You can prove out the annualised return and how the relative effect of dividend increases vs share price inceases affect the overall performance
Here I have done so
https://docs.google.com/spreadsheets/d/ ... sp=sharingsorry for the tabulation below.. I have tried my best..
flat yield and constant shareprice you earn a constant return - 10%/yr in this example
Year Divid growth Capital growth SharePrice DividendperShare Shares Capital Total Dividend Yield Total Annualised Return
1 0.0% 0.0% 100.00 10.00% 100.00 £10,000 £1,000 10.00% £11,000 10.00%
2 0.0% 0.0% 100.00 10.00% 110.00 £11,000 £1,100 10.00% £12,100 10.00%
3 0.0% 0.0% 100.00 10.00% 121.00 £12,100 £1,210 10.00% £13,310 10.00%
4 0.0% 0.0% 100.00 10.00% 133.10 £13,310 £1,331 10.00% £14,641 10.00%
5 0.0% 0.0% 100.00 10.00% 146.41 £14,641 £1,464 10.00% £16,105 10.00%
6 0.0% 0.0% 100.00 10.00% 161.05 £16,105 £1,611 10.00% £17,716 10.00%
7 0.0% 0.0% 100.00 10.00% 177.16 £17,716 £1,772 10.00% £19,487 10.00%
8 0.0% 0.0% 100.00 10.00% 194.87 £19,487 £1,949 10.00% £21,436 10.00%
9 0.0% 0.0% 100.00 10.00% 214.36 £21,436 £2,144 10.00% £23,579 10.00%
10 0.0% 0.0% 100.00 10.00% 235.79 £23,579 £2,358 10.00% £25,937 10.00%
11 0.0% 0.0% 100.00 10.00% 259.37 £25,937 £2,594 10.00% £28,531 10.00%
12 0.0% 0.0% 100.00 10.00% 285.31 £28,531 £2,853 10.00% £31,384 10.00%
13 0.0% 0.0% 100.00 10.00% 313.84 £31,384 £3,138 10.00% £34,523 10.00%
14 0.0% 0.0% 100.00 10.00% 345.23 £34,523 £3,452 10.00% £37,975 10.00%
15 0.0% 0.0% 100.00 10.00% 379.75 £37,975 £3,797 10.00% £41,772 10.00%
16 0.0% 0.0% 100.00 10.00% 417.72 £41,772 £4,177 10.00% £45,950 10.00%
17 0.0% 0.0% 100.00 10.00% 459.50 £45,950 £4,595 10.00% £50,545 10.00%
18 0.0% 0.0% 100.00 10.00% 505.45 £50,545 £5,054 10.00% £55,599 10.00%
19 0.0% 0.0% 100.00 10.00% 555.99 £55,599 £5,560 10.00% £61,159 10.00%
20 0.0% 0.0% 100.00 10.00% 611.59 £61,159 £6,116 10.00% £67,275 10.00%
21 0.0% 0.0% 100.00 10.00% 672.75 £67,275 £6,727 10.00% £74,002 10.00%
22 0.0% 0.0% 100.00 10.00% 740.02 £74,002 £7,400 10.00% £81,403 10.00%
23 0.0% 0.0% 100.00 10.00% 814.03 £81,403 £8,140 10.00% £89,543 10.00%
24 0.0% 0.0% 100.00 10.00% 895.43 £89,543 £8,954 10.00% £98,497 10.00%
25 0.0% 0.0% 100.00 10.00% 984.97 £98,497 £9,850 10.00% £108,34 10.00%
26 0.0% 0.0% 100.00 10.00% 1083.47 £108,34 £10,83 10.00% £119,18 10.00%
27 0.0% 0.0% 100.00 10.00% 1191.82 £119,18 £11,91 10.00% £131,10 10.00%
28 0.0% 0.0% 100.00 10.00% 1311.00 £131,10 £13,11 10.00% £144,21 10.00%
29 0.0% 0.0% 100.00 10.00% 1442.10 £144,21 £14,42 10.00% £158,63 10.00%
30 0.0% 0.0% 100.00 10.00% 1586.31 £158,63 £15,86 10.00% £174,49 10.00%
5% yield, 5% growth, 5% shareprice appreciation each year - the same, you annualise at 10%/yr
Year Divid growth Capital growth SharePrice DividendperShare Shares Capital Total Dividend Yield Total Annualised Return
1 5.0% 5.0% 100.00 5.00% 100.00 £10,000 £500 5.00% £11,000 10.00%
2 5.0% 5.0% 105.00 5.25% 104.76 £11,000 £550 5.00% £12,100 10.00%
3 5.0% 5.0% 110.25 5.51% 109.75 £12,100 £605 5.00% £13,310 10.00%
4 5.0% 5.0% 115.76 5.79% 114.98 £13,310 £666 5.00% £14,641 10.00%
5 5.0% 5.0% 121.55 6.08% 120.45 £14,641 £732 5.00% £16,105 10.00%
6 5.0% 5.0% 127.63 6.38% 126.19 £16,105 £805 5.00% £17,716 10.00%
7 5.0% 5.0% 134.01 6.70% 132.20 £17,716 £886 5.00% £19,487 10.00%
8 5.0% 5.0% 140.71 7.04% 138.49 £19,487 £974 5.00% £21,436 10.00%
9 5.0% 5.0% 147.75 7.39% 145.09 £21,436 £1,072 5.00% £23,579 10.00%
10 5.0% 5.0% 155.13 7.76% 152.00 £23,579 £1,179 5.00% £25,937 10.00%
11 5.0% 5.0% 162.89 8.14% 159.23 £25,937 £1,297 5.00% £28,531 10.00%
12 5.0% 5.0% 171.03 8.55% 166.82 £28,531 £1,427 5.00% £31,384 10.00%
13 5.0% 5.0% 179.59 8.98% 174.76 £31,384 £1,569 5.00% £34,523 10.00%
14 5.0% 5.0% 188.56 9.43% 183.08 £34,523 £1,726 5.00% £37,975 10.00%
15 5.0% 5.0% 197.99 9.90% 191.80 £37,975 £1,899 5.00% £41,772 10.00%
16 5.0% 5.0% 207.89 10.39% 200.93 £41,772 £2,089 5.00% £45,950 10.00%
17 5.0% 5.0% 218.29 10.91% 210.50 £45,950 £2,297 5.00% £50,545 10.00%
18 5.0% 5.0% 229.20 11.46% 220.52 £50,545 £2,527 5.00% £55,599 10.00%
19 5.0% 5.0% 240.66 12.03% 231.03 £55,599 £2,780 5.00% £61,159 10.00%
20 5.0% 5.0% 252.70 12.63% 242.03 £61,159 £3,058 5.00% £67,275 10.00%
21 5.0% 5.0% 265.33 13.27% 253.55 £67,275 £3,364 5.00% £74,002 10.00%
22 5.0% 5.0% 278.60 13.93% 265.63 £74,002 £3,700 5.00% £81,403 10.00%
23 5.0% 5.0% 292.53 14.63% 278.28 £81,403 £4,070 5.00% £89,543 10.00%
24 5.0% 5.0% 307.15 15.36% 291.53 £89,543 £4,477 5.00% £98,497 10.00%
25 5.0% 5.0% 322.51 16.13% 305.41 £98,497 £4,925 5.00% £108,34 10.00%
26 5.0% 5.0% 338.64 16.93% 319.95 £108,34 £5,417 5.00% £119,18 10.00%
27 5.0% 5.0% 355.57 17.78% 335.19 £119,18 £5,959 5.00% £131,10 10.00%
28 5.0% 5.0% 373.35 18.67% 351.15 £131,10 £6,555 5.00% £144,21 10.00%
29 5.0% 5.0% 392.01 19.60% 367.87 £144,21 £7,210 5.00% £158,63 10.00%
30 5.0% 5.0% 411.61 20.58% 385.39 £158,63 £7,932 5.00% £174,49 10.00%
Now when the dividend grows faster or slow than the shareprice is when you need to ask the question of "how long before the dividend grower outgrows the flat-high yield?"
In this scenario with 8% dividend growth but only 2% capital growth, it takes 17 years for your annualised return to exceed 10%/yr:
Year Divid growth Capital growth SharePrice DividendperShare Shares Capital Total Dividend Yield Total Annualised Return
1 8.0% 2.0% 100.00 5.00% 100.00 £10,000 £500 5.00% £10,700 7.00%
2 8.0% 2.0% 102.00 5.40% 104.90 £10,700 £566 5.29% £11,480 7.15%
3 8.0% 2.0% 104.04 5.83% 110.35 £11,480 £644 5.61% £12,354 7.30%
4 8.0% 2.0% 106.12 6.30% 116.41 £12,354 £733 5.94% £13,334 7.46%
5 8.0% 2.0% 108.24 6.80% 123.18 £13,334 £838 6.28% £14,439 7.62%
6 8.0% 2.0% 110.41 7.35% 130.77 £14,439 £961 6.65% £15,688 7.79%
7 8.0% 2.0% 112.62 7.93% 139.31 £15,688 £1,105 7.05% £17,107 7.97%
8 8.0% 2.0% 114.87 8.57% 148.93 £17,107 £1,276 7.46% £18,725 8.16%
9 8.0% 2.0% 117.17 9.25% 159.82 £18,725 £1,479 7.90% £20,579 8.35%
10 8.0% 2.0% 119.51 10.00% 172.20 £20,579 £1,721 8.36% £22,712 8.55%
11 8.0% 2.0% 121.90 10.79% 186.32 £22,712 £2,011 8.86% £25,177 8.76%
12 8.0% 2.0% 124.34 11.66% 202.49 £25,177 £2,361 9.38% £28,041 8.97%
13 8.0% 2.0% 126.82 12.59% 221.10 £28,041 £2,784 9.93% £31,386 9.20%
14 8.0% 2.0% 129.36 13.60% 242.62 £31,386 £3,299 10.51% £35,313 9.43%
15 8.0% 2.0% 131.95 14.69% 267.63 £35,313 £3,930 11.13% £39,950 9.67%
16 8.0% 2.0% 134.59 15.86% 296.83 £39,950 £4,708 11.78% £45,457 9.93%
17 8.0% 2.0% 137.28 17.13% 331.13 £45,457 £5,672 12.48% £52,038 10.19%
18 8.0% 2.0% 140.02 18.50% 371.64 £52,038 £6,875 13.21% £59,954 10.46%
19 8.0% 2.0% 142.82 19.98% 419.77 £59,954 £8,387 13.99% £69,540 10.75%
20 8.0% 2.0% 145.68 21.58% 477.35 £69,540 £10,30 14.81% £81,231 11.04%
21 8.0% 2.0% 148.59 23.30% 546.66 £81,231 £12,74 15.68% £95,596 11.35%
22 8.0% 2.0% 151.57 25.17% 630.72 £95,596 £15,87 16.61% £113,38 11.67%
23 8.0% 2.0% 154.60 27.18% 733.40 £113,38 £19,93 17.58% £135,58 12.00%
24 8.0% 2.0% 157.69 29.36% 859.83 £135,58 £25,24 18.62% £163,54 12.35%
25 8.0% 2.0% 160.84 31.71% 1016.7 £163,54 £32,23 19.71% £199,04 12.71%
26 8.0% 2.0% 164.06 34.24% 1213.2 £199,04 £41,54 20.87% £244,57 13.08%
27 8.0% 2.0% 167.34 36.98% 1461.5 £244,57 £54,05 22.10% £303,51 13.47%
28 8.0% 2.0% 170.69 39.94% 1778.1 £303,51 £71,02 23.40% £380,60 13.88%
29 8.0% 2.0% 174.10 43.14% 2186.1 £380,60 £94,29 24.78% £482,51 14.30%
30 8.0% 2.0% 177.58 46.59% 2717.1 £482,51 £126,5 26.23% £618,74 14.74%
Reverse this and with 2% dividend growth but 8% price appreciation, your annualised returns are immediate higher, but they fall over time as the yield falls due to the higher price and falling yield, eventually tending toward 10% over the long run
Year Divid growth Capital growth SharePrice DividendperShare Shares Capital Total Dividend Yield Total Annualised Return
1 2.0% 8.0% 100.00 5.00% 100.00 £10,000 £500 5.00% £11,300 13.00%
2 2.0% 8.0% 108.00 5.10% 104.63 £11,300 £534 4.72% £12,738 12.86%
3 2.0% 8.0% 116.64 5.20% 109.20 £12,738 £568 4.46% £14,325 12.73%
4 2.0% 8.0% 125.97 5.31% 113.71 £14,325 £603 4.21% £16,074 12.60%
5 2.0% 8.0% 136.05 5.41% 118.15 £16,074 £639 3.98% £17,999 12.47%
6 2.0% 8.0% 146.93 5.52% 122.50 £17,999 £676 3.76% £20,116 12.35%
7 2.0% 8.0% 158.69 5.63% 126.76 £20,116 £714 3.55% £22,439 12.24%
8 2.0% 8.0% 171.38 5.74% 130.93 £22,439 £752 3.35% £24,986 12.13%
9 2.0% 8.0% 185.09 5.86% 134.99 £24,986 £791 3.17% £27,775 12.02%
10 2.0% 8.0% 199.90 5.98% 138.95 £27,775 £830 2.99% £30,828 11.92%
11 2.0% 8.0% 215.89 6.09% 142.79 £30,828 £870 2.82% £34,164 11.82%
12 2.0% 8.0% 233.16 6.22% 146.52 £34,164 £911 2.67% £37,808 11.72%
13 2.0% 8.0% 251.82 6.34% 150.14 £37,808 £952 2.52% £41,785 11.63%
14 2.0% 8.0% 271.96 6.47% 153.64 £41,785 £994 2.38% £46,122 11.54%
15 2.0% 8.0% 293.72 6.60% 157.03 £46,122 £1,036 2.25% £50,847 11.45%
16 2.0% 8.0% 317.22 6.73% 160.29 £50,847 £1,079 2.12% £55,994 11.37%
17 2.0% 8.0% 342.59 6.86% 163.44 £55,994 £1,122 2.00% £61,595 11.29%
18 2.0% 8.0% 370.00 7.00% 166.47 £61,595 £1,166 1.89% £67,688 11.21%
19 2.0% 8.0% 399.60 7.14% 169.39 £67,688 £1,210 1.79% £74,313 11.13%
20 2.0% 8.0% 431.57 7.28% 172.19 £74,313 £1,254 1.69% £81,512 11.06%
21 2.0% 8.0% 466.10 7.43% 174.88 £81,512 £1,299 1.59% £89,332 10.99%
22 2.0% 8.0% 503.38 7.58% 177.46 £89,332 £1,345 1.51% £97,824 10.92%
23 2.0% 8.0% 543.65 7.73% 179.94 £97,824 £1,391 1.42% £107,041 10.86%
24 2.0% 8.0% 587.15 7.88% 182.31 £107,041 £1,437 1.34% £117,041 10.79%
25 2.0% 8.0% 634.12 8.04% 184.57 £117,041 £1,484 1.27% £127,889 10.73%
26 2.0% 8.0% 684.85 8.20% 186.74 £127,889 £1,532 1.20% £139,652 10.67%
27 2.0% 8.0% 739.64 8.37% 188.81 £139,652 £1,580 1.13% £152,404 10.62%
28 2.0% 8.0% 798.81 8.53% 190.79 £152,404 £1,628 1.07% £166,225 10.56%
29 2.0% 8.0% 862.71 8.71% 192.68 £166,225 £1,677 1.01% £181,200 10.51%
30 2.0% 8.0% 931.73 8.88% 194.48 £181,200 £1,727 0.95% £197,423 10.45%