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RE:Math problem Mat

[materialsgirl]

Newstock;

You have good observation skills I think but your math may be a bit exaggerated. 

Two things to keep in mind.  If a person buys more shares on the market the very act itself dilutes the ownership of the existing shares.  The total number of outstanding shares expands IF the purchases are done as a divi reinvestment plan. This factor of "diluting ones self" does not apply to purchasing existing shares in the market which is what you had in mind.   The other point is that a basic calculation assumes that the share price stays fairly fixed at 40 cents or whatever.  In reality the share price will likely rise.  Should the divi rise alongside the share price (quite likely) then this factor does not change anything.

To simplify a math example let us assume that the share price and divi stay the same for 5 years OR rise in unison.   To illustrate in a simple way let us also assume that he owns a fixed 25% of company shares.   His divi of 4% on his 25% ownership would then account for exactly 1% of the the total corporate market cap.   Therefore after year one he would own 26%.   Due to compounding that number would rise to 30% (simple growth) and then an incremental amount on his growing divi each year  to arrive at something close to 31% after 5 years. 

This growth scale would not quite get to 40% from 28% inside 5 years based on a quick look.   I am too lazy to do the detailed math but the 40% that you identifed would happen in well under a decade. possibly 8 years.   Directionally your thinking is spot on.

If you have done the detailed math why not post it.  I will not bite the hand of any thinking blogger and I will give you my feedback.

Fun with numbers  (especially if I do not have to do the work)

mat