SAMPLE-Dividend Growth Investing Portfolio (CDN) – Business Plan

Posted by BM on December 8, 2023

Intro

This is your template for building your own powerful dividend growth portfolio. For those looking for a little more help, subscribe as a paid subscriber and build your portfolio alongside our model portfolio, complete with what we are buying/selling and when.

This business plan discusses dividend growth concepts and principles while demonstrating how to use them to build a reliable and growing income stream (wealth building).

Whether one has $1,000 per month to invest or $100,000 or anything in between, the principles remain the same.

The good part is that you can start at any age with any amount of money. It’s not too late!

Summary

“A goal without a plan is just a wish.”

Any investor’s portfolio is his or her own small business, and any business should have a well-articulated plan to help it run successfully and efficiently.

Our methodology is based on investments in dividend growth companies in Canada and follows three basic rules:

1. Quality – look to buy larger-cap companies with a long dividend growth streak and good financial safety metrics in an industry that is stable and growing.

2. Valuation - look to buy a company that is sensibly priced or undervalued by looking at a company's track record. Undervaluation introduces a margin of safety. Essentially, you are tilting the odds in your favour that future price movements will be upward.

3. Monitor - keep an eye on your dividend growers. Especially the current yield. Fluctuations in yields send signals. The consistency of a firm's dividend growth is the best measure of management's confidence in the long-term growth outlook for a company.

We will start with investment capital in the amount of $100,000. To demonstrate the power of regular contributions in building a portfolio, we will add $12,000/year to our pool of investable cash at the beginning of every year (except Year 1), which we will fully invest in that year.

The portfolio will be diversified across sectors and industries, with no individual position accounting for more than 8% of the overall portfolio.

All dividends will be collected and reinvested in the portfolio (not necessarily in the security that generated them).

We will buy and sell investments based on our process and not on any schedule. We will provide DGI alerts (timestamped) each time we buy/sell stock in our portfolio and then write an article on why. We will also monitor the portfolio and provide a quarterly summary for all subscribers.

We will execute each purchase and provide proof of each transaction. We will maintain and monitor the MP Wealth-Builder Model Portfolio (CDN), regularly reporting its progress.

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Inception Date:

Enter today’s date, and let’s get started.

Goal:

The main goal of the portfolio is to generate growing dividends from quality Canadian companies that have a track record of dividend growth.

The secondary goal is to build a portfolio that generates above-average total returns over the long term (5-10 years).

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Income Target:

We will target to invest our initial investment capital ($100K) over the first four years as we never know the timing of 'Mr. Market' and when he will give us good buying opportunities or not.

Additional annual contributions ($12K) will begin in year two and continue thereafter. We will aim to invest the entire amount in the year it is contributed.

We understand that the timing of these investments will affect the projections in any given year. Due to the longer-term nature of the portfolio, we still feel comfortable with the ten-year targets we have set.

We will target an annual dividend income of ~ $11,400 within ten years of inception. The dividend reinvestment and new contributions will help accelerate the compounding of our income.

We chose the ten-year time frame to emphasize the concept of having a longer period in mind. Indeed, DGI is a long-term strategy that truly bears fruit after years (or better yet, decades) of compounding.

The following table shows how the MP Wealth-Builder Model Portfolio's (CDN) income stream ("Dividends") could potentially grow over time. It assumes a 3.0% starting yield on our investment capital and 7% annual dividend growth – numbers we believe are conservative and likely attainable.

To simplify the calculations, we assumed that capital is invested at the beginning of the year and dividends are collected at the end.

Although our primary goal is income generation, we have also assumed, for demonstration purposes, that our invested capital will grow at a rate similar to Jack Bogle's formula for estimating future returns:

Future Market Returns = Dividend Yield + Earnings Growth +/- Change in P/E Ratio

In our example above, we project an annualized capital return of 10%, assuming that earnings growth and dividend growth are aligned and we purchased our good dividend growers at or below their historical P/E (a sensible price).

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You can subscribe below to learn more about how we select which companies to include in our portfolio, our valuation metrics, proper position sizing, and trading strategy. In addition, you will receive our premium subscriber newsletter, exclusive content and DGI alerts sent directly to your inbox whenever we make a trade in our model portfolio. We do all the work, and you stay in control.

Join our community of dividend growth investors and start building real wealth today!