I made a spreadsheet when I started this article. I have put it on my site. If you want a copy of this spreadsheet, just email me. This spreadsheet, because it is using formulas smooth out dividend increases. However, dividend increases are really lumpy, not smooth.
I have put on my spreadsheet what I think the likely growth in dividends would be based on what has occurred over the past 5 and 10 years. I have also included a line with growth that I have experienced with the particular stock.
For dividends yields on original investments nothing seems to beat the banks with their good dividends and good dividend increases. With the Royal Bank (TSX-RY) after owning it for 17 years, I have a yield of 31% on my original investment. My original yield on this stock was 4.13%. SNC-Lavelin (TSX-SNC) has not done badly. I started with a 2.35% and currently, after some 14 I have a yield on my original investment of 25.9%
I had at one time hoped that companies with low dividend yields, but high dividend growth would produce great dividend yields on the original investment. However, if you had bought Saputo stock at an average price in 1997 (15 years ago), when it was first issued, your dividend yield on your original investment would only be 11.2%.
The thing is that to beat the good growth, good dividends of banks with a lower dividend yield, the company would have to grow very fast. The problem is that fast growing companies do not maintain that fast growth over the longer term. At some point fast growing companies turn into mature companies and growth slows down.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.