Wealth-Builder Model Portfolio (CDN) – Quarterly Review – As of July 31, 2024

Posted by BM on August 29, 2024

“A true investor buys for the dividend return and understands that yield growth will drive total return.”

- Tom Connolly

“I measure our progress primarily on the basis of the income we are collecting and the growth of that income through dividend increases.”

- Josh Peters

SUMMARY

The Wealth-Builder Model Portfolio (CDN) is a real-money portfolio designed to demonstrate dividend growth investing in action.

• We now receive cash flow from 17 companies across seven sectors of the economy.

• Three companies increased their dividend payout this quarter.

• We increased our holding in one position within the portfolio this quarter.

• This quarter, we earned $776.72 in dividend income, up 16.3% from the previous quarter. The portfolio now generates $3,094 in annualized income.

• Return, including dividends, is 10.93% Year-To-Date. Since its inception in May 2022, the portfolio has had an annualized total return of 10.81%.

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BACKGROUND

Dividend growth investing is a long-term investment strategy that involves selecting quality stocks with a history of consistently increasing dividends and holding them for the long term.

The Magic Pants Wealth-Builder Model Portfolio (CDN) is a real-money, real-time portfolio demonstrating the principles and practices of dividend growth investing. The portfolio was launched on May 1, 2022, and has been managed in real-time since. Its primary goal is to generate a steadily increasing stream of dividends paid by quality Canadian companies. The secondary goal is to build a portfolio that generates above-average total returns over the long term (5-10 years). When I speak of average, I mean the index. In Canada, our goal is to beat the TSX Composite Index in total returns over this period.

The point is that dividend growth investing and maximizing total returns aren't mutually exclusive.

All the decisions to buy, hold, and sell securities are real decisions about handling money. The portfolio is intended to serve as a blueprint for constructing a dividend growth portfolio, and as a living example of how dividend growth investing works.

With an initial capital injection of $100,000, dividend reinvestment and annual contributions of $12,000, the 10-year target is to achieve ~ $11,400 annual income by the tenth-anniversary date. The MP Wealth-Builder Model Portfolio (CDN) – Business Plan can be found here.

$1,000,000 Investing Example

The ‘magic’ of our strategy lies in the fact that if you start early or have a significant amount of capital to invest, you can maintain your original investment while enjoying a steady, inflation-protected stream of growing dividend income throughout retirement. This allows you to live comfortably in retirement without worrying about short-term market fluctuations.

Our dividend growth investing strategy is highly adaptable and designed to meet the unique needs of investors regardless of their age or the size of their initial capital. Whether you have a substantial amount saved or are ready to make a significant investment, we can tailor the approach to align with your financial goals. For example, instead of our standard $100,000 model portfolio used for illustrative purposes on the blog, let’s consider a more ambitious scenario based on a $1,000,000 business plan.

If you were to invest $1,000,000 over four years following our strategic plan, projections suggest that you could generate over $70,126 in annual income within ten years. Additionally, your portfolio could grow to a value exceeding $3,000,000. These estimates assume that dividends are reinvested and that you make modest additional contributions of just $1,000 per month starting from the second year.

The true power of our strategy lies in its ability to deliver growing income year after year, even throughout retirement. Unlike traditional fixed-income investments, your purchasing power isn’t just preserved—it continues to grow, ensuring your financial security long into the future.

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