In partnership with

Happy Monday!

Today, I’m sharing why dividend growth is the most important factor for long-term dividend investors. I’ll illustrate this by modeling how dividend growth compares between 3 different types of dividend stocks: a low yield with high growth, an average yield with average growth, and a high yield with low growth.

This example is designed to show you how powerful dividend growth can be over time. On top of this, I’m going to share 9 notable stocks who just increased their dividend payment this past week.

Let’s Do This!

Was this email forwarded to you?

THE KEY STORY

The Power Of Dividend Growth - (3 Case Studies)

Understanding Dividend Growth

Dividend growth refers to the rate at which a company increases its dividend payouts over time. For long-term investors, this growth can dramatically enhance the value of an initial investment, especially when compounded over decades. To illustrate this, I created a model that tracks how a $1,000 investment could grow over 30 years across three types of stocks…

1. Low Yield, High Growth: Visa (V Stock)

For the low yield, high growth category, I selected Visa (V Stock). With a current stock price of $259.76, a $1,000 investment would buy you 3.84 shares. Visa's forward-looking annual dividend is $2.08, giving it a 0.80% dividend yield—a relatively low starting yield. However, Visa is a dividend growth machine, with a five-year compound annual growth rate (CAGR) of 15.77%.

• Year 10: The annual dividend per share is projected to grow to $6.71, resulting in a 2.58% yield on cost.

• Year 20: The dividend could reach $33.60 per share, giving a 12.9% yield on cost.

• Year 30: The annual dividend per share could hit $145.33, translating to a whopping 55.94% yield on cost. This means your $1,000 investment could earn you over $550 annually in dividends alone.

2. Average Yield & Growth: Procter & Gamble (PG Stock)

Next, I looked at Procter & Gamble (PG Stock) for the average yield, average growth category. With a current stock price of $170.54, your $1,000 would get you 5.86 shares. PG’s forward-looking annual dividend per share is $4.03, offering a 2.36% dividend yield. Over the past five years, PG’s dividend has grown at a 6.18% CAGR.

• Year 10: The annual dividend per share is projected to be $6.91, with a 4.05% yield on cost.

• Year 30: The annual dividend could grow to $22.94 per share, giving a 13.45% yield on cost.

While PG provides more dividends in the early years compared to Visa, its slower growth means that by year 13, Visa surpasses PG in yield on cost.

Want Yield Now? At NO RISK!

We put your money to work

Betterment’s financial experts and automated investing technology are working behind the scenes to make your money hustle while you do whatever you want.

Learn more

3. High Yield, Low Growth: Verizon (VZ Stock)

For the high yield, low growth example, I chose Verizon (VZ Stock). With a stock price of $40.75, you’d be able to buy 24.53 shares with $1,000. Verizon offers a forward-looking annual dividend per share of $2.66, giving it a 6.53% dividend yield. However, its five-year dividend growth rate is only 2%.

• Year 10: The annual dividend per share is projected to be $3.18, yielding 7.79% on cost.

• Year 30: Verizon’s annual dividend could grow to $4.71 per share, providing a 11.56% yield on cost.

While Verizon provides substantial early dividends, Visa eventually surpasses it due to its higher growth rate. Over 30 years, Visa is projected to earn more cumulative dividends ($4,046) compared to Verizon ($2,642).

The Power of Dividend Growth

This example demonstrates the importance of dividend growth, especially for long-term investors. While high-yield stocks might seem attractive initially, the true power of compounding comes from consistent dividend growth. Over decades, a company that can consistently grow its dividends will vastly outperform in terms of total returns.

Conclusion

Dividend growth is crucial for long-term investing success. While it’s important to get a stock at a good value and maximize your yield on cost, choosing businesses that can consistently grow dividends will provide the best results over time. Remember, time in the market is more important than timing the market.

NOTABLE DIVIDEND INCREASES

Dover, Simon Property, & High Growth From Primerica

• $DOV - Dover declares $0.515/share quarterly dividend, 1% increase from prior dividend of $0.510.

• $SPG - Simon Property declares $2.05/share quarterly dividend, 2.5% increase from prior dividend of $2.00.

• $RBA - RB Global declares $0.29/share quarterly dividend, 7.4% increase from prior dividend of $0.27.

• $NOG - Northern Oil & Gas declares $0.42/share quarterly dividend, 5% increase from prior dividend of $0.40.

• $ENS - EnerSys declares $0.24/share quarterly dividend, 6.7% increase from prior dividend of $0.23.

• $PRI - Primerica declares $0.90/share quarterly dividend, 20% increase from prior dividend of $0.75.

• $CHRW - C.H. Robinson Worldwide declares $0.62/share quarterly dividend, 1.6% increase from prior dividend of $0.61.

• $VCTR - Victory Capital declares $0.41/share quarterly dividend, 10.8% increase from prior dividend of $0.37.

• $WLK - Westlake Corporation declares $0.525/share quarterly dividend, 5% increase from prior dividend of $0.500.

Source: Dividend Data

Our Top News Story To Watch

Google has an illegal monopoly on search, US judge finds (REUTERS)

SOMETHING FUN

The Journey Starts Somewhere!

Thanks for the read! Let me know what you thought by replying back to this email.

— Zach

Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter.