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How Your Investment Portfolio Grows When You Bet On Dividend Growth Stocks

Each investor needs to balance yield and growth. If you put all your efforts into stocks with a high yield but no growth, you could also buy a high-yield bond. It seems to be much safer because dividends might be cut to satisfy bond holders and to pay debt down.

A growth strategy might work better; just think on Twitter, Facebook or the other unicorns on the market. But do you believe that billions of market valuations in a few years should be sustainable when the corporate has nothing to sell. The only asset unicorns have is a fast growing customer base. Often they have no clue about how they can make with them.

In addition, a company that earns money but did not give anything back to shareholders is also risky. Your wealth depends on high stock prices. I there is a crises, you might get some trouble.

A right way in my view is to find the right mix of growth and dividend payments. Below, you can find a good list of a portfolio that has a solid growth rate and pays a nice dividend per year.

You might see, the higher the growth at a high initial yield, the bigger the final value in the end. If you find investments with a 4% initial yield that grows dividends by 12% yearly, your 100k portfolio will end in USD 1.6 million in 30 years.

How Your Investment Portfolio Grows 
When You Bet On Dividend Growth Stocks 
(click to enlarge)

The results of the spreadsheet are shown above for the value of a portfolio with initial capital $100,000 after 30 years. The initial dividend yield ranges from 1% to 4% while the dividend growth rate ranges from 2% to 12%.

In the following week I like to show you those stocks that have achieved a 12% Growth rate in the past 10 years while paying yields over 4%.

1 comment:

  1. This is a great reference chart. I'd like to see the other growth rate numbers too, i.e.: 3, 5, 7, 9, etc. Also, 30 years is a long time. Can you display, for example 5, 10, 15, 20, 25 years?


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