A thousand dollars might seem like loose change in the world of dividend investing. After all, a $1,000 investment in a dividend stock with a 5% yield would generate only $50 in extra cash each year -- and that gain could easily disappear if the underlying stock sheds more than 5% of its value. That's why many dividend investors shifted toward safer CDs and T-bills as interest rates rose over the past two years.

However, over time investors who buy a stable dividend stock and reinvest its dividends can still generate much higher total returns than CDs or T-bills offer. For example, a $1,000 investment in dividend stalwart Coca-Cola (NYSE: KO) would have turned into $11,300 after reinvesting its dividends over the past three decades. That same investment in a 30-year CD with an annual percentage yield of 5% would have grown to only around $4,300.

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Source Fool.com