Dear DTA,

My goal is to have retirement cash flow from my investments by the time I reach 55, which is 11 years from now. We are Canadian, so the US dollar affects us as well. I currently have a relatively large chunk of money sitting in US dollars that I need to invest.

-Tiffany B.

Hi, Tiffany. It’s wonderful to hear from readers like yourself.

We know that there are real people with real financial goals and challenges reading our articles.

Likewise, there are real people with real financial goals and challenges writing these articles for you.

It’s with that in mind that I think I’m a great person to tackle your question today.

I say that because I had a similar plan to you – I wanted to create retirement cash flow from my investments.

Except my goal was a bit more aggressive.

My plan was to quit my job and put myself in a position to live off of investment income before 40 years old.

And I didn’t start until almost 28 years old, meaning I had a time frame of a bit over 10 years.

Well, my expectations have been exceeded, as I quit my day job just one day after my 32nd birthday.

And my passive investment income started to cover my expenses before turning 34, making me financially free at 33.

How did this happen?

In a fairly straightforward manner, actually.

I simply lived below my means and regularly invested my excess capital into high-quality dividend growth stocks like those that can be found on David Fish’s Dividend Champions, Contenders, and Challengers list – an invaluable compilation of data on more than 800 US-listed stocks with at least five consecutive years of rising dividend payments.

This plan allowed me to build a six-figure dividend growth stock portfolio (this is real money we’re talking here) that is on pace to generate five-figure passive dividend income for me over the next 12 months.

This passive income exceeds how much I’m going to spend on the basics in life (rent, food, transportation, etc.) over the next 12 months.

Better yet, that passive income is highly likely going to increase year in and year out all by itself – in a totally organic manner – due to the very stocks the portfolio holds.

That’s because these are dividend growth stocks. That means the dividends are growing.

How does this happen?

These are wonderful businesses which are selling products and/or services that people all over the world demand and enjoy.

Think the iPhones that Apple Inc. (AAPL) manufactures, markets, and sells.

Think the McDonald’s Corporation (MCD) cheeseburgers that millions of people enjoy every single day.

Think the cleaning and personal care products from Procter & Gamble Co. (PG) that households all around the world buy, use, and rely on.

See, these companies are able to increase their profit over time because they’re selling more products to more people at higher prices.

The world is growing, making it a pretty surefire bet that more people will be consuming more products in the future.

And the high-quality products that these companies sell have a demonstrated ability to command a premium in the market. This is unlikely to change.

Due to the brand and pricing power that these companies thus have, they’re able to charge more money over time.

This all trickles down to the bottom line (the profit).

And since shareholders technically own a publicly traded company, that profit is technically owed to the shareholders.

Well, a dividend is a shareholder’s rightful slice of a company’s profit. And as profit grows, so should the dividend.

Thus, it’s logical to believe that a lengthy dividend growth streak is evidence of all of these dynamics in place, and so a lengthy dividend growth streak tends to be a pretty good general litmus test of business quality.

And just like these wonderful businesses helped me achieve financial independence in my 30s, they can also help you achieve your goals in your 50s.

That’s because we’re both after the same thing: passive investment cash flow.

The last thing I’d ever want to worry about for decades of my life is slowly but surely selling off my portfolio to generate cash flow, worrying about every single fluctuation in the stock market (because of how it would affect how many shares I’d have to sell).

I instead look at high-quality dividend growth stocks as golden geese that lay golden eggs.

As long as you don’t go and sell the golden geese, they’ll very likely grow plumper over time, laying you even more golden eggs with which to pay for bills in your life.

As a Canadian, you have easy access to hundreds of “golden geese” in the United States, which are, frankly, some of the best in the world. Your US dollars can be put to work immediately.

Furthermore, you have access to plenty in your own country, as a number of businesses in your country (especially in banking, natural resources, and telecommunications) offer plenty of income and income growth opportunities.

However, I wouldn’t stress out too much about the currency concerns. And I say that as an American who’s invested in businesses all over the world (including some in your country of Canada) and living in Thailand, meaning I have plenty of currency exchange exposure.

Currencies fluctuate (up and down) relative to each other all the time, but there tends to be a pretty reliable mean over the long run for some of the world’s largest currencies (which include both the US and Canadian dollar).

Summing it up, I think dividend growth investing is a fantastic way for you to chase after and achieve your financial dreams.

And there are a number of resources right here on the site that are designed to help you get there.

Fellow contributor Dave Van Knapp put together an excellent (and robust) series of articles that are designed to educate novice and experienced investors alike on all of the intricacies of dividend growth investing.

Each article is an individual “lesson”. This is a great resource for further knowledge building on this strategy.

And then if/when you’re ready to put some of your capital to work, I personally highlight a compelling long-term dividend growth investment stock idea every Sunday as part of the Undervalued Dividend Growth Stock of the Week series.

These are free ideas that are presented to the investment community, with each stock being sourced from Mr. Fish’s aforementioned CCC list. Upon publication, a stock looks compelling based on fundamentals and valuation.

And while most of these businesses are from the US, there are also a number from Canada.

You can achieve your financial dreams, Tiffany.

And we only want to help, which is why we’ve taken the time to respond to you today.

But it’s ultimately up to you to take the next steps.

And there’s no better time to start than today.

I wish you luck and success.

Jason Fieber

Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.

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