Jan 182016
 

Dividend Growth Investing

There are many ways to learn about financial management. But never take investment advice from strippers. They tend to always lose their shirts. ? The trick with investing is balancing the risk vs return. Savings accounts are safe but the problem is they don’t grow. I don’t know anyone who became a millionaire by investing in savings accounts, GICs, CDs, or money market funds. On the other hand growth stocks like Dollarama or Apple may have experienced huge gains over time, but they are quite risky and lots of people lost their life savings in the dot-com bubble or the great recession. So what is an investor to do? ?

The answer is dividend growth stocks! 😀 The dividend growth investing strategy is less risky than buying high volatility stocks, but generally provides much higher returns than low interest savings accounts. It’s the best of both worlds!

Dividend growth investing has always been a fundamental part of my retirement portfolio. Ever since I began to invest in the stock market I have been buying strong businesses that have a long history of growing dividends, usually every year. 🙂 Getting paid today is good, but almost certainly getting paid continuously for the next 10 years is even better. The secret sauce to a good dividend growth stock is a mix of having a lucrative business model and a management team that is committed to shareholder value. 😉 The best place to start looking for dividend growth stocks to look at a list of Dividend Aristocrats. many companies I hold such as Royal Bank, TD, and Enbridge are on that list. Here’s a look at my dividend income over the years.

The 5 Figure Dividend Income Club

I have been using the dividend growth strategy for the past 7 years and have built up a portfolio that gives me about $7,000 a year in dividends. But let’s look at some other dividend bloggers who are doing much better. The following 10 individuals are all making $10,000+ in divs and are the experts when it comes to dividend investing. Some of them have been growing their dividend portfolios for a long time.

Dividend Income Experts

  • Dividend Earner – Annual div ~ $11,000 CAD
    A fellow Vancouverite who is on his way to early retirement by focusing on dividend investing.
  • Tawcan – Annual div ~ $11,000 CAD
    Another blogger who hails from Vancouver. He started his dividend income journey in 2007.
  • My Own Advisor – Annual div ~ $12,000 CAD
    Mark started investing when he was in his early 20s after reading David Chilton’s The Wealthy Barber.
  • Dividend Hawk – Annual div ~ €11,000 EUR
    A Finland investor who has an impressively diversified portfolio in 5 different currencies.
  • Dividend Growth Investor – Annual div ~ $15,000 USD
    DGI managed to grow his passive income from $0 to $15k in just 8 years. This year, for the first time, he will be living off his dividend income and side hustle, while investing 100% of his after-tax paycheck. Amazing!
  • My Dividend Pipeline – Annual div ~ $10,000 USD
    He amassed an incredible amount of assets after climbing his way out of $35,000 credit card debt. From age 35 to 42 his net worth increased 7 fold.
  • Financial Samurai – Annual div ~ $25,000 USD
    Sam is a successful entrepreneur living in the San Francisco Bay Area. He quit his stable finance job a few years ago to pursue his own projects. Other than a huge stock portfolio his other sources of cash flow include rental income, book sales, and alternative investments. He currently makes over $150,000 a year from, (get ready for this,) passive income alone! ? Cheese and rice!
  • Dividend Hustler – Annual div ~ $27,000 CAD
    His mission is to build a massive portfolio to fund all the expenses in his life such as a big home and a nice car, and to provide his family with financial security.
  • Asset Grinder – Annual div ~ $28,000 CAD
    AG is in his late 30s and lives in Victoria, B.C. His $3 million net worth gives him the choice and freedom that we all strive for.
  • Income Journey – Annual div ~ $29,000 CAD
    Crystal started investing in 2008. She retired last year and has been living off her investments and options trading. Her real time trades are posted on Twitter @nachoswithsalsa

These folks are the rockstars of the dividend investing world. 🙂 And they only represent a handful of the countless number of investors in society who are making at least $10,000 a year in dividend income.

My Personal Dividend Progress

I’m convinced dividends are the best financial invention since credit. It’s the perfect tool for people like myself. It’s not a get rich quick scheme, nor is it just savings accounts and government bonds. It’s a brilliant way to make a reasonable amount of money over a reasonable amount of time. My goal is to make $8,500 in forward annual dividend earnings by the end of this year.

16-01-dividend-income-history-liquid-freedom35

Everyone Starts Somewhere

The online dividend blogging community is growing all the time. New investors are jumping on-board the dividend train every year.

  • Revanche got serious about dividend investing in 2014 and made $500 last year in dividends.
  • This dividendbeginner started investing last year and also made $500 in 2015.
  • Location FI earned $1,200 last year.
  • Dividendwisp has a goal to make $2,000 in dividends this year.
  • DivHut made $4,500 last year and even started a dividend fund for his new baby. 🙂 He describes in his recent post that his dividend income has increased “54.0% from 2014. You just have to love the very real results of dividend growth investing.
  • Passive Income Pursuit made roughly $6,000 in dividends last year.
  • Wellroundedinvestor plans to earn $6,000 this year in dividends.
  • SaveSpendSplurge got out of $60,000 of debt in less than 2 years and now has a sizable dividend portfolio paying her $6,000 a year.
  • Roadmap2Retire has a goal for 2016 to make $9,000 in passive income, mostly from dividends. In his annual update he wrote, “Not in my wildest dreams did I think we would reach a number this high so soon. I’ve had some long term plans, but I figured reaching a number like $7.8K would take me years and even if you asked me a year ago, I would have saidImpossible!””

It just goes to prove it doesn’t matter what stage of life you’re at now. As long as you have savings you can take part in this extraordinary financial journey. 😉 None of these junior investors, including myself, are raking in 5 figures yet. But I’m pretty sure eventually all of us will earn $10,000 in annual dividends some day if we continue to track our investments and watch them grow. It gets easier over time because after making a few thousand dollars a year in dividends, the compounding nature of dividend growth can be truly impressive. 🙂

Early retirement critics often spread rumors like becoming financially independent by age 35 is impossible for the average person. But this post clearly demonstrates that it does work for many people. The bloggers I’ve mentioned in today’s post, including myself, are self made dividend investors. We didn’t get large inheritances and many of us work average paying 9 to 5 jobs with some side projects to supplement our incomes. We all have different education levels, careers, family backgrounds, and personalty types. But what we all have in common is the belief that dividend investing works as one of the best ways to become wealthy. And there’s a lot of empirical data that supports it.

My short term goal is to reach $10,000 of annual dividend income. If I ever lose my job, at least having some passive income can help cushion the financial blow of a layoff. The fact that dividend income is completely passive means I can work on other projects or search for another job without distraction. 🙂 Dividend income is also a great retirement plan for those without generous company pensions. Thanks to special tax incentives, someone in Toronto making $50,000 a year in eligible dividends with no other income pays no tax on their entire $50,000, according to this income tax calculator.

It’s clear as crystal. Dividend investing is the cats pajamas of getting rich in a predictable and fool proof way. We don’t need to be smart to be a dividend investor, we just have to be disciplined and consistent. I’m thankful to be traveling on this amazing dividend journey with fellow Canadians and others investors from all around the world. Financial independence is only a matter of time now.

 

 Random Useless Fact

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Women shaving their legs didn’t become mainstream in the United States until the 1940s

i-need-to-shave-cat-legs

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39 Comments on "The Rise of Dividend Growth Investing"

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Roadmap2Retire
Guest
01/18/2016 3:10 pm

Really like this roundup 🙂 Thanks for including me in the list, F35.

Btw, one minor correction – my total income and the goal for 2016 is from various different sources of passive – of which a majority comes from dividends. Really amazed at the rate of my own progress, nonetheless.

R2R

Dividend Hustler
Guest
01/18/2016 3:21 pm

Hey Liquid. Thanks for including me in your post. Thanks for taking the time. The community that we are apart of is awesome. Great minds sharing our lives and investing journey. We learn a lot from each other and hopefully make less mistakes moving forward.
I love Dividend Growth Investing and will continue marching on this journey forever. It’s not so stressful when you invest in high quality companies and can predict and expect the dividends to roll in consistently.
Let’s all hustle it up and keep investing to better our lives and futures. Cheers bud.

Tawcan
Guest
01/18/2016 3:55 pm

Thanks for including me in your post Liquid. Very cool to see the income level of other dividend growth investors. You can’t build dividend income in one day, it takes time and it’s neat to see this strategy is getting more and more popular.

Just to clarify, we don’t convert dividend received in US currency to CAD currency. Giving the crappy currency now, we probably received slightly more than indicated. 🙂

Tom
Guest
01/18/2016 4:06 pm

I love seeing the progress over time. It really highlights how over the long term things really start to add up. Currently I think my dividend income is around $500 AUD, but that should grow as I buy more shares (and as I actually start to track it). Nothing provides more motivation that watching things grow 🙂

DivHut
Guest
01/18/2016 4:26 pm

Great round up showing “very real” results of our dividend income. Of course, thank you for mentioning DivHut. Nice to see some heavy hitters bringing in 5 figures in dividend income. That’s my next long term goal. $1k a month average. Step by step. These posts should be enough to inspire anyone to begin a dividend growth portfolio of their own.

Dividend Beginner
Guest
01/18/2016 5:39 pm

Hey LI,

I was just reading through this and saw my name! Awesome! Thanks for including me here, I really appreciate it. Made $500 in 2015, and now I’m at $100 a month going forward. The dividend growth strategy is just perfect for me!

Awesome that you put this together, what a great community. Looking forward to reading more of your work!

Best regards,
DB

Chris
Guest
01/18/2016 7:39 pm

I’ve been able to start over the past few months, going from a forward dividend income of $0 to nearly $90 in just a few months. Hoping to more than double this during 2016.

Revanche
Guest
01/18/2016 9:10 pm

Thanks for the mention!

Financial Samurai
Guest
01/18/2016 10:10 pm

Thanks for the mention!

That’s a very nice looking dividend income chart! I hope the market doesn’t crush the stock market so much as to negate the benefits of dividend income. Things look very rocky for the next two years I fear.

I like your variety of Canadian and US sites!

Sam

Mr. SSC
Guest
Mr. SSC
01/19/2016 5:56 am

We got about $10k in dividend investments this past year. However, we’re not actively going after dividend stocks currently, because we’re putting more towards the higher risk aggressive growth strategy. Our plan is to switch a lot of our portfolio into dividend stocks in a few years when we are wanting more of the income from them, and be exposed to less risk. I’ll have to check out some of these other blogs, it looks like a good list.

Dividend Growth Investor
Guest
01/19/2016 6:37 am

Thanks for the mention Liquid! The benefits of dividend investing are particularly evident when stock markets gyrate up and down like crazy. When I receive a dividend check from a company that has a strong and sustainable business model, I can ignore the fact that its stock price could fluctuate wildly. Therefore, I can stick to my investments – those dividend checks provide long-term stockholders like me with positive reinforcement . The fact is that dividends are more stable than capital gains, which makes them more reliable as form of income in retirement.

Good luck in your passive income journey. I like your site, because you have a lot of interesting ideas about generating income – like owning a farm and real estate.

Dividend Growth Investor

My Own Advisor
Guest
01/19/2016 6:17 pm

Good post. Very interesting to read all the dividend investors in this post. Sam (Financial Samurai) is killing it and he’s definitely living the life. He’s earned it 🙂

We hope to cross $13,000 later this year, if our investing plans go well. Time will tell! We just have to focus on our savings rate and stay invested in our blue-chip stocks. DRIPping definitely helps as well. Thanks for including me in your list, it’s a nice mention.

Back to you, I hope you meet your goal in 2016 Liquid. Stay the course, I know you will.

Best wishes and happy capitalism,
Mark

Michael James
Guest
01/19/2016 8:02 pm

Amusingly, the dividends I get would put me at the top of your list, but I’m not a dividend investor. I’m an indexer. I know that all after-tax dollars are equal whether they are dividends, capital gains, or interest.

Financial Independence
Guest
01/20/2016 4:06 am

It would be very interesting to see the dividends results next year. However the overall sum is not entirely representative. The return on the investments, sustainability is of importance and risks.
Thank you for putting the list together.

MoneyAhoy
Guest
01/21/2016 5:58 am

Liquid,

I am also convinced that dividends are the way to go. I made $7,200 in 2015 with dividends, so it looks like we are on nearly the same trajectory. I hope to get to 5 figure dividend income soon :-). It’s great to see the bar of dividends ticking up each and every month as compounding interest kicks in with reinvesting the dividends!!!

Don
Guest
Don
01/23/2016 11:58 am

Please don’t take this as bragging. I’m posting to illustrate this is possible.

I’m a 63 year old retired dividend income investor. I now collect > 96k in dividends per year. I didn’t actually switch to being a dividend income investor until I retired in 2013. For the 10 years before that, I was in capital appreciation mode. Before that, I was just in mutual funds and didn’t pay much attention.

I didn’t make huge dough. Just reasonable but my wife and I are good savers and live quite a simple life. We found that once our portfolio starting increasing, it was like a snowball effect.

The other point to make is that we don’t hold any bonds or GICs. Everything is in Canadian dividend paying companies and in limited sectors – mainly utilities, telecom, financials, REITs, pipelines. I’m sure any advisor would say we’re crazy but my thinking is that a number of the companies have raised their dividends for years and if we get the odd cut, it’s no big deal. Also, the total portfolio value doesn’t really matter as we can live off the dividends. We actually re-invest a certain amount each year.

Anyway, something to think about.

Ciao
Don

Gareth @ Investment Road to Freedom
Guest

Wow reading Crystal’s blog even though she no longer keeps it up to date is really inspiring. I went to the beginning of her blog to see how she built that wealth from dividend and option trading but when she started the account it was already huge so I did answer that.

I really like this post as It confirms the answers to the questions that have been going round my brain for a while. Using OPM (or debt however you term it) to build one’s wealth using well thought out decision making. Viewing Crystal’s, Asset grinder, yourself and other blogs I see it is a massive wealth building tool if used correctly – having a hard time convincing the wife though! Those blogs have used margin, line of credit and other platforms to their advantage.

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[…] way up into the 50%-75% range (which is relatively easy to do if you live a low-cost life), and wisely invest your saved money to create passive income over the years you spend working, you can drastically reduce the amount […]

DividendPlanet
Guest
04/15/2016 12:17 am

Nice to see compounding doing it’s job, namely giving you a growing passive income. It’s no wonder that Buffett always talks about compounding, and it’s also no wonder that his biggest holdings can be characterized as dividend growth stocks.

Rakiki
Guest
Rakiki
05/01/2016 3:42 am
Well done Freedom 35. I personally mix broad market ETFs, dividend ETFs (US and Canadian) and individual dividend growth stocks. At less than 40 years old, my wife and I gross $35K CAD in dividends. A great new offering is the Horizons HXH ETF – it uses a swap mechanism to convert dividends from Canadian companies into cap gains that will only be taxable when units are sold, which is very tax efficient especially if one’s income is relatively high (the rate on dividends is higher than on cap gains above the $90,500 earnings threshold in Ontario). So there is no annual tax payable. The dividends received by the fund are simply added to its NAV, in effect creating a DRIP. And the fee is 0.10%. I hold some XDV, XEI and RCD (diversification, monthly payments, reinvestment and no single security risk), but I am gradually moving to more HXH since I don’t need the current income. For US exposure, I now only hold the Vanguard VIG, VYM and VTI in RRSP since I’ll only be withdrawing in a very long time, and single companies do go out of business. I’d rather diversify and have it rebalanced for me. Anyhow,… Read more »
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