dividend yield... is this calculation correct?

It makes sense that your annual anticipated payout goes up in that scenario, you are contributing $250,000 over 10 years, plus all of your dividend is being reinvested.

I have not run your calculations however using simple math I can see that a $500,000 investment, with a $25,000 annual contribution AND 5% dividend yield being reinvested should have you ending up with $1,000,000+ in value.

That said a couple drawbacks:
a) If done outside a RRSP / TFSA you need to pay taxes on dividends still
b) Dividend paying stocks generally go up less in price compared to stocks that pay a lower / no dividend and focus on growth. Remember the money they give you as a dividend could have been reinvested in the company to grow further.


There is no right or wrong answer, just make sure you know both sides. Historically the Big 5 Canadian banks have been a safe bet. Small banks (Laurentian) have not been as good. That is no guarantee of future performance.

The catch is nothing is guaranteed to be linear. Companies can increase, cut, or suspend their dividends. The 500k can also drop to 250k while collecting dividends.

An average return of 5 percent per year in dividends can still mean large fluctuations in capital.

One has to be able to stomach the volatility without flinching. March 2020 is the most recent example where markets crashed... they have also recovered. Many people get caught at minus 40 percent not being able to stomach the temporary loss when "only getting 5 percent per year".

Long-term is a win in the majority of cases but you have to know yourself in the short-term in order to make it to the long-term.

On the topic of dividends:

Why the Return from Dividends Matters