Ten years from now, you’ll be glad you bought three great dividend stocks
There’s something special about 10 years, and that something special is the power of compounding. With the beautiful stocks below, you can witness the true power of stock compounding in ten years.
Canadian natural resources
Canadian natural resources (TSX:CNQ) is a buy due to its double-digit dividend growth. CNQ has the second largest oil sands reserves in the world and a cost advantage that allows it to grow its dividends. It has a 25-year history of growing dividends between 2% and 56%. It has factored the dividend amount into the breakeven price of around $40 per barrel, which ensures that the company can maintain its dividends. Canadian Natural Resources also gives special dividends when oil prices are high.
If you purchased 1,000 shares of CNQ in January 2016 for $14,450, you would have received $470 in annual dividends in 2016, which would have grown to $2,350 by 2025. 2016 witnessed a major oil crisis when US shale exploration permanently lowered the oil price from $100/barrel to $60/barrel. Then the pandemic created an oversupply problem, causing oil prices to drop to $35 per barrel for a short period. After the two major crises, oil prices rose to $125 in 2022, when the lockdown ended and the war between Russia and Ukraine caused a supply shock.
Over the past ten years, a $14,450 investment in CNQ has returned a cumulative dividend of $12,900 and increased the value of those 1,000 shares to $48,000. This is before assembling. If you had reinvested the dividends, your annual payout in 2025 would be $3,221, and your cumulative dividend payout over 10 years would be about $15,920.
| Year | CNQ dividend per share | Total number of shares | Total dividend | CNQ stock price on January 1 | Bought new shares |
| 2025 | $2,350 | 1371 | $3,221.85 | $44.85 | 47 |
| 2024 | $2,138 | 1324 | $2,830.05 | $43.50 | 42 |
| 2023 | $1,850 | 1282 | $2,371.70 | $37.30 | 62 |
| 2022 | $2,300 | 1220 | $2,806.00 | $26.54 | 37 |
| 2021 | $0.999 | 1183 | $1,181.52 | $15.13 | 56 |
| 2020 | $0.850 | 1127 | $957.95 | $20.23 | 37 |
| 2019 | $0.750 | 1090 | $817.50 | $15.56 | 43 |
| 2018 | $0.670 | 1047 | $701.49 | $21.40 | 25 |
| 2017 | $0.550 | 1022 | $562.10 | $21.04 | 22 |
| 2016 | $0.470 | 1000 | $470.00 | $14.45 | |
| $15,920.16 |
Automatic compounding with a dividend reinvestment plan
With CNQ, you have to buy shares at the market price and pay brokerage fees to increase returns. However, some TSX stocks offer a dividend reinvestment plan (DRIP), which saves you brokerage fees and automates compounding.
Manulife financial (TSX:MFC) and Telus Corporation (TSX:T) have grown their dividends at a ten-year average annual rate of 10% and 7%, respectively. Telus has slowed its dividend growth as changes in the regulatory landscape have affected its cash flows.
Management expects dividends to rise 3-8% between 2026 and 2028 as it deleverages its balance sheet to boost cash flow. Telus has reduced its capital expenditure on network infrastructure and is focusing on expanding its customer base on partner networks. Once it reduces debt burden and taps into 5G potential, it could accelerate dividend growth.
Meanwhile, Manulife is seeing strong demand for its health, wealth and life insurance products in the United States, China and Asia. The company is to grow both organically and through acquisitions. It has acquired the American Comvest Credit Partners and PT Schroder Investment Management Indonesia. It has also entered into a partnership with Mahindra & Mahindra to enter the Indian insurance market and strengthen its presence in the world’s largest economies.
The aforementioned expansion plans will help Manulife secure higher premiums, giving the company room to continue increasing dividends.
Takeaway for investors
Investing in the above three dividend stocks and holding them for 10 years can give you the dual benefit of dividend growth and compounding through a DRIP.
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