Dividend growth investing
X
0
Below transcript between my friend HKT and myself will help you understand another ignored benefit of growth stocks, dividend growth investing !
A lot of people ignore dividend thinking of its petty return of 1-2%, this % return is the dividend yield at that moment of time.
What people misses out is that as the company grows and its stock price rises, it may keep increasing the dividend amount or DPS (dividend per share). After long time invested in growth stocks, annual dividend amount may easily cover part or even all of your annual expenses !
You do not trust me ! Do you ?
Dividend growth investing with examples
Before I give details about dividend growth investing, let me put the same warning again !
Gentle reminder that the stock price should rise along with dividend amount in the long run !
MY DIVIDEND YIELD
Dividend yield does not give a practical picture to understand numbers in long term investment, thus I use what I call "MY DIVIDEND YIELD". If we divide DIVIDEND with BUY PRICE of stock, we get "MY DIVIDEND YIELD".
Since dividend keeps increasing for decades and your BUY price remains constant, MY DIVIDEND YIELD thus shows in percentage, your investment amount returned each year as dividend !
For example let us assume below hypothetical case
What I am trying to say is "Your dividend yield" increased from 2% to 30% in 10 years, which is not apparent if we only see dividend yield of stock. Using our stock portfolio you can monitor "MY DIVIDEND YIELD" to see which stocks can be held for cash returns !
Let us understand it better with real life practical examples now ! I hate this "if you invested 10,000" nonsense comparison, but for today, I have no other option but to use similar approach to prove my point. (Investment and fooled by luck)
Mind you 10,000 is not a small amount for 7 - 15 years ago !
Basis 7 years ago at 8% inflation, it amounts to 17,139 today. (2023)
Basis 15 years ago at 8% inflation, it amounts to 31,723 today. (2023)
Of course the definition of small amount and huge amount is also relative to each reader.
We will use our share market calculator & CAGR Calculator to see if you invested 10,000 INR in popular and some non popular small cap growth stocks, 15 years ago, how much dividend will you be getting today !
Below tables were made basis March 2023 for best case scenario of Yearly low. Obviously this may be not the ideal condition but it helps me to exaggerate my point and you are free to check the worst case scenario too !
In simple terms, if you invested 10,000 in Caplin Point 15 years ago, ignoring the massive gains, you will get 33,000 now as dividend each year, and that amount too is increasing !
If you say 15 years is too long, here are good dividend growth investing stocks within 7 years span.
If you say 7 years is too long, here are dividend growth investing stocks within 3 years span. Obviously this has the benefit of market crash due to COVID and apparently we are getting greedy and impatient ! BEWARE OF YOURSELF ! (If share investing is so simple)
Someobvious key points to highlight from this chapter :
I will end this chapter by stating that Mr Warren Buffett got 704 million USD as dividend in 2022 which may very well go in billion USD in 2023 !
As for me, I know one of my close relative who happily lived on dividend amount after retirement, and oh, his short term 50% profit drop in portfolio never affected his dividends !
FINANCIAL PLANNING FINANCIAL INDEPENDENCE GROWTH INVESTING STOCK MARKET COURSE STOCK INVESTMENT
Dividend growth investing
We have already talked about Dividend in ex dividend date of stock traders follow stock investors chapter. We also emphasized the importance to track dividend upcoming and high dividend stocks for better returns and investment opportunities.
In this chapter of our Share market tutorial we will learn about dividend growth investing and answer few doubts :
- How to live, if you do not sell for profits and invest for "forever" (Warren Buffett investment strategy) ?
- Should you consider petty dividends for your financial independence goals ?
- Can you plan to live only on dividends ?
Below transcript between my friend HKT and myself will help you understand another ignored benefit of growth stocks, dividend growth investing !
HKT : I do not invest in stocks as they are not reliable, if market crashes your stock portfolio value drops to half ! It is a nightmare for a retired person !
ME : It still does not matter to real long term growth investors, infact they have made sure that stock price does not affect their living !
HKT : What crap ! Who can ignore a 50% drop in portfolio, specially when you are retired and more than 60 age !
ME : Well if you are living on dividend amount, short term losses like these do not matter ! 50% drop in portfolio does not mean LOSS, it may mean drop in PROFIT too !
HKT : Dividend is hardly 1-2%, who can live on it ?
ME : Its 1-2% now, not when you will be aged 60, lets say 15-20 years later !
HKT : Huh ! Please explain.
A lot of people ignore dividend thinking of its petty return of 1-2%, this % return is the dividend yield at that moment of time.
What people misses out is that as the company grows and its stock price rises, it may keep increasing the dividend amount or DPS (dividend per share). After long time invested in growth stocks, annual dividend amount may easily cover part or even all of your annual expenses !
You do not trust me ! Do you ?
Dividend growth investing with examples
Before I give details about dividend growth investing, let me put the same warning again !
Buying stocks, only because of dividend, is pure stupidity.
Gentle reminder that the stock price should rise along with dividend amount in the long run !
MY DIVIDEND YIELD
Dividend yield does not give a practical picture to understand numbers in long term investment, thus I use what I call "MY DIVIDEND YIELD". If we divide DIVIDEND with BUY PRICE of stock, we get "MY DIVIDEND YIELD".
Since dividend keeps increasing for decades and your BUY price remains constant, MY DIVIDEND YIELD thus shows in percentage, your investment amount returned each year as dividend !
For example let us assume below hypothetical case
| Year | Trading price | Buy Price | DPS | Remarks |
|---|---|---|---|---|
| 2023 | 100 | 100 | 2 | Div Yield : 2% My div Yield : 2% |
| 2033 | 1000 | 100 | 30 | Div Yield : 3% My div Yield : 30 % |
What I am trying to say is "Your dividend yield" increased from 2% to 30% in 10 years, which is not apparent if we only see dividend yield of stock. Using our stock portfolio you can monitor "MY DIVIDEND YIELD" to see which stocks can be held for cash returns !
Let us understand it better with real life practical examples now ! I hate this "if you invested 10,000" nonsense comparison, but for today, I have no other option but to use similar approach to prove my point. (Investment and fooled by luck)
Mind you 10,000 is not a small amount for 7 - 15 years ago !
Basis 7 years ago at 8% inflation, it amounts to 17,139 today. (2023)
Basis 15 years ago at 8% inflation, it amounts to 31,723 today. (2023)
Of course the definition of small amount and huge amount is also relative to each reader.
Shares name mentioned are for educational purpose only and not to be taken as recommendations. Mentioned stocks may have been good investment at that moment of time which may have changed at the time of reading.
Please learn share market basics & how to value stocks before investing or consult a good Investment advisor.
Rishi kashyap is not a certified Financial advisor, please contact your Investment advisor if you do not know investing
Please learn share market basics & how to value stocks before investing or consult a good Investment advisor.
Rishi kashyap is not a certified Financial advisor, please contact your Investment advisor if you do not know investing
We will use our share market calculator & CAGR Calculator to see if you invested 10,000 INR in popular and some non popular small cap growth stocks, 15 years ago, how much dividend will you be getting today !
Below tables were made basis March 2023 for best case scenario of Yearly low. Obviously this may be not the ideal condition but it helps me to exaggerate my point and you are free to check the worst case scenario too !
| Share in Company | Invested approx (2008) | Value approx (2023) CAGR Return | Dividend approx (TTM) My Div Yield |
|---|---|---|---|
| ITC Limited ITC Limited returns | 9975 | 1.05 Lakhs 17.8 % | 2756 27.6 % |
| Mazda Ltd Mazda Ltd returns | 9990 | 2.61 Lakhs 24.31 % | 4477 44.8 % |
| GHCL Ltd GHCL Ltd returns | 9996 | 2.74 Lakhs 26.17 % | 7140 71.4 % |
| Page Industries Page Industries returns | 9894 | 13.3 Lakhs 40.5 % | 8840 89.3 % |
| Sanofi India Sanofi India returns | 9750 | 1.15 Lakhs 18.7 % | 10,245 105 % |
| Tata Consultancy Services TCS returns | 9984 | 3.72 Lakhs 28.6 % | 17,280 173 % |
| Caplin Point Caplin Point returns | 9996 | 56.9 Lakhs 52.6 % | 33,320 333 % |
In simple terms, if you invested 10,000 in Caplin Point 15 years ago, ignoring the massive gains, you will get 33,000 now as dividend each year, and that amount too is increasing !
If you say 15 years is too long, here are good dividend growth investing stocks within 7 years span.
| Share in Company | Invested approx (2016) | Value approx (2023) CAGR Return | Dividend approx (TTM) My Div Yield |
|---|---|---|---|
| GHCL Ltd GHCL Ltd returns | 9984 | 58,037 28.3 % | 1560 15.6 % |
| Tata Consultancy Services TCS returns | 8208 | 30,085 22.9 % | 1,440 17.5 % |
| Sanofi India Sanofi India returns | 7700 | 14,785 9.8 % | 1,366 17.7% |
| Banco Products India Banco Products returns | 9919 | 34,122 19.24 % | 3,052 30.7 % |
If you say 7 years is too long, here are dividend growth investing stocks within 3 years span. Obviously this has the benefit of market crash due to COVID and apparently we are getting greedy and impatient ! BEWARE OF YOURSELF ! (If share investing is so simple)
| Share in Company | Invested approx (2020) | Value approx (2023) CAGR Return | Dividend approx (TTM) My Div Yield |
|---|---|---|---|
| Tata Consultancy Services TCS returns | 9042 | 21594 34 % | 1,080 11.9 % |
| Power Grid Power Grid returns | 9963 | 28,522 42.6 % | 1323 13.2 % |
| GHCL Ltd GHCL Ltd returns | 9940 | 76,616 100 % | 2130 21.4 % |
| Banco Products India Banco Products returns | 9955 | 51,051 74 % | 5068 50.9 % |
Some
- Growth Stocks must grow for decades.
- Growth stocks must have consistent dividend records.
- Growth stocks must increase dividend per share (DPS) with time.
- Total dividend return depends upon your amount invested
- Investor should have patience !
I will end this chapter by stating that Mr Warren Buffett got 704 million USD as dividend in 2022 which may very well go in billion USD in 2023 !
As for me, I know one of my close relative who happily lived on dividend amount after retirement, and oh, his short term 50% profit drop in portfolio never affected his dividends !
FINANCIAL PLANNING FINANCIAL INDEPENDENCE GROWTH INVESTING STOCK MARKET COURSE STOCK INVESTMENT
FINANCIAL INDEPENDENCE FINANCIAL PLANNING GROWTH INVESTING STOCK INVESTMENT STOCK MARKET COURSE
