In a previous article, we talked about the beauty of a dividend snowball. In a nutshell, this is where you invest enough in one dividend stock (or even several dividend stocks) so that the dividend payout is sufficient to buy into the same stock/stocks. This way, even if you don’t have money to invest in a certain month or a period, your portfolio still keeps growing.

A dividend snowball is a great way to keep things moving at all times. And you are essentially reinvesting their money on which they give you more dividends. This is an exponential process.

So, I’ve chosen Timbercreek Financial (TF.TO) as my ‘chosen one’ company to start my dividend snowball. There are certain good-to-have features in a stock that qualifies it to be turned into a snowball. In my opinion, Timbercreek Financial checked them off well.

However, I’m not a financial advisor. So, we suggest you do your own research before investing in any company stock.

Timbercreek Financial Company Profile

Timbercreek Financial is a mortgage investment company, provides shorter-duration structured financing solutions to commercial real estate investors in Canada.

Essentially, they lend money to companies with a focus on real-estate space, be it residential, office, and retail. As of June 30, 2021, the Company has 113 mortgage investments, with an average investment value of $10 million. 89% of the investments are in income-producing properties, thus ensuring investor money is put into good use.

From Q2 2020 to Q2 2021, the net income of the company grew by 15% and reduced their massive payout ratio by 9% to 86%, which is actually better for the health of the company.

The reduction in the payout ratio is not actually an issue since Timbercreek Financial still yields over 7% per annum.

They also pay a monthly dividend, which is a very good trait to have when it comes to building a dividend snowball. This allows me to add additional Timbercreek Financial stocks to my portfolio every month!

The checkmarks that Timbercreek Financial met to be eligible for my dividend snowball are;

• Stable company
• Monthly dividend payments
• High dividend yield (not necessary, but helps)
• A lower share price (obviously, this is out of our control)

Timbercreek Financial ➡️ Dividend Snowball

So, this is how I have planned and executed the process of converting Timbercreek Financial holdings into a dividend snowball in my dividend portfolio.

When I decided to begin this process, I owned 105 shares of Timbercreek Financial. I got a dividend of $6.04 from these holdings in the month of August 2021.

When looking at the market price of Timbercreek Financial at the time, I realized that my monthly dividend payment from them was only around $3 away from being able to afford 1 share of them. At the time, Timbercreek was trading around $9.5 – $9.7 and I realized I only need a little more investment into the stock to start a dividend snowball.

According to the math I did, with the market price at the time, I only needed around 170 shares of Timbercreek Financial for its monthly dividend to buy an additional share of the company.

I purchased an additional 55 shares during the month and I have a total of 160 shares of Timbercreek Financial now.

With these 160 shares, I’m able to receive a monthly dividend of $9.2, which is almost enough to buy a Timbercreek share every month.

Every month, I will be able to buy a new Timbercreek Financial share and every month my dividend will increase. This process will grow exponentially with time.

Even if I don’t add a single dollar into this snowball, it would grow to have over 240 shares in just 5 years. This might not seem a lot, but this is completely FREE.

I can speed up this process by investing my own cash on and off and even starting off with a higher initial investment. For example; had I added 340 shares now, it would buy me 2 additional shares every month. The dividend snowball would grow much larger this way.

Growing a dividend snowball can be done with any dividend-paying company. Depending on certain characteristics of the company, the speed of dividend snowball growth may vary.

Let us hear your feedback and questions in the comments below.