Building Wealth with Dividend Growth Stocks

Most of us invest our money with two main goals -building wealth and creating a sustainable income.

Of course, these are achievable goals for everyone with right a plan and mindset.

There are several options exist to achieve these goals, and one of the possible options for ordinary people like me is to invest in dividend growth stocks.

Actually, this strategy, dividend growth investing, takes time to get noticed. Select a good company at a fair price and being patient are the key requirements to master this strategy.

Let’s take RBC- Royal Bank of Canada (TSX: RY) as an example from my dividend portfolio.

I am taking RBC for this example because it the first dividend stock I purchased and also it hiked its dividend recently, and not the reason it is my top performing stock.

Actually, my top performing stock in my portfolio is Brookfield Infrastructure Partners LP (TSX: BIP.UN). We will discuss this stock in another post.

Disclaimer

RBC dividend history

Now, let’s get back to my RBC example from my portfolio.

RBC has been paying the dividend every year for well over 100 years. Some reliable sources say it has been paying since 1870.

Plus, it didn’t even have to cut its dividend during the 2008-2019 financial crises. Although its share price took a massive hit but recovered quickly in a short period of time.

For those who sold the stocks during the worst time would be missed the post-recession rally.

• Focus on dividend ignore the share price

Regardless, its dividend payment has been rising very consistently for the last couple of years.

In addition, RBC hiked its quarterly dividend this week from 0.94 cents to $0.98 cents. If you look at this as an ordinary person, then it is just a 4 cents hike. What is the big deal here?

But, for a long-term investor is a great reward for being patient and helps your passive income through the tin and thick times. I will show this from my personal experience.

My experience with RBC

Currently, I have 80 RBC shares in my portfolio. Thus, the recent hikes add $12.80 to my estimated yearly passive income (4 cents x 4 quarters x 80 shares = $12.80).

Still, it looks like a small amount but we will see how big thi is for a long-term investor like me.

As I mentioned above, RBC was the first dividend stock I purchased. I wasn’t that serious about dividend investing at the time, but I was looking for an option to build wealth.

On April 03, 2012, I purchased 15 shares of RBC at $57.14 using Questrade discount brokerage. I didn’t pay a commission as I received a $50 trade commission rebate. Later, I used another 9 rebates for different stocks.

If you have a plan to open an account with Questrade, please accept my gift and take advantage of this $50 trade commission rebate using this link.

At the time, Royalbank was paying the annual dividend of $2.16 per share. So, its dividend yield was 3.78% and it wasn’t an attractive yield for those looking for immediate income.

However, I am still having those shares in my account. Over the time, RBC has hiked its dividend payment several times, and as a result, its annual dividend increased from $2.16 to $3.92.

Thus, my yield on cost for my first purchase is 6.86%.

It is now a fat dividend for those looking for income.

My purchases

Later, I added more shares at different times - whenever the share price took massive hits.

• added 10 shares at $59.85 on April 23, 2013
• added 25 shares at $78.70 on December 08, 2014
• added 15 shares at $67.57 on January 15, 2016
• added 15 shares at $64.72 on February 11, 2016

Therefore, the total amount I spent to buy 80 shares of RBC is $5407.45 + $19.80 for commission ($4.95 x 4) at Questrade. And, the average cost per share is $67.84.

So the yield on cost of my RBC investment is 5.78%. It is a pretty decent yield to consider.

It is not just the reward I received from my investment. From my initial purchase to now, I received 26 cash dividend payments from RBC, and the total value is $1057.30.

Therefore, I got back 20% of my investment in the form of the dividend.

I am not done yet.

Total return..

As of this writing, the share is trading at $103.79. So the capital gain from this investment is over $2800 (paper gain).

So that, my total gain from this investment is $3864.68 or 71.21%.

Clearly, it is not a bad return compared to a savings account.

Again, this is just a small example from my portfolio, and there are so many stocks in my portfolio did really well. In fact, the returns from a couple of stocks are more than double than this example.

Currenly, I have over 70 dividend stocks in my portfolio. They all are working hard and sending to my brokerage accounts every quarter and some paying every month.

Every one of the has a story like this. Of course, there are some bad picks in my basket but the damages are minimum compare to the benefits from my good picks.

Therefore, getting rich is possible by buying good dividend growth stocks and letting them ride through tin and thick periods.

Again, it is not just one strategy to build wealth. There are so many ways - from realestate to online income.

All you need to do is take a time, do enough research, find your way, create a strategy and build a massive wealth.

Disclosure: Please note above is an affiliate link. Therefore, I will earn a commission if you use the above links to open an account at Questrade (at no additional cost to you).

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