Are you trying to get started with dividend investing, starting with a relatively small starting budget?
This is a pretty common situation for Canadian investors to find themselves in.
Everyone knows that a million dollars invested in dividend stocks can go a long way, possibly providing enough income to retire off of.
But when you’re just starting with a small amount – let’s say $10,000 – you might find yourself earning just a few hundred per year.
In this article, I’ll explore how you can get started with dividend investing beginning with just $10,000, and eventually build your portfolio into something that you can pay your bills with.
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Your first $10,000
You can get a few hundred dollars per year in income starting with your first $100,000 invested. This is what’s obtainable with defensive Canadian stocks today.
Take Fortis Inc. (TSX: FTS), for example. It’s a Canadian utility stock that is well known for its stellar dividend track record. The company has not just paid, but raised its dividend every year for the last 52 consecutive years. This track record has led some to call FTS stock a “dividend kingpin.” The company’s sensible payout ratio, stable revenue stream, and ongoing reinvestment argue for it remaining a quality play into the future.
As you can see in the table below, a $10,000 investment in Fortis could produce about $315 per year worth of dividend income. If you reinvest the dividends, and the company keeps increasing its annual payout, you could eventually find yourself earning thousands of dollars a year from Fortis!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Fortis Inc | $81.01 | 123 | $0.64 per quarter ($2.56 per year) | $78.72 per quarter ($315 per year) | Quarterly |
Now, $315 might not seem like a whole lot of money. Indeed, it isn’t – but it can grow. Fortis has raised its payout every year for 52 years running. Turn on automatic reinvestment and add $10,000 worth of fresh funds into an FTS position each year, and you might eventually find yourself with a million-dollar position. In the next section, I’ll explore how much income THAT could get you.
How much you could get later in your investing career
Once you get to a million dollars in investments, the amounts of annual dividends can really add up. Going again with the Fortis example, a $1 million holding in that stock would produce about $31,600 in annual dividend income. That combined with CPP and OAS could easily be enough to retire off of in smaller Canadian cities.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Fortis Inc | $81.01 | 12,344 | $0.64 per quarter ($2.56 per year) | $7,900 per quarter ($31,600 per year) | Quarterly |
Foolish takeaway
As you can see from the tables above, it’s quite possible to generate substantial amounts of money from dividend stocks. The key is to keep investing progressively over time. The amount of dividends generated by a $10,000 portfolio is not much. But the amounts you’ll get if you invest progressively over the decades can be substantial. By the time you get to a $1 million balance – achievable over a few decades – you’ll be getting tens of thousands per year in dividend income!
