I Just Invested $4,700 Into 4 Dividend Stocks. Here's Why I'm More Excited About Their Potential Returns Than Their $59 in Annual Income.

In the past few days, I allocated approximately $4,700 to invest in four dividend stocks: Brookfield Corporation, Prologis, Chubb, and Kinsale Capital. Although the annual dividend income generated by this investment is around $59, my primary focus is on the potential returns within the next ten years, rather than the passive income.

This investment comprises 50 shares of Brookfield at about $1,900, yielding less than 1%, but the company's alternative asset management, insurance, and operating businesses offer significant growth potential. Prologis, with a yield over 3%, is expected to generate annual dividends of $34.24, with a reasonable growth assumption of 5% annually.

Chubb, with a yield of about 1.3%, is backed by profitable underwriting, a growing investment portfolio, and buybacks, with an 8% annual normalized EPS growth forecast. Kinsale, the riskiest of the four, has exceptional underwriting profitability and growth, but rising competition threatens its business. Despite its lower dividend yield, I anticipate 8%+ annual EPS growth and a widening valuation multiple.

The total investment in these four dividend stocks doesn't generate much income, but dividends are just one way a company can reward investors. By growing earnings and cash flow per share through business growth and share repurchases, a higher valuation can be achieved in the market. Building a valuation model, I estimate a 9% to 12% average annual total return over the next decade, resulting in a potential gain of around $8,400, surpassing the $59 annual dividend income expectation.

While these outcomes aren't guaranteed, these financially strong companies have a history of growing shareholder value. My investment strategy prioritizes long-term wealth creation over mere yield generation, making these investments a compelling choice.