The stock market is one place that can give you unprecedented returns if you invest in high-growth stocks. And if you are not so adventurous, you can also opt for stable dividend stocks. Their stock prices do not grow much as they pay the excess profit to shareholders as dividends. Dividend stocks are not preferred if you want to be a millionaire with a just $10,000 to $50,000 investment. Still, there is a way a dividend stock like Telus Corporation (TSX:T) can help you retire a millionaire.
What type of returns can you expect from Telus Stock?
Let us first understand what Telus has to offer its shareholders. As Canada’s third largest telecom operator, Telus enjoys stable cash flows from wireless and wireline subscriptions. It uses its cash flow for servicing its debt, capital spending, and dividend payouts. T stock’s long-term dividend payout ratio guideline is to give 60 to 75% of its free cash flow (FCF) as dividends.
The telecom operator has been paying incremental dividends since 2005. Its dividend growth rate was initially high at around 30% but has moderated to 7% since 2019. Telus offers a dividend reinvestment plan that allows you to compound your dividend payouts by buying more shares of Telus without paying brokerage fees.
Can a 7% dividend growth rate make you a millionaire? And if so, in how many years? And what amount would you have to invest?
Forecasting 15-20 years into the future is impossible. Hence, I took a historical approach to find the answers. After a few permutations and combinations, I arrived at the below investment model.
If you started investing in Telus in 2010 and continue to do so till 2030, a $1 million amount could become a reality. Let’s understand this with the help of a table.
Could Telus Stock Help You Retire a Millionaire?
| Year | Dividend | Telus Stock Price | New Investment | New Shares Added | Total Share Count | Total Dividend Amount |
| 2030* | $2.30 | $26.00 | $85,079.19 | 3,272.28 | 40,602.73 | $93,195.60 |
| 2029* | $2.15 | $26.00 | $74,124.75 | 2,850.95 | 37,330.45 | $80,079.19 |
| 2028* | $2.00 | $26.00 | $64,923.93 | 2,497.07 | 34,479.50 | $69,124.75 |
| 2027* | $1.87 | $26.00 | $57,154.37 | 2,198.25 | 31,982.42 | $59,923.93 |
| 2026* | $1.75 | $26.00 | $50,560.00 | 1,944.62 | 29,784.18 | $52,154.37 |
| 2025* | $1.64 | $26.00 | $44,936.06 | 1,728.31 | 27,839.56 | $45,560.00 |
| 2024* | $1.53 | $23.58 | $39,904.45 | 1,692.30 | 26,111.25 | $39,936.06 |
| 2023 | $1.43 | $26.13 | $35,705.90 | 1,366.47 | 24,418.95 | $34,904.45 |
| 2022 | $1.33 | $29.79 | $32,554.99 | 1,092.82 | 23,052.48 | $30,705.90 |
| 2021 | $1.25 | $25.21 | $29,232.14 | 1,159.55 | 21,959.66 | $27,554.99 |
| 2020 | $1.17 | $25.14 | $26,853.16 | 1,068.14 | 20,800.12 | $24,232.14 |
| 2019 | $1.11 | $22.63 | $24,221.50 | 1,070.33 | 19,731.97 | $21,853.16 |
| 2018 | $1.03 | $23.81 | $22,240.07 | 934.06 | 18,661.65 | $19,221.50 |
| 2017 | $0.97 | $21.38 | $20,108.36 | 940.52 | 17,727.58 | $17,240.07 |
| 2016 | $0.90 | $19.13 | $17,994.08 | 940.62 | 16,787.06 | $15,108.36 |
| 2015 | $0.82 | $20.94 | $16,155.45 | 771.51 | 15,846.44 | $12,994.08 |
| 2014 | $0.74 | $18.28 | $14,428.51 | 789.31 | 15,074.93 | $11,155.45 |
| 2013 | $0.66 | $16.27 | $13,023.67 | 800.47 | 14,285.62 | $9,428.51 |
| 2012 | $0.60 | $14.41 | $11,807.83 | 819.42 | 13,485.15 | $8,023.67 |
| 2011 | $0.54 | $11.37 | $10,715.12 | 942.40 | 12,665.73 | $6,807.83 |
| 2010 | $0.49 | $8.53 | $100,000.00 | 11,723 | 11,723 | $5,715.12 |
You begin with a $100,000 investment in Telus on December 31, 2009, that would buy you 11,723 shares at $8.53. Telus paid $0.49 dividend per share in 2010. It means 11,723 shares would earn you $5,715 in dividend income.
From next year, you buy Telus shares worth $5,000 on December 31 (Telus stock price column) and also reinvest your dividend income.
On December 31, 2010, you would invest $5,000 + $5,715 in dividend income to buy 942 new shares. Adding them to the existing 11,723 shares, you earn $6,807 in annual dividend income by the end of 2011.
If you continue this process, you will have 26,111 shares of Telus, with a portfolio value of around $626,600 (26,111 x $24 share price).
Aim for $1 million
To achieve a $1 million portfolio, you have to continue this process till 2030. For the forecasted period (2024-2030), I assumed Telus would continue growing dividends at a 7% rate, and its stock price trades around the $26 range. By 2030, you would have accumulated 40,602 shares that have a portfolio value of $1.05 million (40,602 x $26) and dividend income of $93,195. The 21-year wait might look long, but it can give you a lifetime of wealth, assuming Telus continues to earn regular cash flows.
