I’ve been using the dividend growth investing strategy for a decade.
And it’s performed magic. Despite growing up on welfare, not having a college degree, and never having a high-paying job, I retired in my early 30s.
How’d I do it?
I took the savings from my very regular car dealership day job and invested it into high-quality dividend growth stocks. These are stocks that represent equity in world-class businesses. And these stocks pay safe, growing dividends.
It’s these safe, growing dividends that I now live off of. But it’s not just dividends. Dividend growth investing sometimes gets a bad rap, as if these stocks are boring and don’t grow. Well, that’s just not true.
Many high-quality dividend growth stocks grow at incredible rates and beat the market. That shouldn’t be surprising.
Most of the S&P 500’s long-term total return comes from the compounding of reinvested dividends. And today, I’m going to show you five dividend growth stocks that turned a $1,000 investment in each into more than $1 million after 30 years.
Let’s dig in.
Let me set the stage here. I’m talking about investing just $1,000 into each of these five dividend growth stocks from March 1991 to March 2021. You reinvested dividends along the way but otherwise didn’t invest new money.
That’s right. This is investing a total of only $5,000 one time. And then never investing another new dime for the rest of your life.
All you had to do after that point was let these five businesses go to work for you and compound your wealth and passive dividend income.
Also, I’m not cheating here by starting this time period before these stocks were paying out growing dividends.
These five stocks were already dividend growth stocks 30 years ago.
Each one of these stocks were sporting measurable dividend growth track records at the time. So this isn’t getting in before the growing dividends start rolling in and supposedly slow things down.
Can you turn just $5,000 into $1 million? Yep. It doesn’t require so-called growth stocks to do it. You don’t need crazy moonshots for this.
Dividend growth investing offers growth. It’s right in the name of the strategy. Dividend growth investing. The “G” in “DGI” stands for growth. Dividends can’t grow without business growth. And I’m going to show you just how much growth is possible with some of these stocks.
Dividend Growth Stock #1: Target Corporation (TGT)
First up, Target Corporation (TGT).
Target has been a well-known retailer for a long time. What’s not as well-known is just how great the stock has been.
This stock turned a single $1,000 investment into slightly over $204,000 between March 1991 and March 2021. Yeah, there’s some growth there. The annualized total return is almost 20%.
Not totally impressed yet? Okay. Let’s keep it going.
Dividend Growth Stock #2: Parker-Hannifin Corp. (PH)
Next up is Parker-Hannifin Corp. (PH).
This supposed boring industrial company has been anything but boring if you like making money.
It turned $1,000 into over $104,000 between March 1991 and March 2021. The annualized total return is over 16%.
That’s the best kind of boring I’ve ever seen.
We’re over $300,000 and just getting warmed up.
Dividend Growth Stock #3: Sherwin-Williams Co. (SHW)
The next dividend growth stock I want to tell you about Sherwin-Williams Co. (SHW).
Paint? That sounds about right. Successful long-term investing should be like watching paint dry.
This high-quality dividend growth stock turned a $1,000 investment into just under $118,000 between March 1991 and March 2021. The annualized total return comes in at over 17%.
Watching paint dry has never been so exciting. Three stocks down. $3,000 invested. And we’re almost halfway to our $1 million.
Dividend Growth Stock #4: American States Water Co. (AWR)
The next stock is American States Water Co. (AWR).
Is this a company that makes drones for Mars? Nope. Just a water utility business.
This dividend growth stock turned a $1,000 investment into slightly over $300,000 over the last 30 years. We’re talking an annualized total return of over 20%.
Water has never looked more like money than it does right now.
We’ve got one stock to go. And I saved the best for last.
Dividend Growth Stock #5: S&P Global Inc. (SPGI)
The final stock is S&P Global Inc. (SPGI).
The credit ratings agency has been a beast of a long-term investment.
It turned a $1,000 investment in March 1991 into just over $404,000 by March 2021. This is an incredible annualized total return of over 22%.
Who needs a credit rating when you’re compounding your money like that?
So we’ve taken $1,000 invested into each stock in March 1991 and turned that into a final tally of… drumroll, please… $1,131,684.29.
We overshot our millionaire goal here. This investor is already well on their way to $2 million.
This massive sum of money was built from only $5,000. If that doesn’t show the power of long-term compounding from high-quality dividend growth stocks, I don’t know what will.
The S&P 500 sported an annualized total return of a bit over 10% over this 30-year period, with dividends reinvested. These dividend growth stocks trounced the market. Compounding $5,000 at 10% annually turns into almost $100,000 over 30 years, which is impressive, but that’s a far ways off from $1 million.
Now, I’ll be honest. These have been exceptional investments. Not every dividend growth stock performs like these.
But dividend growth investing is an excellent strategy for building sustainable long-term wealth and safe, growing passive dividend income.
And that’s really the crux of the matter here. The focus should always be on building that safe, growing passive dividend income and letting the stock appreciation happen as a natural byproduct of correctly investing in great businesses.
This safe, growing passive dividend income could be the wellspring from which your financial independence flows, as it is for me.
Plus, it’s not like anyone out there invests only $5,000 just one time. When you experience the incredible power of compounding firsthand, you get excited to invest more money month in and month out.
Thus, you’ll end up investing hundreds, or even thousands, of dollars month in and month out for years on end.
And that only accelerates the process. It increases the eventual size of your wealth snowball.
Warren Buffett said it best: “Someone is sitting in the shade today because someone planted a tree a long time ago.”
These five examples show you just what kinds of trees you can grow when you give it time.
I’ll add one piece of advice to this.
Don’t just plant a tree. Plant a forest.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
