Growing dividend income

Over the past number of years, we have been slowly building our passive income, in particular, dividend income, so that one day our annual passive income is greater than our annual expenses. When this happens, we can call ourselves financially independent.

As you may know, for dividend growth investors, there are three key ways to grow your dividend income:

  1. Invest fresh capital
  2. Individual stock’s organic dividend growth
  3. Enroll in dividend reinvestment plans (DRIP) to purchase more shares of dividend-paying stocks

Since we are still in the accumulating phase, we rely heavily on the first method. So every year we invest a large amount of fresh capital to purchase more dividend-paying stocks. The money invested is spread across tax-free accounts like TFSA’s, tax-deferred accounts like RRSP’s, and regular taxable accounts so we can be as tax efficient as possible.


The declining dividend growth rate

If you look at our year-over-year dividend growth rates, our growth rates have been impressive. the 2012-2011 YOY growth rate was 267.94%, the 2013-2012 YOY growth rate was 119.62%, the 2014-2013 YOY growth was 53.26%, the 2015-2014 YOY growth rate was 23.39%, the 2016-2015 YOY growth rate was 21.73%, and 2017-2016 YOY growth rate was 18.11%. One thing you’ll notice it that the YOY growth rate has been on a steady decline. However, this is expected. As your dividend income increases, it becomes increasingly difficult to grow your dividend income.

For example, when your annual dividend income is $100, it is easy to grow the dividend income by 200% to $300. This is equivalent to increasing $200 in dividend income. At 4% yield, it only requires investing $5,000 new capital at beginning of the year. On the other hand, if your annual dividend income is $15,000, to have a 200% YOY growth rate would mean an increase of $30,000. An increase of $30,000, at 4% yield, would require investing $750,000 new capital. This is something that is not easily achievable by the general public (i.e. you’d need to earn A LOT of money to save to invest three-quarter of a million dollars). Even a 10% YOY growth, an increase of $1,500, would require investing $37,500 in new capital at 4% dividend yield.

So, it makes sense to see a steady decline of YOY growth rate as your dividend income gets higher and more substantial. This is a common occurrence among the dividend growth investing community. Many of the long-term dividend growth investors experience lower and lower dividend growth rate each year.

Therefore, as your dividend income grows, it becomes increasingly more important to grow dividend income via the other two methods – organic dividend growth and DRIP.


Growing our dividend income organically

The last few years when we purchase a dividend paying stock, we put more focus on stock’s dividend growth rate (DGR) over the past 10 years. This is because we want to our dividend income to grow organically as well.

Just how much of our dividend income growth is done organically? Rather than using hypothetical examples, let’s use a real-life example and look at our portfolio’s organic dividend growth throughout 2017. Below are the different dividend payout increases that we saw in 2017:


  • Enbridge (ENB.TO) raised dividend by 10% to $0.583 per share.
  • Canadian National Railway (CNR.TO) raised dividend by 10% to $0.4125 per share.
  • Exco Technologies (XTC.TO) raised dividend by 14% to $0.08 per share.
  • Omega Healthcare (OHI) raised dividend by 1.64% to $0.62 per share.
  • ConocoPhillips (COP) raised dividend by 6% to $0.265 per share.
  • BCE Inc. (BCE.TO) raised dividend by 5.13% to $0.7175 per share.
  • Brookfield Renewable Partners (BEP.UN) raised its dividend by 5% to $0.61 per share.


  • Suncor Energy Inc. (SU.TO) raised dividend by 10.34% to $0.32 per share.
  • Manulife Financial (MFC.TO) raised dividend by 10.81% to $0.205 per share.
  • TransCanada Corp (TRP.TO) raised dividend by 10.62% to $0.625 per share.
  • Coca-Cola (KO) raised dividend by 5.71% to $0.37 per share.
  • Wal-Mart (WMT) raised dividend by 2% to $0.51 per share.
  • Canadian Imperial Bank of Commerce (CM.TO) raised dividend by 2.42% to $1.27 per share.
  • Royal Bank (RY.TO) raised dividend by 4.82% to $0.87 per share.
  • Magna International Inc. (MG.TO) raised dividend by 10% to $0.275 per share.
  • Bank of Nova Scotia (BNS.TO) raised dividend by 2.7% to $0.76 per share.


  • Canadian Natural Resources (CNQ.TO) raised dividend by 10% to $0.275 per share.
  • TD (TD.TO) raised dividend by 9.09% to $0.60 per share.
  • Qualcomm (QCOM) raised dividend by 7.55% to $0.57 per share.
  • Magna International (MG.TO) raised dividend by 10% to $0.275 (US) per share.
  • Intel (INTC) raised dividend by 4.81% to $0.2725 per share.


  • Johnson & Johnson (JNJ) raised dividend by 5% to $0.84 per share
  • Omega Healthcare (OHI) raised dividend by 1.61% to $0.63 per share
  • Procter & Gamble (PG) raised dividend by 3% to $0.6896 per share
  • Unilever plc (UL) raised its dividend by 12% to €0.3585 per share


  • Apple (AAPL) raised its dividend by 10.53% to $0.63 per share
  • Hydro One (H.TO) raised its dividend by 4.76% to $0.22 per share
  • Enbridge (ENB.TO) raised its dividend by 4.63% to $0.583 per share
  • Telus (T.TO) raised its dividend 2.60% to $0.4925 per share
  • Bank of Montreal (BMO.TO) raised its dividend 2.27% to $0.90 per share
  • National Bank of Canada (NA.TO) raised its dividend 3.57% to $0.58 per share


  • Target (TGT) raised its dividend by 3.3% to $0.62 per share
  • General Mills (GIS) raised its dividend by 2.08% to $0.49 per share


  • Omega Healthcare (OHI) raised its dividend by 1.59% to $0.64 per share


  • Saputo raised its dividend by 6.7% to $0.16 per share
  • Royal Bank raised its dividend by 4.6% to $0.91 per share
  • CIBC raised its dividend by 2.36% to $1.30 per share
  • Bank of Nova Scotia raised its dividend by 3.95% to $0.79 per share


  • McDonald’s (MCD) raised its dividend by 7.45% to $1.01 per share
  • Emera (EMA.TO) raised its dividend by 8.13% to $0.565 per share


  • Fortis (FTS.TO) raised its dividend by 6.25% to $0.425 per share
  • Omega Healthcare (OHI) raised its dividend by 1.56% to $0.65 per share
  • Visa (V) raised its dividend by 18.18% to $0.195 per share
  • AbbVie (ABV) raised its dividend by 10.94% to to $0.71 per share


  • Telus (T.TO) raised its dividend by 2.54% to $0.505 per share
  • Inter Pipeline (IPL.TO) raised its dividend by 3.70% to $0.14 per share
  • Canadian Tire (CTC.A) raised its dividend by 38.46% to $3.60 per share
  • Enbridge (ENB.TO) raised its dividend by 10% to $0.671 per share
  • Enbridge Income Trust (ENF.TO) raised its dividend by 10% to $0.1883 per share


  • Bank of Montreal (BMO.TO) raised its dividend by 3.33% to $0.93 per share.
  • Ventas (VTR) raised its dividend by 1.94% to $0.79 per share.
  • Waste Management (WM) raised its dividend by 9.41% to $0.465 per share.
  • AT&T (T) raised its dividend by 2.04% to $0.50 per share.

You will notice that some stocks like Enbridge, Omega Healthcare, CIBC, Royal Bank, Bank of Nova Scotia, Telus, and Bank of Montreal had multiple payout increases in 2017. Meanwhile, a number of dividend stocks that we own did not announce dividend increase at all in 2017.

If we lump all these dividend payout increases, our annual dividend income would have increased by $802.45, or about a 6.39% increase over our 2016 dividend income. Because these payout increases were announced throughout 2017, the actual impact to our overall 2017 annual dividend income was smaller.


Growing our dividend income via DRIP

In addition to organic dividend growth, we also have enrolled in DRIP whenever we are eligible so dividend received can be reinvested. This has been a monthly and quarterly occurrence, depending on how frequently the individual stock pays ou the dividend.

Below are the stocks that we enrolled in DRIP in 2017 and how frequently we purchased additional shares.

  • BCE Inc (every quarter)
  • Bank of Montreal (every quarter)
  • Bank of Nova Scotia (every quarter)
  • Canadian Natural Resources (every quarter)
  • CIBC (every quarter)
  • Dream Office REIT (every month)
  • Dream Industrial REIT (every month)
  • Dream Global (every month)
  • Enbridge (every quarter)
  • Evertz Technologies (every quarter)
  • Fortis (every quarter)
  • H&R REIT (every month)
  • Intel (every quarter)
  • Coca-Cola (every quarter)
  • Manulife Financial (every quarter)
  • MCAN Mortgage Corp (every quarter)
  • National Bank (every quarter)
  • Omega Healthcare (every quarter)
  • Rogers (every quarter)
  • RioCan REIT (every month)
  • Royal Bank (every quarter)
  • Suncor (every quarter)
  • AT&T (every quarter)
  • Telus (every quarter)
  • TD (every quarter)
  • Vodafone (every year)
  • Exco Technologies (every quarter)
  • Vanguard Canadian All Cap ETF (every quarter)

This list above should have been longer but some of the stocks’ price had gone up so much that the dividend received was not sufficient to cover 1 share of the stock price. (Both Questrade and TD Waterhouse only offer synthetic DRIP where you can only buy full shares, rather than fractional shares).

Because most of the Canadian REITs that we own do not have a tendency of increasing their dividend payouts, by enrolling in DRIP, we are effectively growing these dividend stocks’ income after each dividend payout. And since most of the Canadian REITs are on a monthly dividend payout schedule, we are effectively compounding the growth rate every month.

For example, we purchased 12 new shares of Dream Industrial REIT in 2017. At $ 0.69996 of dividend per year, we had added over $8.40 in our forward-looking dividend income in 2017. At 5% dividend yield, that was like investing over $168 of fresh capital into our dividend portfolio.

Just how much has our annual dividend income had increased from enrolling in DRIP? Since we were adding new shares each month, it was difficult to calculate the exact amount. However, by my rough calculation, we added roughly around $30 to $50 in additional dividend income each month in 2017. So in a year, we had added about $360 to $600 or about 2.87% to 4.78% growth from our 2016 dividend income (we are ignoring the compounding effect).


Combining forces

If we were to combine the growing rate from organic dividend growth and DRIP growth in 2017, we were getting anywhere from 9.26% to 11.17%. Please note, what I have presented here is a very simplistic view. The actual growth percentage was probably lower because dividend payout raises were spread over 12 months and we were DRIPing different amount of shares each month.

If we were to stop contributing new capital completely today, I believe the dividend income growth should be able to keep up with inflation (below 5% the last few years) on organic dividend growth and DRIP growth only.

As mentioned, during the accumulation phase, adding new capital to purchase additional dividend paying stocks is the most powerful way to increase your dividend income. However, do not ignore the other two methods. It is definitely important to take advantage of all three methods.

Note: The fourth way of increasing dividend income is to sell profitable positions and purchase different dividend stocks with higher yields. This is something that I have discussed in the recent re-examine our dividend portfolio post.


Final Thoughts

When we first started with dividend growth stock investing, I purchased a lot of high yield dividend paying stocks. Most of these high yield dividend stocks did not provide any organic dividend growth. Furthermore, some of them did not have sustainable dividend payout.

In chasing yield, I had ignored many dividend stock fundamentals. Some of the stocks that we purchased back then ended up cutting their dividend payouts. Some of the stocks had their prices collapsing. It was a hard-learned lesson.

Rather than chasing yield, I began to focus more on organic dividend growth. As a long-term dividend growth investor, I realized it is extremely important to find a mix of higher yield low dividend growth stocks and lower yield high dividend growths stocks. What’s the right mix will depend on each individual investor and their investment timeline.

Combining organic dividend growth and DRIPing are two effective way to grow your dividend income. And all dividend growth investors should utilize these two important methods.


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21 thoughts on “Growing dividend income”

  1. Hello Tawcan,
    Great update as usual.
    For an expat who’s been living outside Canada for quite some time (around 10 years) and planning to return home (Toronto) with a decent amount of cash (around 350k CDN) i have the following question:

    Do you think it is wise to invest most of my money in a taxable account. The reason I am asking is because being a non resident (until I move back to Toronto in sept 2018) I cannot contribute to TSFA or RRSP and even If I can it will be a small amount.

    Thank you


  2. Chasing yield is definitely one of those traps of dividend investing, one that many new investors fall into at first. I remember looking at Yellow Pages when I first started investing because of their high dividend (thankfully I didn’t buy them!)

    Although I do love dividends we do the regular ETF investing now. We still like to see the dividends roll in though. It makes investing seem more “real” when you see money coming in each month/quarter.

    • That’s good you didn’t purchase Yellow Pages, that would have been a rough ride. ?:)

      Nothing wrong with ETF investing, we do hybrid approach with ETF’s and dividend-paying stocks.

  3. I love the organic growth but I also love the 5-10 percenters that provide more cash the Reits and BDC. Of course the risk is always high for a dividend cut some that’s why I try to have a good balance right now it’s About 4,000 in regular dividend and 2,000 in Reits and BDC. I’d like to to bring up the 4,000 a little more to keep it averaged out.

    • Yup, finding the right mix for yourself is very important. What’s right for you might not be right for me because we probably are in different life situations and have different investment timelines. 🙂

  4. chasing yield and ignoring total return are killers for beginning investors. i’m glad you spelled it out for somebody just starting out. i won’t touch an individual dividend stock that hasn’t increases their payout at least 30% over the past 5 years AND with plenty of coverage to increase the payout in the future.

    • That’s a good matrix for picking a stock. However, a dividend stock that increases their payout at least 30% over the past 5 years probably doesn’t have very high initial yield. This is why you need to find a good mix of high yield lower growth and low yield higher growth dividend payings stocks.

      • that’s the other thing i’ve seen. you can’t just blindly put these things into a stock screener and buy what pops up. the ones that fit what i mentioned usually have an initial yield between 1 and 2.5% but with some growth prospects and share price appreciation. i would say you still have to think about the underlying businesses and how they might do going forward. total return matters. most of my higher yield is in preferred shares which tend to hover more around par.

  5. 9.26% to 11.17% increase combining dividend raises and drip is very impressive. You are indeed growing your dividends income very fast. The way I look at it, it is the increase of forwarding yearly dividend increase, so it does not matter when it happened.

    I tracked organic dividend/interest increase, but did not separate dividend raises and drip, I think I should next year.

    Once we enter into retirement years, we might stop drips and dividend increase will be the only method to increase the dividend. How to balance between high yield low growth stocks and low yield high growth stocks will be something to think about.

    • Thank you May. The actual number might be slightly lower since I’m taking a very simplistic calculation. But I also didn’t consider the compound effect, so who knows, maybe the growth rate is around 9.26% to 11.17%.

      I haven’t decided whether we’d stop DRIPing once we are living off dividend income. We probably will but we’ll determine that when we get there. For now, we’ll continue doing what we’ve doing.

  6. You seem like you have a pretty good handle on this Bob. Your investment are growing dividends faster than inflation which is a really big positive. Keep it up!

    One thing I do is regularly reevaluate my holdings — For example, if a company hasn’t grown dividend as fast as inflation over the last 3 years, I take a really hard look at it. Some businesses can get into a lul due to industry conditions, but if the underperformance isn’t justified (i.e. it’s not coming back) then it’s a potential candidate to sell.

    • Very glad our investments are growing dividends faster than inflation, I mean, that’s the attractiveness of dividend income – being able to keep up with inflation.

      I need to reevalue our holdings more. Many of the REITs don’t grow dividend but they have pretty high yield. As I said, we are DRIPing as a way to grow these REITs’ dividend income. Having said that, definitely worthwhile to examine the portfolio and trim the underperforming stocks.

  7. Agreed, Bob. Great points here. Thanks very much for this post (going to read this again more thoroughly as well).

    Combining these factors is key. It’s also a great feeling to see your holdings begin to grow and carry themselves. The dividend growth is an item I’ve initially overlooked while primarily looking at yield.

    Also, I’ll say it again, I think you have a great list of individual names in your portfolio. There is a good balance of holdings as well as the frequency of their respective payouts.

    Thanks again for the post. – Mike

    • Hi Mike,

      Yes I think combining all the positive forces is extremely important. Why work twice as hard when you can use all 3 key factors to expedite your path to FI. I think many of us DGI’s overlook the organic dividend growth initially, this is definitely something we all learn over time.


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