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Grow your dividends. Grow your wealth. Do it yourself—with a strategy that works.
My name is Brad McMillan, and I want to tell you about an investment philosophy I encountered that some of the world's wealthiest people have used for decades. An investment strategy that provides them and their families with inflation-protected income in all market cycles and an above-average total return on their capital in the long term. This evidence-based, unbiased approach empowers DIY investors to outperform both actively managed dividend funds and passively managed indexes and dividend ETFs over longer-term horizons. The strategy is called dividend growth investing or DGI.
My goal is to coach and educate readers on what I have learned about dividend growth investing and introduce them to my process. To learn more, sign up to receive our FREE newsletter.
Dividend growth investors like me take a different approach to financial independence, one that replaces the traditional “net worth” mindset with a “cash flow” mindset. Rather than relying on selling stocks to generate income, we aim to live off the dividends, harvesting the fruit while keeping the tree intact.
By focusing on high-quality companies with a proven track record of growing their dividends, investors can benefit from both capital appreciation and a rising income stream. Our strategy empowers investors to make informed decisions, build reliable income, and create lasting wealth over the long term.
I want to emphasize that I never tell you what to do. Instead, I share what I am doing, and you decide how to use that information. This approach is a "model signal service"—focused on investment and portfolio research, not investment advice.
The magic of dividends
"You have a pair of pants. In the left pocket, you have $100. You take $1 out of the left pocket and put in the right pocket. You now have $101. There is no diminution of dollars in your left pocket. That is one magic pair of pants."
A dividend is a payment that a company makes to its shareholders, who are the people who own shares or stocks in that company. It's a way for the company to share its profits with the people who have invested in it. Instead of keeping all the money it makes, the company returns a portion to shareholders as a reward for their investment. Dividends are typically paid out regularly, such as quarterly or annually. It's like a little "thank you" from the company to the people who own a stake in it.
We do not get sucked into the debate over whether dividends are good; we look at the evidence.
Companies that pay dividends, on average, have generated higher investment returns than those that do not for decades. Companies that increase their dividends year after year have done even better.
Source: Royal Bank of Canada
Source: Ned Davis Research and Hartford Funds
Over long periods, there's no better bet than the stable, steadily compounding companies that comprise the dividend growth stock universe.
When you see such dramatic outperformance, your first question is, why? Why do dividend growth companies grow your capital better than dividend non-payers?
The answer is simple: for a company’s management to commit to a dividend payout policy, the company needs to generate cash to pay the dividends. As it turns out, high-quality companies are more likely to be profitable and generate cash to pay dividends consistently. Companies that grow their dividends consistently are at the top of this pile.
That’s right, companies that pay a growing dividend are some of the highest quality companies you will find. Some have even been paying a growing dividend for 50+ years.
A rising dividend will eventually lead to rising stock prices
The fundamental theory behind a dividend growth investing strategy is that a rising dividend will eventually lead to rising stock prices.
To understand why this happens, ask yourself a question:
What price is an investor willing to pay for an investment that increases its cash flow regularly? The answer is more. This is why the share price increases.
The concept that rising income drives rising prices is clearly evident when investing in real estate. Suppose you pay $1 million for a commercial building in town, and your neighbour also invests $1 million in another building. The future value of these buildings for the next buyer comes down to how much rental profit you can generate from each building.
Now, assume that your building generates $100,000 in rental profits after ten years, and your neighbour’s only generates $50,000. Which property do you think would be more valuable to the next buyer? The one that produces more income for that buyer. A buyer wouldn’t pay the same amount for the building that produces only $50,000 of rental income as the one that produces $100,000. This is the same concept that applies to dividend growth stocks. The ones that produce more long-term income for their owners will become more valuable.
But what makes this hard to see in DGI stocks is the very turbulent price movements that overwhelm income returns in the short term. Once you move beyond shorter-term cycles, the value of DGI stocks will be linked to the amount of income they produce for their owners.
Dividend growth portfolios outperform
On average, the portfolio of Canadian DGI companies we invested in outperformed the benchmarks in every period, and the outperformance only increased as our time horizon lengthened. This highlights the compounding effect of our ever-increasing dividends.
Our outperformance continues
Through the blog, I manage two model portfolios to showcase my dividend growth investing (DGI) strategy in action, demonstrating how to build wealth and generate reliable, growing income for retirement.
The MP Wealth-Builder Model Portfolio (CDN) includes only Canadian dividend growth companies, while the MP Wealth-Builder Model Portfolio (USA) focuses on high-quality American DGI stocks.
PAID subscribers can track portfolio performance, view all trades, and gain full access to premium content that brings the strategy to life.
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I have much more to teach you about our DGI strategy, including how to select the highest quality companies that pay growing dividends and how to purchase them at sensible prices.
I will publish a FREE weekly newsletter for all subscribers.
PAID subscribers enjoy full access to our enhanced weekly newsletter, premium content, and easy-to-follow trade alerts so they can build DGI portfolios alongside ours. This service provides the resources to develop your DGI business plan confidently. We do the work; you stay in control!
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The greatest investment you can make is in yourself. Are you ready to take that step? It's a decision you'll never regret.
