How Dividends Change the Game for UnitedHealth Group Inc. (UNH): The Home Depot, Inc. (HD), American Express Company (AXP)

The wealth-building power of compound interest will never cease to amaze me. It’s a story of patience and attention to detail, where small differences in the short term add up to massive divergence over decades. In the end, the biggest winners don’t always deliver the fattest share-price returns.

Today, we’re looking at the newest member of the Dow Jones Industrial Average 2 Minute (Dow Jones Indices: .DJI) index. UnitedHealth Group Inc. (NYSE:UNH) became a significant dividend-payer only recently, but it’s never too late to start an all-night party.

Setting the stage
UnitedHealth Group Inc. (NYSE:UNH) paid a pittance of a dividend for many years. The policy was started at $0.01 per share, once yearly, way back in 1999. A full decade later, the yearly payout remained a minuscule $0.03 per share.

UnitedHealth Group Inc. (NYSE:UNH) absolutely crushed the Dow during those 10 years — no thanks to dividend boosts.

UNH data by YCharts

However, that all changed in 2010.

UnitedHealth Group Inc. (NYSE:UNH) had been using its spare cash on big, splashy acquisitions, but the well of available targets was drying up due to changing congressional policies. So the board of directors decided to divert some of the buyout reserves into a much more substantial dividend policy.

Suddenly, UnitedHealth Group Inc. (NYSE:UNH) paid out $0.50 in annual dividends per share — and started raising the payouts every year.

UNH Dividend data by YCharts.

The result? The formerly forgettable dividend yield is growing by leaps and bounds, and it now sits at a respectable 1.6%.