Dividend Millionaire - Anne Scheiber (2024)

Anne Scheiber’s story is an excellent example of successful long-term investing in dividend stocks. She wasa secret dividend millionairewho effectively generated a passive income stream and built great wealth with a minimal salary. Her story is a case study aboutliving on dividendsand a pension.

Anne was an Internal Revenue Service (IRS) auditor without formal education in equities or investing. Despite this lack of training, she had significant stock-picking successes, especially after she retired in 1944 at the age of 51.

She spent the next 50 years researching stocks, investing, and building wealth. She made an excellent purchase in 1950 when she bought 1,000 shares of Schering-Plough, a pharmaceutical company. At the time of her death, the 1,000 shares had become 64,000 shares worth approximately $3.79 million. By the time she died, she was receiving hundreds of thousands of dollars annually individend incomefrom her roughly 100 stock holdings and municipal bonds, much of it tax-free.

She died in 1995 at the age of 101. After her death, Anne gave most of her fortune, $22 million, toward scholarships at Yeshiva University’s Stern College for Women and the Albert Einstein School of Medicine in New York City. She was mainly estranged from her family, expect one niece, who received $50,000. Her experience at the IRS reportedly embittered her, and she desired to help young, needy women overcome the job discrimination she had endured.

Anne Scheiber’s Biography

Anne Scheiber was born in Brooklyn, New York, on October 1, 1893. She was one of nine children. Her father died young after substantial real estate losses. Hence, she was raised by her mother, who worked as a property manager.

Anne started working at age 15 as a bookkeeper. She used the money to put herself through college and the predecessor of the George Washington University Law School. She started work as an IRS auditor in 1920 but was never promoted and passed the bar exam in 1926 at the age of 32. After a 23-year career at the IRS, Anne retired with a pension of ~$3,100 at the age of 51. Subsequently, Annew Scheiber become a self-directed investor in dividend growth stocks and municipal bonds for the next 50 years.

She lived her entire life in the same rent-controlled apartment on West 56^thStreet in Manhattan. Anne Scheiber died on January 9, 1995, at the age of 101.

Anne Scheiber’s Stock Holdings

Unlike some secret dividend millionaires, Anne Scheiber had a diversifieddividend stock portfolioconsisting of about 100 stocks and municipal bonds. Her largest holding was Schering-Plough, later bought by Merck (MRK). She also owned stocks like Pepsico (PEP), AlliedSignal, Loews (L), Bristol-Myers Squibb (BMY), Coca-Cola (KO), Allegheny Power System, Rockwell International, Unocal, and Exxon (XOM).

The table below shows her top stock holdings, number of shares, and share price, as reported by Ben Clark and Merrill Lynch, the year of her death.

In many cases, other companies acquired her holdings, like Schering-Plough and AlliedSignal. Other firms conducted mergers, like Exxon and Mobil, becoming ExxonMobil. Other holdings included Capital Cities Broadcasting, Columbia, and Paramount. Her last purchases were in 1985 when she bought 100 shares each of Apple (AAPL) and MCI.

Municipal Bonds

Anne did not stick solely to stocks. Her dividend income stream was rising and was taxable. In the late 1970s or early 1980s, her broker convinced her to buy tax-free municipal bonds yielding ~8%, using her roughly $40,000 of monthly stock dividends. She never sold any stocks, but her municipal bond portfolio eventually grew to about $8.1 million, or approximately 37% of her total worth. It had the effect of limiting the taxes paid for her growing income stream.

By the time of her death, her stock portfolio and municipal bond holdings were generating close to $800,000 annually in dividends. Anne Scheiber’s portfolio then was about 60% stocks, 30% bonds, and 10% cash.

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How Anne Scheiber Became a Dividend Millionaire

Frugality

Anne Scheiber was extremely frugal, probably to the point of austerity. Reportedly, she saved as much as 80% of her annual income. This is much higher than the 10% rate Americans save on average. She spent only a few dollars per day. Supposedly, Anne wore the same clothes for many years, lived in the same rent-controlled apartment for decades, did not have a family, and did not have much of a social life living as a recluse. Her only known contacts were her lawyer and broker. This kind of lifestyle is probably a bit too frugal for most people. But still, it points to the importance ofsavingfor building wealth.

Good Stock Picking

As an investor, Anne Scheiber bought what she knew and owned stocks in many large-cap companies by the time of her death. In 1944, some of these companies were small, but most of the companies grew with time into giants generating capital appreciation and dividends to her benefit.

Anne Scheiberhad some significant successes in stock picking. At the time of her death, she had a few stocks that formed the bulk of her wealth despite owning around 100 stocks overall. She had invested $10,000 in Schering-Plough in 1950. This eventually became $3.78 million at the time of her death. Her Coca-Cola stock increased in value from $28,000 to $720,000 in the last 15 years of her life.

Some stocks will far outperform others. Not all need to be winners. Toquote Peter Lynch,

“You only need a few good stocks in your lifetime. I mean how many times do you need a stock to go up ten-fold to make a lot of money? Not a lot.”

Power of Compounding

She relied on the power of compounding and started investing early. Anne Scheiber essentially followed a buy-and-hold strategy, buying stocks and holding them for decades, and reinvesting the dividends. Her longevity and time in the market worked to her advantage in the context of compounding and building wealth.

If we assume her portfolio was $21,000 in 1944, the annualized rate of return was ~14.6% to attain $22 million in 1995, almost double the S&P 500 Index in the same period.

Persistence and Patience

She had patience and was persistent despite an early setback. Anne Scheiber’s path to a diversified portfolio worth millions of dollars was not straightforward. Her first foray into buying stocks was seemingly a failure. She had invested with the youngest of her four brothers, Bernard. He was seemingly successful, but her initial brokerage firmreportedly went bust in 1934. According to Laurence, Bernard’s son, she remained bitter at his father for years.

After retiring from the IRS, Anne took $5,000 of savings and invested with William Fay at the firm Merrill Lynch Pierce Fenner & Bean. In addition to her savings, she had an annual pension of $3,100.

However, the commonly told story may not be completely accurate. Her lawyer, Ben Clark, said, according to her tax returns in 1936, Anne already had $900 of dividend income and $3,000 in capital gains. These values suggest that Anne never fully exited the market as commonly reported. Her portfolio value can be estimated using the market’s average dividend yield of 4.3% in 1936. A little math gives a portfolio value of almost $21,000 in 1936.

The bottom line was that she bought stocks, reinvested the dividends, and held them for many years despitebear markets. In addition, she added municipal bonds later in life for tax efficiency.

Final Thoughts on Dividend Millionaire – Anne Scheiber

Over time, Anne Scheiber out-saved and out-invested many people. She was not born rich but had a knack forsaving for the futureand investing. She was also extremely patient and had the advantage of a long life. Admittedly, Anne may have been more frugal and intensely involved in the stock market than most people. But still, she became a Secret Dividend Millionaire. However, like others on this list, Anne Scheiber did not enjoy her wealth. She accumulated wealth without spending any of it.

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