Dividend Growth Investing – Looking 30 years Into The Future
Dividend Growth Investing – Looking 30 years Into The Future
Hope you all are having a great week. This morning I decided to try to look into the future and see how things would look. I got to say, things look pretty good and it was a neat exercise to do.
When I first started investing in stocks, I focused on just dividend stocks with a decent yield and that I thought would go up in price in the coming years. It’s not a bad start and some stocks have done well, while others haven’t. One thing keeps screaming at me and has changed my investing strategy the last year, and moving forward.
Dividend Growth Stocks are the way to go. Their stock tends to appreciate better with the bigger payouts and who doesn’t like getting raises for doing nothing? So far we have received $131.54 to our forward income from dividend raises alone in 2019. Definitely a nice bit of change and that number would be even higher if our whole portfolio would be dividend growth stocks.
My Portfolio Improvements
This is something I will be improving upon in the next month or two. While it sucks to be selling stocks as those trading fees add up, In the long term the move to a dividend growth stock portfolio would be a major improvement.
Stocks that I have that aren’t DGI stocks are
- Russell Metals
- Sienna Senior
- Dream Global Reit
- General Mills
I feel pretty confident about Shaw, Riocan and Dream Global Reit moving forward, while the others may be (or have been chopped) on the chopping block. Although CVS and General Mills have just froze their dividend for the time being to pay down debt from acquisitions.
Ultimately moving forward I would like our overall portfolio to have a dividend growth rate of 5% or more a year. Of course in tough times this may not be realistic but when you look at some great growth stocks they have been raising their dividend for over 40 years with a higher than 5% average growth rate.
Forward Looking Charts
I decided to do a couple charts projecting what the future will hold in terms of future dividend’s. My goal for 2019 is to have a forward dividend income of $6,500, so I started the charts in 2020 with that number for simplicity.
The charts are pretty basic, The year in column 1, column 2 adds in an extra $1,000 that I hope to achieve through new buys and drip’s working their magic the year before. Column 3 shows the overall dividend increases based on either 5 or 8% growth. The last one is what our forward dividend’s should be, at the end of the year.
There is some issues with these charts as I will be deploying money every month and should excel the rate of return going forward but for simplicity I just added a thousand the following year. Also I’d like to be retired in 20 years and this chart shows the next 30 years. I did this for fun and also maybe at that time those drips, would add 1,000 synthetically. We would be using the dividends to live off in our retirement, so yeah things aren’t perfect.
It will be cool, moving forward to compare where we are each year. Will we be under the proposed totals or over? Either way it creates a sweet target to aim towards or break through!
Without further Ado, let’s check them out.
This chart shows an average 5% growth rate on our overall portfolio.
How cool is that? In 30 years if we keep at it, we will be bringing in almost 90k a year from dividend’s alone. In 20 years we will be cashing in a cool 47k if we decided to retire than. We could live off that no problem, if the house was paid off and the kids were both out of the house!
Ultimately though when we retire I’d love to sell our house and move to a cottage and living there. This would lower our cost of living and most likely create a tonne of equity on the house sale. This is a long way from now though and health would be a huge factor.
Anyways that is the 5% growth chart. Did you know that the total of those dividend’s alone would be worth $1,218,657.75 at the end….. Pfffft sweet! A millionaire and that doesn’t even include our portfolio or any assets that we own. I like the sound of that. Might be able to upgrade the kayak to a bass boat!
This chart shows an average 8% growth rate on our overall portfolio.
An absolute massive difference in total’s…… It really shows the power of dividend growth rates. With the 5% dividend growth rate, you would need almost 20 years to get the dividend raise’s the 8% one gets in 10 years. 17 years to be exact. Is a 8% average portfolio attainable? I think so, but of course you can’t be chasing yield. At&t ain’t going to be raising their dividend this high with their current yield. But Telus is in the ballpark of this rate, same with those Canadian bank’s.
Now you got to remember we are talking about a average 8% dividend raise on your whole portfolio, You get some companies like CNR in there and they knock those average’s way up. CNR has a 10 year average dividend growth rate of 14.7%. Canadian Utilities, Canada’s longest dividend growth stock has a 10 year growth rate of 9%. We need to start looking at their growth rates more than their current yield’s for long term results.
This is a amazing site for Canadian’s to see our best Dividend growth stocks.
With the same timeline of investing the 8% growth rate chart brought in $1,878,657.75 from dividend’s alone a monster difference over the 5% one. A $660,000 difference is something to really consider. =)
So Is Dividend Growth Investing For You?
Hard question eh? haha the chart’s kind of speak for themselves. There is the argument, that if you are young you should focus on growth stocks. I know I passed on a bunch of stocks because they didn’t pay a dividend. ( shopify at $27, Canopy at 6 bucks) No question I’d be richer at the moment if I didn’t, but I want that cash flow! Also I’m sure I would of sold my position’s halfway up, making sure to take profits. With dividend growth investing, there’s no market timing. Let those dividend’s continue to trickle in and stack those dividend’s! So yeah dividend growth investing is for me.
These charts were a eye opener to me, I hope they may be to you as well.
What are your thoughts? Would you of done anything different in the charts?
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.
Nice man – you are well on your way.
Just curious – what Yield are you using? To add 1000 a year in dividend income from previous years investments…assuming say 4% yield, you’d need to invest 25k per year each year. Just curious what number you used, and if you think its doable.
Also – what % of this is TFSA vs RRSP? 90k a year in TAX FREE dividends would be insane..hah
You nailed the nail on the head. I was using a 4% yield. 2k a month should be doable with the wife back at work (if we can hold back on other projects around the house… lol)
Also i drip probably 100-200 a yr in forward dividends currently, so this will actually get easier as time progresses and the portfolio grows.
It will be cool looking at this going forward and comparing the results.
100% agree with you Rob, dividend growth stocks is the way to move forward. High yields like REIT are good for retired/wealthy people because they can put a million into 6% yield, instead of 4% yield and enjoy an extra 20K per year. But for us, the youngsters, we need to invest in growth, to grow the dividend and equity at the same time. You listed 10 stocks that you would like to sell and buy dividend growers. You don’t have to sell them all at once. When you make your monthly transfers to your portfolio, you can sell one stock at the time, combine that with fresh capital and invest in new company. This way you will gradually consolidate and re-balance your portfolio. It feels like you cracked the code for success, Rob. I can feel the excitement in your article. Get them, the good stocks and let’s make the money you deserve!
Love it German, yeah its exciting seeing it all written down like that.
You are exactly right about the sales, I sold 2 the end of last week and plan on deploying that capital with new money this friday.
I dont think ill sell them all, but there is some fat to be cut for sure!
What do you use for tradding And what do you think about weathlsimple trade app.
I use rbc direct investing for simplicity.
wealthsimple trade sounds good but as of right now its for non registered accounts only.
which sucks because all my accounts are registered at the moment. tfsas, resp and rrsps.
Once they are all maxed maybe their app would be the way to go. Atleast by then there will be more reviews on them.
Hope that helps, sorry I dont got much more info.
My buddy uses questtrade though and seems to enjoy it, if your looking for other options.
Exactly I just noticed after my comment that i cant use my TFSAS account on it …
i will wait and see.
Long live DGI – ALL the way baby! 5% growth rate is conservative and look at what happens in a normalized growth rate environment. Love the charts, as that usually turns the heads or drops the jaws.
Yeah the charts were an eye opener for sure. The numbers definately add up fast!
This is a great, enjoyable exercise. I’ve done this a few times with charts to see where I could get to in the next ten-fifteen years. Your growth rate of 5% is very modest and likely very achievable. While some companies like REI.UN don’t offer much growth, they do provide a healthy payout that you can then use to reinvest into other higher paying companies. I picked up REI.UN way back in 2009 and have been using those payments to fuel my other dividend positions for years.
couldnt agree more. Its always great to have a path showing you where you are going or want to go.
Im a big fan of riocan so doubt ill be getting rid of that one.