@boanerges1989 Theory is nice and all, but l was curious what happened in real life. Using portfolio visualizer to back test performance of a TSX index ETF vs a 2 dividend stock portfolio for simplicity over a 24 year period. XIU has been around since 1999, and TD and Royal Bank for comparison (XEQT is too new). I used a starting portfolio of 100k, end results:
XIU $239k, 3.74% CAGR, dividends not reinvested
XIU $444k, 6.48% CAGR, dividends reinvested
TD & RY $588k, 7.75% CAGR, dividends not reinvested
TD & RY $1.37 mil, 11.6% CAGR, dividends reinvested
Reinvested dividends clearly boosts total returns and the simple 2 dividend stock portfolio clearly beat the ETF index by more than triple from 1999 to today. Wow, I did not expect this result to be so dramatic.
XIU has a current yield of 3.6%, the banks about 5%. So someone retiring today would receive $16k from XIU, or $68k from the bank portfolio. Dividends seem pretty relevant to me in real life vs the theory from those 2 channels.
Edit : a better comparison would be 2 identical stocks, same market cap, same starting share price, one that doesn't have a dividend and one that does, then see the results over a 20yr period. This is likely impossible to find in real life.