Predictable dividend growth: An investor's best friend

When Pat McHugh is trying to sell clients on the benefits of dividend growth investing, he likes to point to the example of Toronto-Dominion Bank. If you had bought 100 shares of TD at the start of 1983 and never purchased another share, today – thanks to stock splits – you would have 2,400 shares. What’s more, those shares would be spinning out annual dividend income of $4,512 – more than the $4,000 cost of those original 100 shares.

“It’s really simple,” says Mr. McHugh, chief investment strategist at Windsor, Ont.-based wealth management firm Kaspardlov Laverty and Associates. “We want to buy companies that can grow their dividends in a predictable manner.” TD, one of the 12 stocks in the firm’s Predictable Dividend Growth (PDG) portfolio, is a classic example. Over the past 30 years, the company has raised its dividend at an annualized rate of 10.5 per cent. The past three years have been even better, with an annualized dividend growth rate of 12.2 per cent.

Source: Globe and Mail

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