A great dividend stock can be just what you need during these trying times. They can provide you with solid passive income that you can expect on a regular basis. But what if I were to tell you that the best use of those funds wasn’t to take in the cash? Instead, it was to use that cash to reinvest right back into the dividend stock?
That’s what I’m going to recommend doing today — along with a dividend stock yielding 6.4%. Why? Let’s get right into it.
The dividend stock to consider
If you’re looking for a long-term dividend stock to hold, then you want to look at Dividend Aristocrats. These are dividend stocks that have increased their dividend year after year for over 25 years, which is exactly why today I recommend BCE (TSX:BCE).
BCE stock has been on the market for the last 40 years, though the Bell Company has been around since the 1800s. That should spell out stability, but, of course, it has competitors in this century. Even so, BCE stock has proven it can take on those competitors and still come out on top.
This comes from the company continuing to take on 60% of the market share among other telecom companies. It also boasts the fastest internet speeds of the bunch, rolling out its 5G network and moving forward with 5G+.
Yet it’s the future that investors should be interested in. In this case, BCE stock is bound for growth. Telecommunications companies are strong, sure. But these are about to become even stronger, as infrastructure to expand internet across the country continues to be built. That’s why not only is the dividend yield of 6.4% safe for this dividend stock, it’s likely to continue expanding.
Some history to consider
BCE stock has seen a lot of growth over the years. Shares of the stock are down 12% in the last year, but up 34% in the last decade. This comes to a compound annual growth rate (CAGR) of 3.19% over that time.
The dividend, however, is more impressive with a CAGR at 5.2% in the last decade alone. And if you’re looking for growth, BCE stock is certainly going to improve with the rollout of more internet across the country — especially as it continues to have a strong hold over most Canadian consumers.
While these numbers aren’t the highest out there, they certainly look stable. And stability is what you want if you’re looking to get rich in the years to come. So, let’s look at what a $20,000 investment could get you in just a decade, while you reinvest your dividends along the way.
| Year | Shares Owned | Annual Dividend Per Share | Annual Dividend | After DRIP Value | Year End Shares Owned | Year End Stock Price | New Balance |
|---|---|---|---|---|---|---|---|
| 1 | 317.00 | C$4.01 | C$1,270.16 | C$21,271.77 | 337.01 | C$65.02 | C$21,910.84 |
| 2 | 337.01 | C$4.22 | C$1,420.54 | C$23,366.29 | 358.70 | C$67.10 | C$24,067.44 |
| 3 | 358.70 | C$4.43 | C$1,590.59 | C$25,697.89 | 382.25 | C$69.24 | C$26,468.04 |
| 4 | 382.25 | C$4.66 | C$1,783.15 | C$28,296.75 | 407.84 | C$71.46 | C$29,143.73 |
| 5 | 407.84 | C$4.91 | C$2,001.46 | C$31,197.32 | 435.68 | C$73.75 | C$32,129.92 |
| 6 | 435.68 | C$5.16 | C$2,249.30 | C$34,438.96 | 466.02 | C$76.11 | C$35,467.12 |
| 7 | 466.02 | C$5.43 | C$2,531.04 | C$38,066.70 | 499.12 | C$78.54 | C$39,201.65 |
| 8 | 499.12 | C$5.71 | C$2,851.76 | C$42,132.15 | 535.28 | C$81.05 | C$43,386.61 |
| 9 | 535.28 | C$6.01 | C$3,217.37 | C$46,694.56 | 574.82 | C$83.65 | C$48,082.93 |
| 10 | 574.82 | C$6.32 | C$3,634.73 | C$51,822.00 | 618.14 | C$86.33 | C$53,360.66 |
As you can see, your shares will have more than doubled in just a decade. That’s by only investing dividends and not adding another penny after your initial investment.
