Compounding turbo charged by dividend growth

I wanted to share this graph to show how critical dividend growth is.

With a starting principal of 200 000$ & a 10 % growth of your dividends with a 3.5% yield, you end up with 825 000$ total after 10 years. Of course we know that in the stock market you will have years that are better that others on top of which nothing is guaranteed.

 

compounding-div

Now look at the same table with only 3% dividend growth keeping the same other variables.

div-comp-2

You can see how the resulting new principal is a lot different. This means PLEASE DO NOT FOCUS ON DIVIDEND YIELD ALONE. ESPECIALLY IF YOU’RE IN YOUR 20’S and have a lot of time to let dividend growth work for you.

 

T

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