Earlier this year, I started publicly tracking dividend growth as it relates to my portfolio. I’ll update this information every quarter, which will provide relevant and important information on dividend raises announced by the companies I hold equity in, the size of those dividend increases, and how that affects my bottom line with real-life numbers in real-time.
What you see below is every company that I currently own a stake in that declared a dividend increase during the second quarter of 2015. So the ex-dividend date or pay date won’t be counted here. In addition, I only count stocks if I was long before the increase was announced. If I buy a stock shortly after a dividend increase was announced, then I don’t count it here. So this is a true reflection of an actual increase in my income, down to the dollar.
This is really exciting stuff. Dividend growth is what I refer to as the “secret sauce” in building and rolling a snowball. It provides a huge exponential compounding effect, especially as the dividend income grows. And now you’ll get to see how that works with real numbers here.
|Company||Ticker||Old Per-Share Dividend||New Per-Share Dividend||% Increase||$ Increase (Annual)|
|Walt Disney Co.||DIS||$0.575||$0.66||14.8%||$2.55|
|Int'l Business Machines Corp.||IBM||$1.10||$1.30||18.2%||$12.00|
|Johnson & Johnson||JNJ||$0.70||$0.75||7.1%||$20.00|
|Kinder Morgan Inc.||KMI||$0.45||$0.48||6.7%||$21.60|
|Realty Income Corp.||O||$0.1895||$0.19||0.2%||$0.42|
|Procter & Gamble Co.||PG||$0.6436||$0.6629||3%||$3.94|
|Southside Bancshares, Inc.||SBSI||$0.219||$0.23||5%||$3.26|
|Unilever PLC||UL||0.285 euros||0.302 euros||6%||$0.00*|
|Vodafone Group PLC||VOD||7.47 pence||7.62 pence||2%||$0.19*|
|Wells Fargo & Co.||WFC||$0.35||$0.375||7.1%||$9.00|
|W.P. Carey Inc.||WPC||$0.9525||$0.954||0.2%||$0.45|
|Exxon Mobil Corporation||XOM||$0.69||$0.73||5.8%||$3.20|
*These amounts are reflective of current exchange rates.
It’s just amazing. Secret sauce, indeed. Since the start of the year, my annual dividend income has basically increased by more than $200 by way of dividend raises alone. And that’s a number I can pretty much count on moving forward, other than fluctuations with currency affecting my foreign holdings (that tends to even out over the long haul). What you see in that chart is essentially, in aggregate, 18 “pay raises”.
And guess what I had to do to receive these pay raises?
Absolutely nada, other than own stock in the above companies.
I didn’t have to show up early, stay late, deal with office politics, make phone calls, manage an email list, or meet quotas.
I just had to sit back and wait.
Patience is tough sometimes, but my progress thus far is proof that patience and persistence works. Since I started investing in 2010, I’ve received countless pay raises every single year. It takes a little time for this to start noticeably working, but the additional cash flow is real.
An extra $200 per year might not sound like a lot of money.
But consider that it would take over $5,700 invested at a 3.5% yield to achieve the same effect.
Said another way, that’s $5,700 less I have to invest now to generate that same increase in my annual passive income. Wonderful!
And even better, every dividend raise increases the base upon which future dividend raises will stand. An annual $1.00 dividend that turns into $1.10 is a 10% dividend increase. But if that respective company announces another 10% raise the following year, that means you’re now collecting $1.21, or $0.11 more. Repeat that and you’re looking at $1.33, or $0.12 more. Rinse, repeat, become wealthy.
I once compared my portfolio to a tree, whereby each position is a branch. And each branch produces bountiful fruit. That fruit – the dividends – is what I’ll eventually live off of, choosing to pluck the fruit and leave the branches intact rather than cutting the branches, possibly slowly killing the tree.
Well, this is where the tree starts to tend to itself. It’s growing branches all by its lonesome.
Not only that – wait, there’s more – but dividend reinvestment continues to become more powerful when combined with dividend growth. Using the above example, you’re at first reinvesting a $1.00 dividend. Before factoring in any dividend reinvestment, your dividend goes up to $1.10 pretty quickly just with dividend growth alone. But when you reinvest your dividends, you’re buying more shares with capital you didn’t have to work for, meaning the dividend growth will become exponential. You’re receiving ever-growing capital with which to buy more shares which are also simultaneously increasing their dividends, allowing you to buy even more shares.
I could theoretically stop investing today and the dividend income the portfolio generates along with dividend raises and dividend reinvestment would still eventually render me financially independent – I’m a guaranteed millionaire at this point. The snowball is starting to move along without me. The good news, however, is that I’m not tired yet. I’m not done pushing. So these results will just continue to exponentially improve with every dollar of fresh capital I invest.
Out of the 62 stocks in my portfolio, this update represents 18 of them that increased their dividends this year. The first quarter update discussed another 19 that increased their dividends. However, I’ve thrown out the Lorillard Inc. dividend increase from Q1 because the company was acquired by Reynolds American, Inc. (RAI), meaning LO’s dividend increase is now meaningless to my finances. There’s also some overlap involved – KMI, O, and SBSI have all shown up in both reports this year.
However, three companies – Union Pacific Corporation (UNP), Travelers Companies Inc. (TRV), and Caterpillar Inc. (CAT) – announced impressive dividend increases before I initiated positions. While those increases aren’t represented in the chart because I didn’t own them prior to the pay raises behind handed out, they still have a material effect on my passive dividend income moving forward and I still count them as dividend increases for the year when looking at the total number of stocks in the portfolio that have handed out “pay raises”.
In addition, Disney announced a surprise dividend increase that came early this year along with a move to semi-annual dividends. A very welcome announcement. I adjusted the numbers in the chart to account for that change.
You’ll also see Unilever up there. They increased their dividend by 6% in euros, which is the currency upon which they declare dividends. But after converting it to sterling and then dollars, it really amounted to nothing. The dividends I see from foreign stocks will fluctuate because of currency exchange rates, but, over the long haul, the actual increases in percentage terms should hold relatively true. I’ll likely see very little dividend growth (or even negative growth) from my foreign holdings in dollar terms while the dollar remains strong, only to then see incredible increases in income when it swings the other way. It tends to equalize itself out. But I note the increases in native currency in these reports and then convert it to USD at the time I put together these updates. I pay little attention to currencies, otherwise.
Looking at all that, 36 out of the 62 stocks in the portfolio have increased their dividends this year. That’s a pretty strong result halfway through the year.
Notably, many of the stocks that are included above generally increase their dividends more than once per year. As such, the YTD total for the percentage increase will continue to factor in YTD increases in stocks’ respective dividends, which will be more accurate than averaging out the quarterly totals. However, I’m also including the quarterly totals so you can see true quarter-to-quarter incremental increases in income through dividend growth.
One last important aspect here is keeping perspective on the increase in dividend income in percentage terms. The YTD increase is somewhere around nine times the inflation rate of 0.8% we experienced last year. So not only is my purchasing power increasing, but it’s doing so at an incredible rate.
Full Disclosure: Long all aforementioned stocks except LO.
Did you have a great second quarter for dividend growth? Dividend increases up to your expectations? Enjoying “pay raises” you didn’t have to work for?
Thanks for reading.
Photo Credit: atibodyphoto/FreeDigitalPhotos.net
Edit: Deleted OHI dividend increase due to it already being counted in the Q1 update.