Dividend investors can maximize investment returns through a simple process: dividend reinvesting. One extra share could make a huge difference because of the power of compounding. If you want to double your investment over time, limit your holdings to Dividend Aristocrats.
Bank of Nova Scotia (TSX:BNS), Capital Power (TSX:CPX), and Great-West Lifeco (TSX:GWO) should entice investors with their dividend-growth streaks of 13, 10, and nine years, respectively. The rock-steady dividends also serve as your protection against market downturns or price drops.
Impressive dividend history
BNS’s dividend history is mighty impressive, as the track record stands at 191 years and counting. The big bank stock trades at $63.29 per share and pays a 6.56% dividend. A $31,645 investment (500 shares) will generate $518.98 every quarter.
If you reinvest the dividends (equivalent to 8.2 shares per quarter), your money will compound to $62,664.37 in 10.5 years. The $76.44 billion bank is Canada’s fourth-largest financial institution.
In the first quarter (Q1) of fiscal 2023, net income declined 21.4% to $2.16 billion versus Q2 fiscal 2023. The drop was due to the significant 229.7% year-over-year increase in provision for credit losses (PCLs) to $709 million. Nonetheless, its president and chief executive officer (CEO) Scott Thomson said BNS is well positioned to navigate heightened macroeconomic uncertainties because of its strong capital and liquidity profile.
Growth-oriented power producer
Capital Power trades at a discount (-10.11% year to date), but a rebound is inevitable. At $40.51 per share, you can partake in the attractive 5.59% dividend yield. If you take a $24,306 position today (600 shares), your investment will grow to $48,649.22 in 12.5 years.
The $4.74 billion growth-oriented power producer owns and operates renewable and thermal power-generation facilities with a combined power-generation capacity of 7,500 megawatts. Capital Power is working to fulfill its off-coal commitment in its coal-fired Genesee Generating Station this year.
Growth should come from the $1.3 billion worth of capital projects through 2024. Recent developments include an order of ultra-low carbon thin film solar modules and three long-term contracts in Ontario and North Carolina.
Top-performing insurance stock
Great-West Lifeco is the top-performing insurance stock thus far in 2023, with its 27.18% market-beating return. At $38.74 per share, the dividend offer is 5.36%. Purchase 1,000 shares today ($38,740) to make a profit of $38,664.54 from dividends in 13 years.
The $36 billion international financial services holding company provides life insurance, health insurance, retirement, and investment services. It also engages in asset management and reinsurance businesses. Management’s near-term plan is to reposition the portfolio for growth.
Great-West will pursue acquisitions to create scale and reach while adding strategic capabilities. The company has growth engines in three core areas. There’s wealth management expansion in Canada, and the focus in Europe will be on wealth management and retirement businesses.
In the U.S., Great-West will reposition and cement its market leadership position in workplace retirement and personal wealth. The cash-generative business should support a progressive dividend policy. Management targets a dividend-payout ratio between 45% and 55% in the medium term.
Magic of compounding
Dividend Aristocrats are safe and stable holdings for people building wealth and believing in the magic of compounding. A recession could hit soon, but the payouts from BNS, Capital Power, and Great-West Lifeco should continue without fail.