As value investors we are big fans of dividend paying stocks. In volatile markets it’s comforting to see those dividend payments roll in. Dividend paying stocks also boost your returns. Empirical evidence proves that dividends account for 40% of the average annual stock market return. When buying dividend paying stocks for our clients we look to own companies that have a history of raising dividends over time. When a company raises its dividend it signals to investors that it believes profits will improve in the future. Higher profits generally lead to higher stock prices so buying companies that raise dividends regularly is the best way to grow your portfolio over time.
One of our favourite dividend paying stocks is Bank of Nova Scotia. Bank of Nova Scotia currently pays a dividend of $1.92 per share a year. Over the past 20 years, Bank of Nova Scotia has raised its dividend 436% and its stock price has increased twelvefold. If you bought Bank of Nova Scotia 20 years ago at its split adjusted price of $4.20 your yield on your purchase price would be 45%. While at times it can be frustrating to wait for a catalyst to take our value stock higher, the dividend gives us the confidence to stay the course.