One Raise at a Time | Banking On Higher Dividends

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Bank of Nova Scotia for yet another 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 Tuesday the Board of Directors at Bank of Nova Scotia (BNS) announced an increase to their quarterly dividend payout.  The dividend was increased from $0.79 CAD per share up to $0.82 CAD per share.  That's a solid 3.8% raise.  Bank of Nova Scotia is a Dividend Challenger with 7 consecutive years of dividend increases.  Shares currently yield 4.14% based on the new annualized payout.

That raise might not seem all that impressive when taken at face value; however, a closer look reveals a much stronger increase.  Bank of Nova Scotia has recently been giving investors 2 smaller dividend raises each year rather than 1 larger one.  A better comparison is to the same payment from a year ago which was $0.76 CAD.  The year over year increase therefore comes in at a whopping 7.9%.

Since I own 25.625 shares of Bank of Nova Scotia in my FI Portfolio this raise increased my forward 12-month dividends by $2.42.  This is the 6th dividend increase I've received from Bank of Nova Scotia since initiating a position in March 2015.  Cumulatively, the organic dividend growth has totaled to 20.6% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 4.6%.  That's dividend growth investing at work.

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

Bank of Nova Scotia has a truly impressive dividend history and you would be hard pressed to find many companies with a history as rich as theirs.  For starters Bank of Nova Scotia has paid a dividend to shareholders every year since 1832 and has rewarded investors with dividend increases in 43 of the last 45 years.  

Unfortunately, the "Great Recession/Financial Crisis" of 2008/9 interrupted their streak.  That's fine by me though because they were able to navigate those troubling times and get back on with regular increases.  

Bank of Nova Scotia's 1-, 3-, 5- and 10-year rolling dividend growth rates since 1994 can be found in the following chart.  Annual dividend growth from Bank of Nova Scotia has slowed since the early 2000's; however, 5-9% annual increases are just fine by me.

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

*2018's dividend assumes the new quarterly payout of $0.82 CAD per share is maintained for the rest of the year.

Wrap Up

This raise increased my forward dividends by $2.42 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.76% this raise is like I invested an extra $88 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 2018 I've received 14 dividend increases combining to increase my forward 12-month dividends by $138.06.  

My FI Portfolio's forward-12 month dividends increased to $6,024.91.  Including my FolioFirst portfolio's forward dividends of $78.47 brings my total taxable accounts dividends to $6,103.38.  My Roth IRA's forward 12-month dividends remain at $336.46.

Do you own shares of Bank of Nova Scotia?  What about other companies that aren't based in your home country?

Please share your thoughts below.


  1. Hi JC, I don't own BNS. I typically avoid Canadian dividend stocks because of the additional 15% withholding tax on those shares. It is difficult for me to recover it with a tax credit, so it is just to much additional tax to bear on top of US taxes. I focus more on stock in countries where no addition foreign tax is levied like the UK where I can by ADRs. DEO and UL are good examples. Tom

    1. Tom,

      That 15% withholding tax is definitely a pain, but the good thing is that the markets account for that some. The pre-withholding tax yield on BNS is 4.11% but even after the tax it's still a solid 3.50%. I can live with that. Although I agree that the non-withholding tax countries are attractive. I own some UL and really want to add some DEO to my portfolio as well. One last note, I'm not 100% sure on this but I think if the Canadian companies are owned in a retirement account for US investors then the withholding tax is skipped.

      Thanks for stopping by!

  2. No complaints from me about the BNS raise. I remember when I first learned about the Canadian banks and their conservative manner which they conduct business. Also, that many of the large Canadian banks have been paying dividends for over 100 years. I'm still long TD, BNS and RY. If there is another meltdown I wouldn't mind adding BMO or CM to the mix. Thanks for sharing.

    1. Keith,

      Yeah I loved seeing the raise climb up to 3.8% and it gives me hope that BNS could double down again with another $0.03 CAD increase later this year. That'd be a 7-8% increase for calendar year 2018. I'm looking forward to see what TD announces here in the next couple days as well.

      Thanks for stopping by!

  3. To answer the question - about 15% of my dividends are paid by foreign companies BNS being one. You are also correct in that the 15% CAD tax does not generally apply to IRAs per the tax treaty. There is one exception (some of the ones Citi manages if I recall correctly) - I just ask the question at my broker's foreign desk prior to performing the transaction. PWCDF and RY are two in my IRA with no CAD tax withheld.

  4. Dividend increases are great! I've had about six this year and I get excited about every single one :)


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