Today I'd like to share with you some wisdom from someone who has been a dividend investor for more than 30 years.
In the latest edition of the Connolly Report (August 2014), Tom Connolly had this to say about investing:
"Focus on the growing dividend income, the increasing yields, is my message to you, in a sentence, after researching dividend income common stocks for thirty years. Dividends give stock intrinsic value. Dividend increases build wealth. In 1993, for instance, Royal Bank’s dividend was 29¢. Now RY’s dividend is $3.00. That’s up 935%. Talk about a great retirement asset. Think on this:Royal Bank’s dividend yield in 1993 was much the same in 1993 as it is now, some 4%. That being the case, what must have happened to the stock price? RY’s price grew too. By how much did the price grow? Yes. You are right. If the yield is the same now as it was, price growth must have been roughly the same as dividend growth."
Mr. Connolly then continues with the most important piece of knowledge:
"I have learned, over the years, to add yield and dividend growth to estimate future return. Telus, for instance, has a current yield of 4% and a five-‐year dividend growth rate of 8%. I’d estimate return to eventually be 12%. A lot of folks do not agree with this computation. That’s their loss. I’ve worked with dividend growth for thirty years now. It works. We have experienced it ourselves. We know. We hold, hold and hold good dividend growth stocks."
Royal Bank's dividend has increased by 935% since 1993, has your income increased by 935% since then? When you own a quality dividend paying stock that continues to increase it's dividends....the simplest thing to do with those shares is to...hold. Hold, and continue to earn increasing income.
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