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Dividend Growth Vs Yield

I set up a spreadsheet to look at 3% yield with 6% growth versus 5% yield with 2% growth comparison for both dividend reinvestment and spending the dividend. The following are my conclusions:

Dividend reinvestment is far more important than dividend growth for increasing the dividend.

If you are reinvesting the dividend, you are seeking to maximize the dividend at the end of the time period. The 3/6 case passed the 5/2 case after 18 years.

If you are spending the dividend, you are seeking to maximize the sum of the dividends paid over the years. The 3/6 case passed the 5/2 case after 23 years.

These are relatively long periods for growth to be dominate. Unsurprisingly, growth is more important for younger people.

Another consideration is that growth has greater uncertainty the higher it becomes. Can the higher growth rate be sustained.

I am certainly not against growth, but I wish people would run the numbers.

Below is a version of the spreadsheet that has been truncated to fit on the page.

Year Reinvest 3/6 Reinvest 5/2 Spend 3/6 Spend 5/2
Capital Dividend Capital Dividend Capital Sum Capital Sum
1 1000 30 1000 50 1000 30 1000 50
2 1030 33 1050 54 1000 62 1000 101
3 1063 36 1104 57 1000 96 1000 153
4 1099 39 1161 62 1000 131 1000 206
5 1138 43 1223 66 1000 169 1000 260
6 1181 47 1289 71 1000 209 1000 315
7 1228 52 1360 77 1000 252 1000 372
8 1281 58 1436 83 1000 297 1000 429
9 1338 64 1519 89 1000 345 1000 488
10 1402 71 1608 96 1000 395 1000 547
11 1473 79 1704 104 1000 449 1000 608
12 1553 88 1808 112 1000 506 1000 671
13 1641 99 1920 122 1000 566 1000 734
14 1740 111 2042 132 1000 630 1000 799
15 1851 126 2174 143 1000 698 1000 865
16 1977 142 2318 156 1000 770 1000 932
17 2119 162 2473 170 1000 846 1000 1001
18 2281 184 2643 185 1000 927 1000 1071
19 2465 211 2828 202 1000 1013 1000 1142
20 2676 243 3030 221 1000 1104 1000 1215
21 2919 281 3251 242 1000 1200 1000 1289
22 3200 326 3493 265 1000 1302 1000 1365
23 3526 381 3757 290 1000 1410 1000 1442
24 3907 448 4048 319 1000 1524 1000 1521
25 4355 529 4367 351 1000 1646 1000 1602
26 4884 629 4718 387 1000 1775 1000 1684
27 5513 752 5105 427 1000 1911 1000 1767
28 6265 906 5532 472 1000 2056 1000 1853
29 7172 1100 6004 523 1000 2209 1000 1940
30 8271 1345 6527 580 1000 2372 1000 2028