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.
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 said “Impossible!””
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
Women shaving their legs didn’t become mainstream in the United States until the 1940s