Dividend growth 2015

dividend growth

If you’ve been following this blog, you know that we are investing in dividend stocks to generate dividend income. Our goal is to have sufficient dividend income to cover our expenses one day in the near future. When this happens, we can say that we’re financially independent. We are adding fresh capital regularly to purchase more dividend stocks, this in terms will generate more dividend income. The fresh capital is the main reason why our dividend income has grown over the years. However, an important factor to consider is organic dividend growth from the stocks that we are holding.

Dividend growth is important because without it, the yield on cost of our dividend portfolio will stay the same forever. Without any dividend growth, inflation will start de-value our dividend income. One thing to keep in mind is that dividend growth provides a huge exponential compounding effect, allowing our dividend income to grow over time.

Below are stocks in our dividend portfolio that have seen dividend increases since the beginning of this year.

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These dividend increases meant an additional $503.19 in dividend income going forward for us.


Our annual dividend income has increased by over $500 without us having to do anything at all. Isn’t this amazing or what?

I love dividend income because we get paid for doing absolutely nothing at all. Now I just showed you that our dividend income is growing itself as well. Talk about icing on the cake!

But wait Tawcan, that’s just an extra $500, what’s the big deal? You are probably wondering...

Sure it may not sound like a big amount at all. But wait a moment and reconsider. Consider how much money you need to generate that kind of money.

At 3% dividend yield, you'd need to invest $16,773 new capital to generate an additional $503.19 in dividend income.

Do you have $16,773 laying around in the house that you can invest this moment?

For the most us, probably not.

The dividend growth from our dividend portfolio meant two things.

First, the fresh capital that we are adding regularly can generate more dividend income and the additional dividend income can grow whenever companies announce dividend increases.

Second, the additional $500 can grow more next year when companies announce dividend increases.

The power of compounding interest really takes off after a few years. Let’s not forget that we’re DRIPing many of our stock holdings too.

This is definitely icing on the cake!

I like to treat each dollar like a seed. We can either eat it by spending it, or we can plant it, nurture it, and wait for it to grow and produce more seeds. The dividend growth within our dividend portfolio is a perfect example of this concept. Each dollar invested inside our portfolio will produce more and more money each year. Although the growth may seem small, a few dollar here and there all add up in the long run.

The cool thing about running the dividend growth numbers that you saw above? I learned a few things about our dividend portfolio.

I learn that we need to focus owning more stocks that grow dividends at annual rate of 15% or higher. Typically these stocks have lower starting yield, so we must invest for the long term to benefit the high dividend growth rate.

Another lesson I learned is that we need to lower our exposure to REITs. We current have about 15% of our portfolio in REITs. Many of the Canadian REITs have not increased their dividends for many years (and they probably won’t due to how they're structured). Although we do get a high dividend yield from REITs, the lack of growth will be a concern once we start using our dividend income, because inflation will impact the real yield. We need to diversify further and not focus too much on the initial dividend yield. High dividend yield stocks may be nice for the initial income but perhaps they're not meant for long term holding.

With these lessons in mind, I'll most likely restructure our portfolio slightly moving forward. Perhaps selling some higher yield stocks that doesn't offer much dividend growth and focus on higher growth dividend stocks. A combination of stocks with high yield and stocks with high dividend growth will be the key.

I'm very excited about the lessons I have learned. Make sure to come back later or sign up our email newsletter to read the latest updates on our dividend portfolio.

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  • Reply
    JC @ Passive-Income-Pursuit
    October 26, 2015 at 11:35 am

    Impressive numbers Tawcan. $500 from dividend Increases alone and a $16k equivalent extra invested capital. That's the power of dividend growth investing!

    • Reply
      October 28, 2015 at 11:21 am

      Hi JC,

      Very happy with the dividend increases but hungry for more. 😀

  • Reply
    October 26, 2015 at 11:53 am

    Nice post, Tawcan. Those numbers in the right column may look piddly, but they add up so much so fast - and like you said - thats the equivalent of investing an extra $16K. Thats absolutely fantastic. When you consider that you can reinvest those and compound those dividends, it truly illustrates how financial freedom is achievable.


    • Reply
      October 28, 2015 at 11:22 am

      Cue Russell Peters joke skip with shopping in a Chinese store...

      "50 cents here, 50 cents there, soon you'll have a dollar!"


  • Reply
    Income Surfer
    October 26, 2015 at 2:40 pm

    Impressive Tawcan, and relating the increase to $16k in fresh capital was a great idea. Dividend growth is much more important to me than stickily yield. I hope you have a great week!

    • Reply
      October 28, 2015 at 11:24 am

      Hi Bryan,

      While impressive I think if we focus more on dividend growth stocks, our number can be bigger in the future. Too many REITs don't raise their dividends.

  • Reply
    Investing Pursuits
    October 26, 2015 at 5:40 pm


    Great post. Low yield and high growth will do wonders for you. High yielders, like the REITs here, do not increase much at all if and when they do.

    A company such as Royal Bank or Enbridge has increased dividends a lot in recent years.

    • Reply
      October 28, 2015 at 11:25 am

      Definitely very happy with RY and ENB's recent dividend increases. The Canadian banks seem to be raising dividends very consistently lately.

  • Reply
    November 1, 2015 at 7:58 am

    Great increase there Tawcan - incredible when you work out how much you need to invest to get that kind of income, ie 16k! Well done!

    • Reply
      November 2, 2015 at 9:36 am

      Hi weenie,

      Thanks, it's amazing how quickly everything adds up.

  • Reply
    Dividend Diplomats
    November 1, 2015 at 11:55 am

    I love you how presented this Tawcan and it just re-inforces why I love dividend growth investing. You would need to invest $16k to receive the same impact....amazing. You had to do ABSOLUTELY NOTHING to earn this too haha

    Are you planning on measuring your portfolio's weighted average dividend growth rate as well? It is something Lanny threw together last year and I love looking at it.

    Keep up the amazing progress Tawcan. You are crushing it and you will hit financial freedom before you know it.


    • Reply
      November 2, 2015 at 9:38 am

      Hi Bert,

      That's why dividend growth is so important. Weighted average dividend growth rate is probably something I should look into. Would be great if this can be tracked automatically.

  • Reply
    Dividend Gremlin
    November 2, 2015 at 11:08 am

    $500 is a ton of money, regardless of Canadian or US. I definitely look forward to the days when I can count that much in dividend growth!
    - Gremlin

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