A 3.2% yield today can become a double digit return tomorrow. The difference is dividend growth, reinvestment, and time.”
Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.
We have been talking a lot about dividend return recently, but sometimes the best way to understand its power is to see it in action. This week, we use a recent purchase in our U.S. model portfolio, NextEra Energy, to show what can happen when a reasonable starting yield combines with consistent dividend growth and the compounding power of reinvestment.
IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases
DGI Clipboard
“When your yields become double-digit, do you really care about price or what the market is doing? What’s wealth?”
- Tom Connolly
Dividend Return: Building Real Wealth
We have been talking a lot about dividend return recently, so I wanted to share a real-life example from our U.S. model portfolio.
NextEra Energy (NEE) is a recent purchase and provides a good example of what we are looking for: a quality business capable of delivering both a growing dividend return and capital appreciation over time.
NextEra has increased its dividend annually for over three decades.
To estimate the potential dividend return going forward, we start with NextEra’s current 3.2% dividend yield and assume its dividend continues to grow at approximately its recent five-year rate of 10.1% annually.
The results show why dividend growth can become so powerful with enough time.
NextEra Energy: Potential Dividend Return
Based on these assumptions, a $10,000 investment today would initially generate about $320 in annual dividend income.
If the dividend continues growing at 10.1% annually, that income could rise to approximately $761 per year by 2035, even without reinvesting a single dividend.
Reinvest those dividends along the way, however, and the picture becomes considerably more interesting.
Our projected annual dividend income rises to about $1,164 by 2035, an 11.6% annual income return on our original $10,000 investment.
The green portion of each bar shows the additional income generated through dividend reinvestment (DRIP). Early on, the difference looks relatively small. But as the years pass, compounding does more and more of the work.
That is the power of combining dividend growth with dividend reinvestment.
And remember, this is only the dividend side of the equation.
Dividends Lead. Prices Follow.
Over the previous ten years, NextEra’s dividend increased approximately 187%. Over that same period, its share price increased approximately 166%.
The two did not move together every year. Stock prices rarely behave that neatly. But over longer periods, the relationship becomes much easier to see.
A growing business can support a growing dividend, and over time, a growing dividend can help lift the share price.
That is why we don’t think of dividend return and capital return as competing outcomes.
Growing dividends provide the income.
Growing businesses create the capital appreciation.
Takeaway
A 3.2% yield may not look like much today. Give it ten years of dividend growth and reinvestment, and it can become an 11.6% annual income return on your original investment.
That is why we focus on quality, dividend growth, and time.
The starting yield gets you in the game. Dividend growth and compounding do the heavy lifting.
And if the business keeps growing alongside the dividend, capital appreciation can follow.
DGI Scorecard
MP Wealth-Builder Model Portfolio (Canada)
Annualized Total Return: +17.19% since inception
Total Return (includes dividends): +16.83 % year-to-date
Dividend Growth: 7.0% year-to-date
Growth Yield: 3.2%
(Inception May 1, 2022, to July 31, 2026. Returns are actual results of our model portfolio in CAD with dividends reinvested.)
This Week’s Highlights
The List (Canada)
Dividend Income Growth: +6.6% year-to-date
Capital Appreciation: +3.2% year-to-date
Dividend Announcements Last Week: None
Earnings Reports Last Week: None
Earnings Reports This Week: None
Top Performers Last Week:
Brookfield Infrastructure Partners (BIP-N), up +5.06%.
Toromont Industries (TIH-T), up +4.86%.
Canadian Natural Resources (CNQ-T), up +2.87%.
Worst Performer Last Week:
Franco Nevada (FNV-N), down -7.2%.
Watchlists
The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:
Dividend growth streak: 10 years or more.
Market cap: Minimum one billion dollars.
Diversification: Limit of five companies per sector, preferably two per industry.
Cyclicality: Exclude REITs and pure-play energy companies due to high cyclicality.
Based on these criteria, companies are added or removed from The List annually on January 1. Prices and dividends are updated weekly.
The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.
Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our dividend growth investing strategy. 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.
In the last week of every month, I will show the updated watchlist for our American dividend growers (The List-USA). I will show the watchlist after the Canadian watchlist above.
New to Magic Pants?
Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.
Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.
The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.
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From breaking news and quarterly earnings to the latest dividend announcements, we highlight what matters most and explain what it means for dividend growth investors.
