend growth i want to toggle over to a similar example and use msft aka microsoft so you have one percent dividend over here and you have 17 years of growing that dividend but in the last five years compared to two percent for tea you have 10.45 percent over the last five years in terms of growth rate which is also kagar compounded annual growth rate so it's not just simple interest of 10.45 but this is compounding and so looking at the dividend history for microsoft you see that this all time it paid a huge dividend over here and it says other so this could be a special dividend this is an exception case but the s over here is a stock split but the point is regarding dividends over here it is clearly up ticking and more so in the last recent past per se and coming to the summary to see the all-time graph i think is where we get some clarity where even though it's a lower dividend in general and a high growth in terms of dividend look at this graph it's exponential it's it's a it's insane and so why i pointed out t and msft here is there's always a concept in dji in dividend growth investing between the stocks like t where they don't grow as much but their dividend off the bat is super high relative to the stock market in general where msft on the other hand and cases like apple they pay dividends and they have a good track record of dividend growth and dividend growth history but their stocks are also exponential in terms of their stock price but the dividend you start with is going to be far far lower the point of all this regarding dividends dividend growth investing is that dividends indeed is another source of income in terms of passive source of income or income in general and it could mean retirement it could mean some type of slush fund it could mean you know taking care of everything so this income could mean everything it could just be one source it's what you want to make it and so the point is not just a source of income but it grows exponentially with time and that's the key concept over here where dividend growth investing isn't about this year or the next or maybe even five years from now depending on the stock but with compounding just like compound interest your cash flow can go to the moon and with that crypto kind of pun segue you have coming over here to staking rewards so staking rewards there's two types of concepts that are important to understand you have proof of work and proof of stake and so staking rewards are similar to dividends where with dividends you're giving your money let's say to the company to do whatever work they do and based on profit and their accounting they will pay you back some agreed upon percentage from their board management team shareholders etc now coming to staking rewards proof of work is basically and i like to use the analogy of being an employee versus being the business so when you're a shareholder of your t your microsoft etc you're a shareholder you're not really working for it but you are because your money is working for you in order to get that dividend now in staking rewards you have proof of work which is essentially working for that compensation so for bitcoin for the blockchain and each block for all the multiple calculations done by miners to mine certain bitcoin their computers are working working and then getting compensated when they get through that block in bitcoin and now on the other end you have certain coins that do actually pay you out staking rewards and it's a bit different but you have proof of stake and so proof of stake is saying that hey i'm not going to work as an employee in terms of proof of work but i already own a stake and based on owning a stake i'll be compensated accordingly and so what this means is when you own this proof of stake so for example if i have some tazos then over here basically i have some stake in the actual coin itself for not just the current state in terms of foundation of where the cryptocurrency can go or a particular coin can go in the long term but it's basically saying that hey i'm providing this foundation of stability and to some degree liquidity depending on which way you look at it but overall tezos over here i don't have a big position this is my coinbase account and so specifically over here you have estimated reward of 4.63 and so we can consider that as the dividend yield in terms of annual payout and so 4.63 is roughly let's say 5 and i don't do math or calculations like this but it's important i'm just gonna keep it more simple for this video so five percent over here and look at the frequency when we talk about dividends we have dividends that are paying out usually quarterly is normal there are some that are semi-annual and you have monthly payers as well so every month you'd be getting a dividend payout and so the yield would be the same per year but you just get 12 paychecks quote unquote versus four which is every three months so here we have some assumptions that are made but i've taken t stock for the figures that you see on screen and so you have a dividend calculator and so you're starting at 100 bucks you're going to contribute 100 every month so annual contribution is 1200 and this is just a real example that anyone can replicate the numbers aren't perfect but at the same time it kind of shows like hey there's this progression and it's possible and this is how to do it so you have seven percent in terms of annual dividend you got two percent annual dividend increase per year the five-year growth rate on seeking alpha was two percent and change but this may not be consistent for the long term and we're also using history to base our future predictions so just a kind of disclaimer of sorts for that so you have seven percent rounded for annual dividend two percent growth the share price aka the stock price it didn't really move it's kind of cyclical but not really and so i just put zero percent for the long term just because the focus for many folks that are in dgi dividend growth investing is to use t kind of in their retirement or otherwise to make sure that they're getting a high payout for the amount of capital they've invested and so 20 years investment time frame and so this is case number one and now we have case number two where i've inputted it for microsoft you have one percent annual dividend yield ten percent growth rate of course for 20 years can microsoft grow their dividend for 10 at 10 for 20 years maybe maybe not but the point is for example and the share price the s p 500 goes up seven to eight percent every single year and so i put 10 because my assumption is tech fang in general facebook apple amazon netflix google et cetera would be growing faster than the market and just an assumption here and just to point it out drip over here dividend reinvestment plan it's basically saying hey whatever dividends you receive do you just reinvest it into the same stock and so finally we have our friend tazos where i took annual dividend yield of five percent rounded off and your annual dividend increase i remained it as zero and uh i put in a zero because specifically there's something with staking rewards where the whole point is also to kind of beat inflation as more coins are existing in the network slash on the platform in general so won't get too detailed into that but the math is basically no increase here same yield but expected annual share price appreciation so five percent and this is just an estimate this is not real numbers because going back to coinbase and if you look at tazos in general of the graph all-time graph of course it had its huge spike up here up to ten dollars december 17th and has been kind of all over the place but i want to speak for the long term sake here so in the long term i'll just say five percent and just an estimate but you can plug in your own numbers so i'll leave a link to this dividend calculator below in the description coming back over here now numbers reveal time right so for t we scroll down all of it is exponential just because of the way it's been the growth rate right so dividend income it kind of is all right it's somewhat linear gradient wise but there is this exponential curve over here and so the final number you have is 61 605 and 15 pennies and this is after investing over here for 20 years and at 100 bucks aka 1200 a year so we're saying 24 000 of our own money is bringing us one thousand six hundred and five dollars aka almost what like two and a half times uh around that area and the estimates are important here because all of these are estimates but i think that i just wanna take the point home where you yourself can plug in your own numbers whether it's for dividends for staking rewards for whatever you want and that's kind of the point of this video and so i just want to share this kind of thing that i've been doing it's like a fun experiment so now coming down to microsoft so we had 61 000 for t and over here look at this you got an ending balance of a hundred and three thousand four hundred and forty one dollars and so the annual dividend income is seven thousand dollars roughly 69.59 specifically but over here you have 6407 for t so it's almost similar but definitely there's a big difference in terms of the overall portfolio balance and that's coming to basically the growth rate of microsoft because you have that almost 10 percent every year for 20 years of course is going to be a lot more with time and naturally with the dividend as well so we started off lower but then it ends up almost the same if not higher after 20 years and now dgi versus staking rewards at a high level you have tezos bringing us in at 69 402 and 75 cents and so this is based on the fact that there's no dividend increase but it's also five percent in terms of dividend but also five percent in terms of growth so it's kind of in that middle area where it's not maybe high growth but it's also definitely not a high payer and slow growth so with that your annual dividend income is coming to three four seven zero so around half of seven thousand and so yeah it's a good insight you know good to know so overall feel free to plug in your own numbers again i'll leave it in the description below but the exercise was basically saying is it better to be a dividend growth investor in the stock market or staking rewards in cryptocurrency so the math just depends where you're putting your money and if you consider this personal finance then to every person it's their own kind of decision and choice and mentality and ideology overall so in my opinion if you're interested in both definitely just diversify right but i just want to talk about the pros and cons here while we have some a little more time before i take up too much of your time so thank you for staying here till the end so i think the pros of staking rewards is basically you have diversity in terms of investment you have a different asset class you're not just into the stock market you're not just into the cryptocurrency market and so with that what that really means is you have more of safety of sorts right because there's this feeling of okay oh man the us dollar it's gonna it's gonna crash with everything that's going on in 2020 and the roni rhona or something else may happen and something else over there and the world is always feeling in this turmoil and currency battles and wars etc and so having this diversity of asset class where cryptocurrency can go across borders go international there's so many other use cases and the way the technology is in the back end can influence a lot for the future and so there's more than just kind of the money aspect but you have that proof of stake you have that stakeholdership in for example at taizos or other coins that pay staking or words and so it's not just working to get that income but you actually have a position in kind of the future which can have even more compounding returns more than just money so that's a pro you know just being involved in that diversity of asset class but coming to a con of staking rewards and it depends on which lens you're looking at it through so for example if you're looking at tazos you're going to get more tazos if you're looking at other coins you're going to get more of the same coin now if you look at dividend growth investing or the stock market fiat is based in u.s dollars and i'm speaking specifically to the u.s stock market but in general the world works off of the us dollar in general so the point is with dgi or the stock market you're getting paid out in cash and you're getting that us dollar that's very flexible that you can buy other stocks with buy maybe cryptocurrency with go do anything else you would do with it because it's flexible on the other hand you have staking rewards which it's not that it's not flexible you have more of the same coin and that's great but just like any system can collapse similar to the previous reasoning you have us dollar versus this particular coin versus another coin versus another coin and you can have a lot of the same thing but if that say that that thing that coin is worth nothing you'll have a lot of nothing with dgi on the other hand you have at least cash where you're basically extracting the share price over the many years so all else equal if t goes to zero at least at seven percent fourteen times seven is roughly ninety eight so it's almost a hundred percent in that many years you would get your money back is that the most exciting thing to hear no but at the same time at least you know that hey what i paid up front i am going to get it back and that all comes back to how fast you want your money to grow risk versus reward et cetera et cetera finally i think it's a great decision to obviously invest in both not a financial advisor you know how it is but overall play with it leave some comments below like share subscribe you know how it is but we'll see you soon enough i hope this video was enjoyable or at least some valuable information was given because this is one of those questions that i always was thinking about casually i was like all right let's make a video about it so anyways thank you so much we'll keep the outro now we'll see you soon enough [Laughter] peace