Given the disappointing stock market finish to 2018, it isn’t easy to find a silver lining. Few clients want to hear that when stocks go down it gives them the opportunity to buy more at a cheaper price. But there was a bright side to 2018 and that came in the form of dividend payments to our clients. In fact, that silver lining is as good as gold.
We actively managed 54 equity positions for our clients in 2018. Most clients have between 25-35 of these names. Across those 54 positions, 48 of those pay dividends and on average those 48 names increased their dividends to our clients by 9.7% In other words, many of our clients got an almost 10% raise in 2018 and they didn’t have to raise a finger or work any harder to get it. The new year is young, but so far in 2019, 18 of those companies have increased their dividends again. In our opinion, when a company raises its dividend, it is giving a clear signal to shareholders that it has confidence in its business as well as its ability to increase profits. Higher profits generally lead to higher stock prices, so buying companies that raise dividends regularly is an intelligent way to grow your portfolio over time.
For clients with new TFSA and RSP deposits, we will be actively buying these dividend growth stocks. And we expect our clients to get many more raises in the years to come.