Thursday, September 1, 2016

Dividend Growth Investing at Work - Loonie For Dividends

Concept of how dividend growth investing works
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Bank of Nova Scotia for the 2nd raise this year!
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?  Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.

On Tuesday, August 30th the Board of Directors of Bank of Nova Scotia announced an increase to their quarterly dividend.  The new quarterly payment is $0.74 CAD per share compared to the previous payout of $0.72 Cd.  That's a solid 2.8% increase.  Bank of Nova Scotia is a Dividend Challenger based on their home currency with 6 consecutive years of dividend increases.  Shares currently yield 4.24% for U.S. investors.

Bank of Nova Scotia has typically given investors 2 smaller dividend increases each year rather than just one larger one.  For me that's awesome because it allows the raises and compounding to come just a little bit faster.  Compared to the year ago period Bank of Nova Scotia has increased the dividend by a total of 5.7%.

Since I own 25 shares of Bank of Nova Scotia in my FI Portfolio this raise increased my forward 12-month dividends by $2.00 CAD or $1.53 at the current CAD:USD exchange rate.  This is the 3rd dividend increase I've received from Bank of Nova Scotia since initiating a position in March 2015.  

Cumulatively my income from Bank of Nova Scotia has increased by 8.8% ex-foreign exchange!!!  That's from dividend increases alone.  According to USInflationCalculator the total rate of inflation over the same time period is just 1.5% so Bank of Nova Scotia is far exceeding inflation with pay boosts.

Bank of Nova Scotia had increased dividends every year since at least 1994; however, the financial crisis ended that streak.  Personally I feel that was a prudent decision because no one knew what was going to happen so erring on the side of caution made the most sense.  

Dividend growth historically had been very strong, but since the financial crisis has settled in around between 6-9% annually.  That's still solid though and if they can continue to keep that up I'll be an extremely happy shareholder.

Bank of Nova Scotia has maintained an average payout ratio of 48.5% over the last 10 years.  Moving forward I would expect dividend growth to track earnings growth with a possibility of slightly faster growth, but overall the payout ratio should remain around where it currently sits.

Bank of Nova Scotia (BNS) Dividend Payout Ratio
Bank of Nova Scotia (BNS) Dividend Payout Ratio
The Canadian banks are typically more conservatively run than their U.S. counterparts and the big 5 have a huge portion of the market share.  But don't think that Bank of Nova Scotia is solely reliant on the Canadian economy as they have a big presence in Central and South America too.  They recently announced Q3 earnings and Ben over at Sure Dividend has a good write up covering the release.

Wrap Up

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 2.97% this raise is like I invested an extra $50 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!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

For a dividend growth investor there's not much that's better than hearing news of a dividend increase.  So far this year I've received 35 increases from 28 companies increasing my forward 12-month dividends by $202.82.

My FI Portfolio's forward-12 month dividends increased to $5,651.56 and including my higher Loyal3 portfolio's forward dividends of $65.06 brings my total taxable account forward dividends to $5,716.61.

Previous increases this month:
Harris Corporation (HRS)

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

Please share your thoughts below! 

Image courtesy of digitalart on


  1. Always love raises especially when it beats inflation.

    1. D&H,

      I can't really complain too much about the small raise since BNS gave around a 3% boost earlier this year. I wish more companies would adopt the 2 or more smaller raises each year because it's always fun to see a dividend increase announcement.

      Thanks for stopping by!

  2. Congrats on a raise for doing nothing. I own BNS as well. This stock has been a good one for me. I bought it in February and it's been rising quickly.

    1. IH,

      I wish I had bought this one earlier, well I wish I had bought and held earlier than I did but I outsmarted myself and sold my first lot of shares. I then reopened my position and have been happy since.

      Thanks for stopping by!

  3. If there was any Canadian bank i would invest in, it would be BNS. Mainly because its the most diversified banks in my opinion. Nice raise! :)

    1. ME,

      I definitely like BNS although TD is solid too. There's so many great companies out there, but unfortunately you can't own them all.

      Thanks for stopping by!