As the name implies, the dividend appreciation index fund seeks to track a benchmark against stocks that have a history
of increasing dividends over time.
A substantial upward
trend of increased dividends is made possible through a company's ability to have successful revenue growth and earnings growth.
The process of making money through dividend investing involves searching for companies that have a good
chance of increasing the dividend year after year, causing more money to flow into your bank account.
Dividend growth investing is largely a story of buying well researched high - quality companies, with a history and
promise of increasing their dividends, collecting them, and then leaving them alone.
We've covered a lot of the important elements of dividend stock investing here in the last few months, from the importance of buying at low valuations to the
benefits of increasing dividends.
Dividend growth stocks with a long history
of increasing their dividends do mitigate some or even most of this risk, while a fixed income investment with a constant yield does not.
The investment seeks to track the performance of a benchmark index that measures the investment return of common stocks of companies that have a
record of increasing dividends over time.
If a company has too much spare cash, it may consider investing the surplus funds in new ventures and in case company is out of investment options it may be prudent to return the excess funds to shareholders in the
form of increased dividend payments.
With Canadian Utilities (bought in October), ATCO and Emera I'll have some decent exposure to utilities and they all have a history
of increasing their dividends in the long run, which falls in line with my strategy of investing in companies over a range of industries that pay steady dividends.
Starting with $ 100,000 and assuming your average $ 30,000 per year contributions (which would not remain constant
because of increasing dividend income but for this I assume that it does) and assuming an average 20 % return per year (the average 10 % stock market gain + 5 % average dividend yield + 5 % average dividend growth) in 8 years (I think you said you're 32) you will have $ 1,023,948 by age 40.
And that's before factoring in the company's balance sheet, which provides a substantial amount of flexibility both in
terms of increasing the dividend and funding acquisitions (which could fuel higher growth).
Dividend Growth Investing is an income strategy of investing in companies that have a barrier to entry (large moat) and consistent history
of increasing dividends by a rate higher than inflation.
We have long believed that investing in dividend paying stocks, especially blue chips with a legacy
of increasing their dividend consistently year - after - year, has always been an attractive and sound idea.
It also found that the effects of activist activities improved long term operational performance at target firms, demonstrated by ROE and ROA increases, while evidence of positive financial and corporate governance effects were observed in the
form of increased dividend payouts and lowered CEO compensation.