For the retired investor or the long-term income-seeking trader, finding stable companies with strong and sustainable dividend yields can be hard enough.
In an age of ultra-low interest rates, investors have largely moved away from demanding higher and higher dividend yields, as was the case during periods of very high inflation in the 1980’s. Yields have crept downwards over time, and income investors or those retiring find themselves with fewer and fewer opportunities to earn a decent return on their principal moving forward.
One way investors can beef up their yield over the long-term is through investing in companies that continuously grow their dividend over time.
An example of a company that has a sustainable, stable dividend with a decent yield, that has managed to increase its dividend every year for more than four decades is Fortis Inc. (TSX:FTS). Fortis is a company which many investors looking for stable income over a long period of time have invested their money, and been well rewarded over time.
Fortis’ track record with raising its dividend each year since 1974 has resulted in an amazing compounding effect in which the dividend payout has been increased on the order of approximately 6% a year, every year. This sort of compounding means that an investor who bought Fortis at 1974 levels would now be paid a dividend that is 1225% higher than the initial dividend received, excluding capital appreciation.
Management has indicated it expects to continue to raise the dividend on the order of 6% a year for the next five years moving forward, meaning long-term investors can expect to see their dividend payments approximately double over the next decade, should the company continue its impressive run.
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