Snowball Effect Investing | Compound Your Wealth Like Warren Buffett

Updated on June 23rd, 2026 by Bob Ciura

The snowball effect shows the power of compounding.

When you push a small snowball down a hill, it continuously picks up snow. When it reaches the bottom of the hill it is a giant snow boulder.

The snowball compounds during its travel down the hill. The bigger it gets, the more snow it packs on with each revolution. The snowball effect explains how small actions carried out over time can lead to big results.

In the same way, investing in high-quality dividend growth stocks can generate large amounts of dividend income over long periods of time. That’s because dividend growth stocks tend to pay rising dividends every year.

And then you can reinvest those rising dividends to purchase more shares each year. This results in an increase in the total number of shares you own, as well as an increase in the dividend per share, for a powerful wealth compounding effect.

Investors looking for the best dividend growth stocks should consider the Dividend Aristocrats, a group of 69 stocks in the S&P 500 with 25+ consecutive years of dividend growth.

You can download an Excel spreadsheet of all 69 Dividend Aristocrats (with metrics that matter such as dividend yields and price-to-earnings ratios) by clicking the link below:

Disclaimer: Sure Dividend is not affiliated with S&P Global in any way. S&P Global owns and maintains The Dividend Aristocrats Index. The information in this article and downloadable spreadsheet is based on Sure Dividend’s own review, summary, and analysis of the S&P 500 Dividend Aristocrats ETF (NOBL) and other sources, and is meant to help individual investors better understand this ETF and the index upon which it is based. None of the information in this article or spreadsheet is official data from S&P Global. Consult S&P Global for official information.

This article shows how to harness the power of the snowball effect to multiply your wealth and income many times over.

It also includes 5 real world examples of the ‘snowball effect’ stocks that have compounded investor wealth.

Table of Contents

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The Power of The Snowball Effect

Before we discuss how to harness the power of the snowball effect we must understand the power of compounding.

The snowball metaphor visually shows the power of compounding.

“The most powerful force in the world is compound interest”– Attributed to Albert Einstein

Here’s the power of compound interest:

Imagine you invested $1 that compounded at 1% a day. In 5 years your $1 would grow to over $77 million. You would be among the richest people in the world by year 7.

Keep in mind that compounding is not a get rich quick scheme. It takes time – and lots of it. There are no investments that compound at 1% a day in the real world.

The stock market has compounded wealth (adjusting for inflation) at ~7% a year over the long run. At this rate an investment in the stock market has historically doubled every 10.4 years.

It takes more time to compound wealth in the real world – but that doesn’t make the principle of compounding any less powerful.

Take Warren Buffett as an example. Warren Buffett is worth over $140 billion. Warren Buffett’s wealth comes from the tremendous benefits of the snowball effect through time.

Warren Buffett compounded his wealth through a specific type of investment.

Buffett invests in:

Shareholder-friendly businesses
With strong competitive advantages
Trading at fair or better prices

“All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”– Warren Buffett

The next section of this article discusses how to harness the power of the snowball effect by investing in the same type of businesses Warren Buffett does.

How You Can Harness The Snowball Effect

You can harness the power of the snowball effect by investing in the same type of businesses that have made Warren Buffett so wealthy over time.

Specifically, companies with strong and durable competitive advantages and shareholder friendly managements, trading at fair or better prices.

The good news is you don’t even have to search for these businesses. There is a list of 58 businesses with 50+ years of consecutive dividend increases called the Dividend Kings list.

Nothing says ‘strong and durable competitive advantages and shareholder friendly management’ like 50 or more years of paying rising dividends in a row.

Coca-Cola (one of Buffett’s biggest investments) is a Dividend King. There are many other well-known stocks in the Dividend Kings list, including:

You may read this and think: “these businesses may have a history of success, but isn’t their run over”?

Investors have wasted tremendous sums of money chasing ‘the new hot stock’. It is steady dependable results that lead to long-term wealth multiplication.

What would happen if you had invested in some of the most well-known Dividend Kings in 1990?

The 7 example businesses below all had 25+ years of consecutive dividend increases by the end of 1990. They were well-known, blue-chip stocks in 1990.

It didn’t take a genius to buy and hold them…

Snowball-Effect Stocks For The Next 25 Years

All 5 examples above trounced the market despite being well established businesses with long dividend histories.

But…

What stocks will be the next snowball effect compounders?

There’s no need to reinvent the wheel.

For those looking to enter into new positions in snowball effect stocks should look for the following:

Above average dividend yield
Below average price-to-earnings ratio
Long dividend history

The biggest constraint of the 3 is the long dividend history. We will start by selecting only from stocks with 25+ years of rising dividends.

Out of these long dividend history stocks, we will screen for:

A dividend yield above the S&P 500’s 1.2% yield
A price-to-earnings below the S&P 500’s ratio long-term average of 16.2

We will then sort these by expected total return. Total return is the expected earnings-per-share growth rate, plus the current dividend yield, as well as the net impact of any positive or negative changes in the price-to-earnings multiple.

The 10 highest expected total return stocks with 25+ years of rising dividends, a dividend yield above 1.2%, and a price-to-earnings ratio below 16 (using data from Sure Analysis), are listed below:

Factset Research Systems (FDS) | Expected total return of 28.8%
First Farmers Financial Corp. (FFMR) | Expected total return of 22.8%
Amcor plc (AMCR)  | Expected total return of 19.4%
The Marzetti Company (MZTI) | Expected total return of 19.3%
Becton, Dickinson & Co. (BDX) | Expected total return of 18.6%
Novo Nordisk (NVO) | Expected total return of 17.4%
Sanofi (SNY) | Expected total return of 17.3%
Community Financial System (CBU) | Expected total return of 16.7%
Abbott Laboratories (ABT) | Expected total return of 16.0%
Eastern Bankshares (EBC) | Expected total return of 15.0%

The 10 stocks listed above best match the criteria to best take advantage of the snowball effect.

‘Snowball stocks’ have durable competitive edges. Evidence of their competitive advantages is seen by their long operating history and consistent dividend increases.

Long-term investing in great businesses with shareholder-friendly managements at fair or better prices will very likely produce compound wealth gains over time.

Related: The video below discusses long-term investing and wealth creation.

Remember the snowball effect when choosing your investments.

Other Dividend Lists

The Dividend Aristocrats list is not the only way to quickly screen for stocks that regularly pay rising dividends.

The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.