Thursday, March 9, 2017

Dividend Growth Investing at Work - Canadian Dividend Increases Work Too

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Toronto Dominion for the dividend increase!
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 Thursday of last week the Board of Directors at Toronto-Dominion Bank (TD) announced an increase to their quarterly dividend payment.  The dividend was raised from $0.55 CAD to $0.60 CAD.  That's a strong 9.1%.  This year will mark 7 consecutive years of dividend increases, in their home currency, giving them the title of Dividend Challenger.  For U.S. investors shares currently yield 3.48%.

Since I own 23 shares of Toronto-Dominion in my FI Portfolio this raise increased my forward 12-month dividends by $3.43.  This is the 2nd dividend increase that I've received from Toronto Dominion since initiating a position in mid 2015.  Cumulatively my Toronto-Dominion dividends have risen by 17.7% from dividend growth alone!  According to USInflationCalculator the total rate of inflation over the same period is just 2.5%.  To say that I'm a happy shareholder to have my income increase 7x faster than inflation would be an understatement.


A full screen version of the chart can be found here.

Toronto-Dominion's dividend history stretches back to 1857.  That's absolutely incredible since there's very few companies that have even been around that long let alone successfully paying dividends without a cut.  Sabeel at Roadmap2Retire recently analyzed Toronto-Dominion if you're thinking of making a purchase.

Toronto-Domnion's dividend growth streak is only 7 years in the making; however, the pause in growth was very much warranted.  Management did the prudent thing by keeping dividends flat during 2010 on the heels of the Global Financial Crisis.  Although in my book that's not a bad thing considering all of the turmoil going on at the time.  Since 1970 Toronto-Dominion has grown the annual dividend in all but 4 years.  

The following table shows Toronto-Dominion's annual dividend payment, in Canadian dollars, as well as the rolling annual dividend growth rates since 1970.
dividend growth investing, dividend increase, financial independence
Toronto-Dominion Bank (TD) Annual Dividend and Rolling Dividend Growth Rates
*2017's annual dividend assumes 2 additional payments at the new increased rate.

An interactive graphical version of the previous chart can be found here. 

Wrap Up

My forward dividends increased by $3.43 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.89% this raise is like I invested an extra $118 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.

Thus far in 2017 I've received 11 dividend raises from the companies that I own increasing my forward dividends by $64.82.

My FI Portfolio's forward-12 month dividends increased to $5,606.98.  Including my Loyal3 portfolio's forward dividends of $69.07 brings my total taxable accounts dividends to $5,676.05.  My Roth IRA's forward 12-month dividends are at $283.59.

Do you own shares of Toronto-Dominion Bank?  Do you think the Canadian dividend growers look attractive for U.S. based investors?

Please share your thoughts below.

Image source

1 comment:

  1. I'm a US investor and have TD in my Roth IRA, to avoid the substantial withholding tax. Definitely satisfied thus far. I don't think it is at a level though where I would add more shares.

    ReplyDelete