The $100 Investment That Could Change Everything

$100 might not seem like a life-changing amount of money to most people these days. However, it can be if used wisely.

Investing $100 in the right investments can really add up over the years. Here's a look at the $100 investment that could change everything.

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The smartest way to invest $100

Ned Davis Research and Hartford Funds dug into the data on the returns of the S&P 500 Index by dividend policy. They found that the best returns came from companies that increased their dividends (an average annual return of 10.2% over the last 50 years). That was much higher than companies that didn't increase their dividends (6.8%) and non-dividend payers (4.3%).

Put another way, if a person invested $100 into dividend growth stocks 50 years ago, that investment would have grown to be worth nearly $15,900 by the end of last year (assuming dividend reinvestment). That compares to only about $3,000 for a $100 investment in companies with no change in their dividend policy, and not even $900 from a $100 investment into dividend non-payers.

There are lots of ways to invest in high-returning dividend growth stocks. One of the easiest is through an exchange-traded fund (ETF) such as the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). The fund holds 100 of the highest-quality dividend stocks selected based on several quality characteristics, including dividend yield and five-year dividend growth rate.

The fund's focus on dividend growth stocks has really paid off over the years. It has delivered an average annualized total return of more than 11% over the past five- and 10-year periods, as well as since its inception in 2011. That can really add up over the years. For example, investing $100 a month into the fund would grow to more than $2 million in 50 years at an 11% average annual total return.

Given the historical returns of dividend growth stocks, a $100 investment can truly make a significant difference.

Matt DiLallo has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.