Tuesday, March 1, 2016

Dividend Growth Investing at Work - Higher Dividends from Our Neighbor to the North


Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?

This morning the Board of Directors at Bank of Nova Scotia (BNS) approved an increase to their quarterly dividend.  The new dividend rate is C$0.72 which is a 2.9% increase from the previous payout of C$0.70.  In their home currency this is the 6th consecutive year of increases after keeping them steady during the "Financial Crisis".  Due to the strength of the USD versus the CAD the increased dividend still shows a decline compared to the comparable payout from 2015.  No worries though because that will provide a boost to yield whenever the currency winds shift.  The current yield on Bank of Nova Scotia shares stands at 5.32% for U.S. investors.

The increase might not seem like much at just 2.9%, but Bank of Nova Scotia has been announcing two smaller raises throughout the year rather than one larger increase.  Compared to the year ago payment of C$0.68 this is a 5.9% year over year raise.

I own 26 shares of Bank of Nova Scotia in my FI Portfolio so this dividend increase grew my forward 12-month dividends by $2.00 in CAD but only $1.53 in USD at the current exchange rate.  This is the 2nd dividend increase I've received from Bank of Nova Scotia since initiating a position in early 2015.  Cumulatively my income from Bank of Nova Scotia has increased 5.9% in CAD!  According to USInflationCalculator the total inflation for that same time period sits at 0% so Bank of Nova Scotia is crushing inflation and increasing my purchasing power.

My forward dividends increased by $1.53 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.21% this raise is like I invested an extra $48 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way.  That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  That's the beauty of the dividend growth investing strategy because you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

I've now received 10 dividend increases thus far in 2016 adding $54.29 to my forward 12-month dividends.

February saw 6 dividend raises and March is getting off to a good start.  I can't wait to see what the rest of March brings.

My FI Portfolio's forward-12 month dividends are up to $5,552.25 and including my Loyal3 portfolio's forward dividends of $62.38 brings my total taxable account forward dividends to $5,614.63.

Do you own shares of Bank of Nova Scotia?  Do you prefer the 2 smaller raises throughout the year or one bigger increase?

Image courtesy of digitalart on FreeDigitalPhotos.net.

14 comments:

  1. Congrats on the raise, JC. Love the reliable dividend increases that keep coming year after year from the banks :)

    cheers
    R2R

    ReplyDelete
    Replies
    1. R2R,

      It's great to see another raise coming through despite the craziness of the markets so far in 2016 the dividends keep coming in and keeping getting bumped up. 10 raises so far and many more to come this year.

      Thanks for stopping by!

      Delete
  2. I don't own BNS but did just purchase shares of RY in my Roth. I'd hoping to invest more in the Canadian bank stocks whenever I can. BNS looks like one to consider. Thanks for the writeup.

    As far as dividend increases, I guess I'd prefer two smaller raises throughout the year rather than one larger one...every little bit of compounding helps!

    Scott

    ReplyDelete
    Replies
    1. Scott,

      I only own BNS and TD of the Canadian banks but RY looks attractive as well. Like you I'm hoping to build these positions up over time.

      Thanks for stopping by!

      Delete
  3. I have 10 shares of BNS. I'd prefer 2 small increases per year!! haha! Compound interest effects is much better! And as dividend growth investors, I'm in for the long hall, and pennies do matter!

    ReplyDelete
    Replies
    1. Vivianne,

      I prefer the 2 smaller increases throughout the year but many companies just give one larger one. That little bit of extra compounding can't hurt.

      Thanks for stopping by!

      Delete
  4. My wife and I own 3533 BNS shares (the TSX listing) since we live in Canada and owning the US listed shares would result in a 15% withholding tax on all dividends. Two small increases per year is fine with us.

    We also own a few thousand shares of each of the other major Canadian FIs (RBC, CIBC, BMO, and TD). We are reasonably confident the dividends will continue to flow to us once we retire. These banks, in my opinion, are "put your head on the pillow and sleep well" investments.

    ReplyDelete
    Replies
    1. Those are some hefty positions in the Canadian banks and I'm sure you're loving those dividends. From an operational/regulation standpoint I much prefer the Canadian banks to their US counterparts. Although I do have some concerns regarding the Canadian economy/housing market especially if the commodity crush continues on.

      Thanks for stopping by!

      Delete
  5. Hey JC,

    Congrats on the increase! Got it over here too. I think BNS is slowly becoming my favourite Canadian bank, actually. The earnings were good, too. 10 dividend increases in two months must feel amazing. Going for that same effect, slowly but surely.

    DB

    ReplyDelete
    Replies
    1. Dividend Beginner,

      BNS is excellent but I think I like TD a bit more than them from a company standpoint. I love the multiple increase each year. A little bit quicker compounding is always a plus.

      Thanks for stopping by!

      Delete
  6. Gotta love BNS, a dividend increase on a stock that is way undervalued.

    ReplyDelete
    Replies
    1. IH,

      The Canadian banks look solid here and I'd love to add to my positions in them. Continued dividend increases and conservatively run. Plus banks make money on the interest rate spread rather than the interest rate themselves which means they make money in any economic environment.

      Thanks for stopping by!

      Delete
    2. I bought BNS mid January, so I'm glad to be a fellow shareholder. I'm not that worried about oil, what keeps me awake at night is the Canadian property market.

      Delete
    3. Dividend Planet,

      Oil has me just as worried as the property market. Canada's economy is largely commodity based and almost every commodity they produce is near cyclical troughs. The problem is that with the oil industry slow down in Canada that could potentially lead to the housing bubble bursting. If people lose their jobs but there aren't enough jobs available to absorb the newly unemployed that could lead to mortgage payments being skipped.

      I still like the CDN banks though even though I have some worries about the sector. BNS has been solid for me and they have pretty broad geographic diversification to help smooth things out if the CDN economy lags.

      Thanks for stopping by!

      Delete