This article highlights the profound impact of dividend growth investing, spotlighting the Vanguard FTSE All-World UCITS ETF (VWRL) - an example of how patience can foster great dividend growth over time.
The Significance of Dividend Growth
Dividend growth investing transcends the conventional pursuit of the usual high-yield stocks. While a 2% initial yield may not turn heads, the real magic lies in the potential for sustained growth. VWRL, known for its global equity market exposure, often starts with a modest 2% yield. However, what sets it apart is its unwavering commitment to increasing dividends year after year.
Time Horizon and Accumulation
The secret of dividend growth investing lies in time, and VWRL exemplifies this beautifully. The initial 2% yield, when viewed through a patient time horizon, becomes the foundation for a compounding effect that can accumulate substantial wealth over the years. For example, I adopt a long-term perspective and harness the power of time and can therefore benefit from dividend growth over time,
Understanding the Total Return
As we explore the dividend growth journey of VWRL, it's essential to grasp the concept of total return. Total return encompasses both the capital appreciation of the investment and the income generated through dividends. In this case, we focus only on dividend growth, whereas for VWRL, the 2% starting yield serves as the starting point of dividends.
The VWRL Dividend Growth Story
VWRL's story unfolds over the years in this example I want to illustrate an example from 2013 to 2023. Starting at a dividend per share of 93 cents in 2013, it has grown to 1.87 Euro 2023. This means that the total percentage increase is about 101% which is more than double in a 10-year period, taking into account that this ETF is focused more on market coverage rather than dividend growth makes it all more impressive. Translating this into Compound Annual Growth Rate (CAGR) this is about 7% which further emphasises this growth.
Conclusion
VWRL stands as a testament to the enduring value of dividend growth investing. Starting with a seemingly modest 2% yield, this investment vehicle becomes a dynamic force when time is recognized as a critical component. However, this estimate is based on historical data and it may be that the future looks different. Nevertheless, the dividend growth performance of such an ETF is impressive to me, and my timeline means that it stands out to me as an attractive investment looking at only the dividends.
Disclaimer: I am not a financial advisor, this blog is centered around my opinion and should not be viewed as legal, professional, or financial advice. For me, it's crucial to supplement my knowledge with resources like videos, articles, and books to deepen my understanding of investing principles and strategies.
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