Not only can you receive a huge return in the form of capital gains, but those seemingly irrelevant dividends can supercharge your portfolio over the course of time.
Here is a live example of the power of dividend growth from a Motley Fool Reader:
“I bought Corus Bankshares (then called River Forest Bancorp) around 1985. My first year’s dividends were $196. Now, after 20 consecutive years of dividend increases and seven splits, I’m receiving $14,400 annually in dividends.”
That $14,400 in annual dividend payments comes off an initial investment of around $12,000. As long as Corus maintains its current payments, Howard will get back more money every year than he originally invested.
This is exactly why dividend growth investing makes so much sense for a patient and long term investor. Examples like these are the best motivators for young dividend growth investors to help us maintain focus and adhere to our original dividend growth plan.
Dividends Matter For Your Retirement income
The essence of dividend growth investing for me is simply to purchase income for my retirement now – this is especially true since yields are higher than their historical averages for stocks.
As the example shows, we can select great dividend growth stocks today and hold them forever while watching our annual income grow at a faster rate than inflation.