Jimmy Mengel is a strong proponent of building long term wealth through dividend reinvestment plans (DRIPs). Here, the editor of The Crow's Nest highlights two consumer products firms well suited for DRIP investors.

I just had a conversation over Memorial Day weekend with a family friend that was about to have their first grandchild. They asked me what they should invest in to make sure that grandchild is set for life.

I told them one thing: DRIPs. If you invest $4,000 into a DRIP around the birth of a child or grandchild and let it ride — meaning you never even contribute another penny to that investment — that $4,000 will compound to around $1 million by the time they turn 65.

That is assuming a 9% return — which, with most of the DRIPs I recommend, is completely within the realm of possibility.

Colgate-Palmolive (CL)

In 1806, William Colgate, an English immigrant, set up a new starch, soap, and candle factory in New York City. Nearly 200 years later, Colgate-Palmolive is an $85 billion corporate giant with personal care and home goods products sold in 233 countries.

It has maintained a tight portfolio of products, emphasizing gross margin, reducing overhead costs, boosting operating profits, and returning value to shareholders via an ever-increasing dividend.

Since 1995, Colgate-Palmolive has boosted gross margin from 47% to 60.7%; realized a compound growth rate of about 6.5%; increased free cash flow from $458 million to $2.5 billion; and increased dividends for 54 consecutive years.

To sweeten the deal for investors with a long-term outlook, Colgate-Palmolive maintains a DRIP that requires a $500 initial purchase and subsequent $50 minimum share purchases.

No more than $10,000 may be bought at once. Initial account setup requires a $10 fee. The automatic investment fee is $1, the reinvestment fee is 5% up to $1.25, and the sale fee is $15. The dividend yield is 2.16% per year.

Kimberly-Clark (KMB)

Kimberly, Clark, and Co. was founded in 1872 in Neenah, Wisconsin by four men with $42,000 of capital. The group’s first venture was in paper mills.

Today, Kimberly-Clark is behind some of the biggest personal care products you can buy; its brands include Kotex, Kleenex, Depends, Huggies, Pull-Ups, Cottonelle, and Scott.

Its brands hold the number one or two spot for brand share in 80 countries, and the company estimates that nearly one-quarter of the world’s population regularly purchases its products every day.

Kimberly-Clark is now a $46 billion company with $18 billion of revenue in 2016. The company has raised dividends for 41 years in a row. The current dividend yield is 3%.

Its DRIP allows you to buy your first shares through its Computershare Investment Plan with a minimum of $50. Existing shareholders can buy a minimum of $50 up to a maximum of $100,000 per year.

The plan has a $10 setup fee, $5 cash purchase fee, $2.50 ongoing automatic investment fee, $0.05 per-share processing fee, and a 5% to a maximum of $5 dividend reinvestment fee.

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