Dividend Growth Update – Second Quarter 2015

growingtreeWelcome to another dividend growth update!

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.

So let’s see which stocks in the Freedom Fund announced dividend increases this past quarter and how that affects the dividend income I’ll be able to generate moving forward.

CompanyTickerOld Per-Share DividendNew Per-Share Dividend% Increase$ Increase (Annual)
Apple Inc.AAPL$0.47$0.5210.6%$2.00
Clorox Co.CLX$0.74$0.774.1%$4.20
Walt Disney Co.DIS$0.575$0.6614.8%$2.55
Int'l Business Machines Corp.IBM$1.10$1.3018.2%$12.00
Johnson & JohnsonJNJ$0.70$0.757.1%$20.00
Kinder Morgan Inc.KMI$0.45$0.486.7%$21.60
Medtronic PLCMDT$0.305$0.3824.6%$11.10
Realty Income Corp.O$0.1895$0.190.2%$0.42
PepsiCo, Inc.PEP$0.655$0.70257.3%$14.63
Procter & Gamble Co.PG$0.6436$0.66293%$3.94
Phillips 66PSX$0.50$0.5612%$6.49
Southside Bancshares, Inc.SBSI$0.219$0.235%$3.26
Target CorporationTGT$0.52$0.567.7%$11.20
Unilever PLCUL0.285 euros0.302 euros6%$0.00*
Vodafone Group PLCVOD7.47 pence7.62 pence2%$0.19*
Wells Fargo & Co.WFC$0.35$0.3757.1%$9.00
W.P. Carey Inc. WPC$0.9525$0.9540.2%$0.45
Exxon Mobil CorporationXOM$0.69$0.735.8%$3.20
Q2 Totals:7.9%$126.23
YTD Totals:7.2%$200.24

*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.

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108 Comments

  1. very impressive, thanks for sharing, UNP got slaughtered today, hope to add some more very soon.

  2. I love the idea of getting pay rises you didn’t have to work for – another aspect of DGI which is awesome! And if you think about it another way, what would $200 pay for, in terms of expenses? If you can cross another monthly/yearly expense off the list because of the increased dividend payments, then you’re even closer than before 🙂

  3. John,

    No problem. Hope you found some value in it.

    Definitely enjoying the increasing volatility lately. Let’s hope this continues! 🙂

    Cheers.

  4. Nicola,

    Absolutely. More money for doing nothing? Sign me up!

    An extra $200 not only covers that much more in expenses, but we’re not even done with the year yet. And future dividend raises will now be based off of these higher numbers. Just keeps getting better. 🙂

    Thanks for stopping by.

    Best regards.

  5. Hey Jason,
    Very cool to track these numbers – something I’ve been lazy on doing since starting, tbh. Do you check or have you had any dividend cuts this year? I know cuts/halts are like sun on snow to the DGI snowball but just wondering if it’s happened this year yet with the 55+ companies you hold?
    Rich

  6. Rich,

    Haven’t had any dividend cuts. The fourth quarter might include a couple of zeros if some companies don’t raise their dividends by the end of the year, though. So that might push the growth number lower somewhat. But, holistically, the overall numbers are quite promising thus far this year, especially in a “challenging” economy. In the end, I look for increasing purchasing power, and there’s a pretty significant lead on inflation right now. 🙂

    Thanks for dropping by!

    Cheers.

  7. DM,

    These are going to be my favourite regular updates, hands down. This is the magic that most non-dividend-believers fail to see. As you said, the future dividend increases will be based on these updated dividend figures.

    Compounding rules.

    Take care,
    – Ryan from GRB

  8. Question : What is more desirable in your opinion, yearly dividend payments or semi-annual (or 4x a year for that matter)? I would have thought that it’d be more advantageous to get it all at once.

  9. blahblah903,

    I’ve seen some people try to do the math on it, and it’s mostly academic, in my view. If the annual payment is coming early in the year, then it’s technically compounding faster (and you’re in the market longer) than those same payments being spread out across the year. But I can’t imagine it making that much of a difference unless you’re investing all that money the second it rolls into the account. I’m always sitting on some cash.

    My favorite would really be monthly payouts. Just makes the monthly payouts/amounts smoother, and more in line with real-life bills. But, again, it’s pretty much a non-issue. If you’re at all literate when it comes to budgeting, it shouldn’t make much of a difference when it comes time to switch off reinvestment and live off of your dividend income.

    Take care!

  10. Nice work compounding there Jason!

    I’ve actually set my status at my favorite instant messaging app to “Compound growth is the 8th wonder of the world”. 🙂 Hopefully I’m able to spread the word to at least one other person.

    Best wishes, DfS

  11. Wow, that’s impressive! Definitely shows the power of compounding and why it’s so important to start this compounding as early as possible.

    Great update, it’s interesting to see the annual impact of each increase.

  12. Hi DM, I’m new to Div Investing so please forgive me if my question comes across as dumb. The $ Annual Increase shown in the graph you would multiply by the number of shares you own in that specific company? Is this correct?

  13. Hey Jason when I saw this article I couldn’t believe that it was time for this article already, this year is just flying by. I actually just had a dividend increase with my one and only stock (wba) of 6.7 percent to 0.36 a quarter. I’m very excited about all of these “firsts” I’m experiencing, and look forward all the time to the inspiration I get from your posts. Keep it up.

  14. Looks great. A 7.2% pay raise is better than most people get at work. It took me a long time to start investing in dividend growth stocks, but I have been onboard for a few years now. Dividend growth is one of the key ways to grow our passive income now. I think our YTD dividend growth is around 7% as well. I’m very happy with that.

  15. Thats awesome stuff Jason! I think dividend increases are one of the best things ever. Im not sure if I prefer dividend increases or stock buys. Either way theyre both a part of DGI and both are awesome. You’ve gotten a $200 raise without having to commit yourself to more time at the office which is great! Keep up the good work!

  16. RTR,

    Thanks so much. I like these updates. Shows the dividend growth in tangible and concrete terms. Academic backtesting is far less useful than real cash, in my opinion. 🙂

    But it’s definitely critical to get started as early as possible. Even though I got started at almost 28 years old, that’s actually pretty late in life. Better late than never, though.

    Cheers!

  17. Rob,

    No problem! 🙂

    Right. That’s the actual $ increase based on the number of shares I own. For instance, IBM increased its quarterly dividend from $1.10 to $1.30. That’s a yearly boost of $0.80. I own 15 shares of IBM. $0.80 x 15 = $12.00/year. You’ll obviously have to substitute your own shares to figure out how these raises impact you, if at all.

    Hope that helps.

    Take care.

  18. Tyler,

    I know. Time is flying by. It flies by a bit shorter for me these days, but still way faster than I’d like.

    This is a very exciting time for you. Although, I still find this stuff just as exciting as I did when I first started. In fact, I think it’s even more exciting for me now with the numbers getting bigger and bigger. I just don’t see how you could become jaded when it comes to something so wonderful. 🙂

    Keep at it over there. Have fun!

    Best wishes.

  19. Joe,

    Thanks for stopping by!

    I’m with you. A 7.2% pay raise is fantastic, and far more than a lot of people get at work. In fact, before I quit my job, I was faced with a pay decrease after they brought another guy on board (we were commission based, and another guy meant less total sales). But I don’t need to worry about such things anymore. Life is great as an investor. 🙂

    7% YTD growth is fantastic. I don’t see how you could be disappointed with that. When combined with a pretty decent yield, you’re looking at attractive total returns there.

    Best regards!

  20. What is there not to like? People, nowadays, have a difficult time getting a raise at all. It is great to receive regular raises from the companies I invest in?

    It is always great to receive passive income, and even greater when the passive income increases with no extra effort on my part.

  21. I was excited about this article when it popped up. I totally forgot that your were making this a quarterly report. I’m currently torn if I will be more excited to see these or your dividend income reports.

    Also I have a question about XOM. I recently sold it as the dividend looks to be unsustainable by FCF alone. I feel like if the company didn’t have the dividend champion status that it wouldn’t have raised the dividend. Part of the dividend and buybacks will have to be funded by debt. XOM can definitely afford to raise debt and do all this, but I ask why? Don’t we want to be owners in companies that make smart decisions like ourselves.

    What if you expanded your venture here and decided to create a blogging enterprise of sorts? Lets say you had a few other people that provided content for you. You also had an unofficial agreement that you would “divy” out any additional profits the enterprise created. Well just like XOM’s case, lets then say you were experiencing a golden age of profits and then “boom!” Profit became non-existent due to a loss in viewership. (XOM’s case a decrease in the price of oil). The understood agreement is that you would only “divy” out profit, but now you feel pressured to keep paying the absurd payment to each partner and you have to take out a loan to keep these payments up. Sure the partners are happy because their income is the same or increasing, but it comes at the cost of the company as you could’ve used that loan to hire new talent or research ways to increase viewership. Instead, you have done nothing to help your enterprise’s situation and in fact you have made it worse by now being on the hook for unnecessary interest payments down the road.

    Now do I think XOM will cut the dividend in the near future, No. It wants to maintain it’s elite status of dividend champion. I will say that there is one pro about maintaining the dividend champion trophy, it stands as a safe haven for investors. Ever since oil started dropping most pundits have mentioned that it has had the lowest volatility compared to other energy companies. Instead of rapidly dropping in price, the stock has slowly dropped to the low $80s.

    Either two things will happen: 1. The price of oil recovers back to $80 or beyond and the dividend becomes sustainable by FCF and the party continues. 2. Oil stays in it’s current range and XOM has to find ways to reduce CapEx to make the dividend payable by FCF before the interest and debt becomes too much to bear before cuts are made to the buyback plan and then the dividend. I am taking an educated guess that we will not see $80 oil again within the next year barring some crazy macro event such as WW III. Oil outputs from OPEC have actually increased since the crisis started in the end of 2014 http://www.iea.org/oilmarketreport/omrpublic/ . With that said I will venture that yield of XOM will continue to rise for at least another year as the stock price slowly deteriorates to match the companies underlying fundamentals of increased debt and reduction in FCF.

    I’m sorry for taking over the comments here with this question, but I am curious as to what your opinion is based on the situation. I recently sold out of all my positions that have any involvement in upstream oil exploration and production. I also know that you vowed to never sell again, but why limit yourself to having just the tool of BUYING when you can save some damage to your Dividend Orchard and SELL, Also know that it was my first ever sell order and I feel much better that I have the money now invested in something that I feel has better long term prospects.

  22. Wow bud,

    Over $200 in dividend increases. It’s incredibly eye-opening when you look at it as “not having to invest $5700” and reaping the rewards. I’m jealous that your dividend increases are about 1/4th of my entire dividend income for the year, haha! Keep up the good work man.

    Respect,
    DB

  23. hi Jason
    Yes isn’t it great to have to do nothing more than own a stock, and they pay you for it. Then they raise that dividend the longer you keep it. That what I call sweet. I see some more of your stocks that weren’t on this list that haven’t increased theirs yet. But they will in time reward you, isn’t that great. Jason you have set up a great portfolio of stocks that will reward you with dividend increases as long as you own them. Well done Jason. keep you the inspirational work.

    Cheers

  24. I like this idea of posting dividend increases. This is something I definitely should pay more attention to. And the fact that these increases coupled with our dividend income could continue growing our portfolio without the need for any new capital is amazing. Compounding interest, gotta love it. Thanks for the update.

    – HMB

  25. Any way to automate this information? I have to manually go and look up each company to find their distribution dates and if there were any raises. I wish I could just keep a list on yahoo finance or wherever that would show all the distributions on one page.

  26. These quarterly posts might just become my number one topic you write about… eclipsing the dividend income, monthly reports! Reason being, in the future, these increases will become the life blood of your portfolio staying ahead of inflation and keeping you financially independent. I know you will probably always continue to make some active income but say you actually quit the working world, these increases will keep your quality of life the same if not even better!

    Love the post, I too had some great dividend increases and I am loving not having to work for the extra money, nor having to invest the capital to make this extra money.

    Such a great feel good post.

    ADD

  27. I’m also assuming administration costs increase with the frequency, so maybe it’s a good move to go from quarterly to semi-annual. More FCF for dividend growth 🙂

  28. Cool-aid, $200 of increases and 19 raises is great. I also have many of the same stocks in my portfolio that I’m building from scratch. Its awesome to see the power of growing passive income and become independent. Keep racing, my friend.

  29. IP,

    Absolutely. It’s hard enough to get a small raise at work with extra effort on your part. Not only did I receive a nice fat increase in my income, but I didn’t have to do a thing for it. The life of a dividend growth investor. 🙂

    Thanks for stopping by!

    Cheers.

  30. TDM,

    I’m not really sure why you’re asking me these questions. It really comes down to what YOU’RE comfortable with. If you’ve already decided to sell out of certain positions, then that’s the decision that’s made and the one you’ll have to live with, either way.

    Of all the supermajors, XOM concerns me the least in terms of dividend sustainability/growth. The dividend is comfortably covered by free cash flow and then some, which is in contrast with some of the other players in this field (like, say, Shell). I don’t see a dividend cut at any point in the future for XOM, so I’m not sure why I’d be worried about damage to the Dividend Orchard. If management thought the dividend wasn’t sustainable, I have no idea why they’d raise it like they did.

    As far as the price of oil goes, it cracks me up to see people pointing to this or that data point as to why oil won’t rise above price $X by time period Y. I don’t remember hearing a peep about oil falling drastically last summer. Now that it has, people think it’ll probably just stay that for a while… until it doesn’t. Then, after it rises, it should just stay at a high price for a long period of time because of data point Z. I don’t bother with that game.

    Your point on dividends being cut during periods of turmoil is exactly why I invest the way I do. Paying a dividend year in and year out forces management to be conservative, efficient, and responsible with shareholders’ cash. To say that companies should just have more leeway and scrap the payout as soon as the seas get rough completely ignores one of the fundamental reasons for why a dividend (especially a growing one) is so attractive in the first place. You could certainly invest in a company like Transocean that cuts their dividend when things get rough, but you’ll see what you get with that. I love a company like XOM specifically because they can effectively manage the ups and downs of the industry. Why would I care about the price of XOM’s stock when my dividend just moves in one direction (up)? Those who buy XOM at $100 and sell at $81 will likely do better either not being in stocks at all, or certainly staying away from cyclical holdings.

    Just my quick take on it.

    Cheers!

  31. DB,

    Thanks so much. Appreciate it!

    I love putting these reports together and specifically pointing out how much capital would be necessary to invest to achieve the same effect. I think that gets the point across better than any backtesting, academic exercise, or hypothetical calculations. 🙂

    Keep at it over there and you’ll see the same (if not better!) results.

    Best wishes.

  32. michael,

    Appreciate that very much. Glad you’re finding inspiration and motivation here. That’s why I do what I do, write what I write, and share what I share. 🙂

    The longer you hold stock, the more you’re rewarded. It’s a tough job being a long-term shareholder, but someone has to do it!

    Hope you’re having a great year over there, too.

    Cheers!

  33. HMB,

    Yeah, this is something I should have been posting about all along. It’s one thing to write about something and show a few figures, but it’s quite another to actually show what it all looks like with real stocks, real dividend growth, real income, and real results. 🙂

    Thanks for stopping by. Have a great weekend over there!

    Best regards.

  34. Justin,

    I’m not sure if there’s a way to fully automate it. I receive emails whenever a dividend is announced/increased and I simply note if it was an increase. If so, I include it in that quarter’s report. It’s fairly easy, even with as many holdings as I have. Might miss one here or there if I forget to pass along the stock ticker, but it’ll all work out by the end of the year.

    Thanks for stopping by!

    Take care.

  35. ADD,

    Thanks so much. Glad you’re enjoying these updates. Takes a little time to put together that chart, but they’re a lot of fun to share. 🙂

    And you’re absolutely right there. Although I’m highly likely to make some active income after I’m 40, these dividend raises will eventually start to become the main driver of income growth down the line. It’ll one day be a runaway snowball of income growth, meaning I’ll have more income than I know what to do with. What a wonderful problem to have.

    Enjoy that extra passive income over there. Tough work being a dividend growth investor, which is why I’m so glad we’re getting pay raises for it!

    Cheers.

  36. R2R,

    Absolutely. I built this thing from the ground up with modest income and in a relatively short period of time. The power of dividend growth doesn’t even take that long to make itself known. Life is good! 🙂

    Thanks for stopping in.

    Take care!

  37. Congrats! Your blog keeps us going. Keep it up! Thanks for all you do. We are getting there too. 🙂

  38. Always interesting stuff. So following up on our last “chat” I researched UTX a bit more and thought it would be an interesting addition to my portfolio – put in a buy @$98 which is right above their 40 week moving average so we’ll see how things play out over the next few weeks. Thanks for the tip!

  39. Well done Jason! The more good companies you buy, the more dividend increases you are able to get. Just now I have uploaded on my blog the Buffett’s speech in the University of Florida, and we was right (as usual): no matter the price you pay, if you buy a good company, you would reach a great performance in the long run.
    You have the right method, sir.

  40. This is one of my favourite articles because it shows how powerful dividend investing is with simply doing … nothing. I have some of the companies as well you listed and for example OHI or KMI are incresing the dividend mostly every quarter by a small amount. It doesn´t look like much, but adding them with the amount of shares its incredible.

    Some weeks ago I had a discussion with a German guy about saving and one of my favourite boring big company Johnson & Johnson. He told me that this share didn´t do anything the last one year. You can have it for the same money and you will get only 3%. What he didn´t see was the increase from ,70 c to ,75 c, which is much more than inflation. In Germany we don´t have a significant inflation of 0,3% at the moment. I gave him a link to the J&J website with the dividends of the last 20 years and told him, that this company was the same boring big firm. But look at the dividend and the splits, if you calculate investing 2000 € in 1995 what you have now and how much dividends you got in that time. I don´t see what is wrong on this. But Germany is very difficult speaking about shares and dividend investing and I don´t see, if he understood the power of it.

    200 $ increase for doing nothing is really wonderful. One day if you are in rent and you can say: I have an income overall increase of say 5% all the people getting a small national old-age pension with an increase of say1.5% would envy you. And we have a lot of people in Germany which will get only this pension. That´s really sad.

  41. I absolutely LOVE this dividend growth update series, Jason! It really makes the concept of dividend growth tangible, and it’s a wonderful sight to behold. Incredible to see your wealth take on a life of its own and move the snowball along, with or without your adding fresh capital on the regular.

    Keep up the great work as always. I look forward to reading more of these updates every quarter.

    Peace bro!

  42. That’s almost crazy to see money making money on it’s own! Congratulations on the dividend growth(s) 🙂

    How are you (re)investing your dividend payouts though? Are there set limits to the minimum amount of paid dividend you want to have before re-investing it into new stocks? Or are you using your paid dividends and combine it with your other income to re-invest into buying new stocks as soon as you find a suitable company to invest in?

  43. That’s the magic of dividend growth. $200 increase in dividend income for doing absolutely nothing is pretty sweet. 🙂

  44. I agree with you. It does gets the point across better than any theoretical discussion. At least for me, and I’m sure that it does for many other people as well.
    Thanks for writing and inspiring, DM!

  45. That really is a pretty tidy sum of money from your div increases so far DM. I’v been enjoying of few of those as well so far this year and looking forward to some more! Now i’m curious just how much my dividend income has gone up in total this year, I’v posted/calculated how much more I have gotten from individual increases but not all of them combined. Curious to also calculate dividend yield based on cost average.

    Thanks for the post/idea! Reinvest well as always 🙂

  46. I think organic dividend growth is one of the most attractive and powerful features of dividend growth investing. As you point out, the organic dividend growth is equivalent to many thousands of dollars invested in the corresponding securities. It’s that organic growth that will come in handy during the next economic meltdown. It allows me to sleep well at night knowing that I am two steps ahead of inflation.

    Over the next few decades our income is set to double and quadruple…a very comforting thought.

  47. Jason,

    As you said you are a guaranteed millionaire and this is the biggest achievement considering that you are doing “nothing”, you are not spending 60 hrs in the office, not stressed and managing your life your way.

    So, every incoming penny is a closer step to the millionaire club.

    Well done.

    Cheers, RA50

  48. HI DM,
    Another great article – Any thoughts on setting up a facility for your community members to contribute articles to your site (after you have approved them of course). I am not an author, but I see a wealth of knowledge in your comment stream.

    Dividend payments and increases are the main criteria I track in my portfolio. Company freezes there Dividend for me that is a warning signal and that is when I sell, very little else will encourage me to sell. If the company no longer has the cashflow to provide a steadily increasing dividend then the cash flow must be deteriorating.

    I aim for a 3% increase every quarter on the previous quarters dividends received (this includes all re-invested dividends and dividend increases).

    The great beauty of managing a portfolio in this manner is the psychological advantages in enabling me to completely ignore the noise as long as my portfolio continues to meet my goals – who cares if the S&P 500 is up or down 1000%? My portfolio meets MY specific aim of a 3% income increase every quarter. ANd no job is realistically going to provide wage increases of 3% every quarter.
    It also enables me to make approximate estimates looking ahead of what my income will be, and I can set small goals which is much more achievable than hoping some millionaire businessmen that has no interest in me will bid my holdings up to a level that will allow me to have a good lifestyle.

    Keep up the good work!

  49. Very nice DM! Check your OHI numbers. I think they bumped to .53 in Jan, also they just increased to .55 but that was this quarter.

  50. Congrats on the $200 organic gain in dividends this quarter and also on this series. Like everyone else I’m loving these Dividend growth updates. Really hammers home the main points of DGI.

    Love the comparison of the $200 gain and how that would take ~$5k of new funds to match. Extrapolating your numbers out for the year you would theoretically be getting about $800 in increases which would equate an extra $20k in money that you didn’t have to come up with.

    So amazing! Great post!!

  51. Trish,

    Thanks so much. Appreciate the support! 🙂

    We’re all getting there together. This community is pretty amazing. Keep it up over there.

    Cheers.

  52. dzogen,

    Nice move there. UTX at anywhere around $100 is a good call, in my view. It’ll be interesting to see what things look like after the sale of Sikorsky and that massive buyback.

    Happy shopping!

    Take care.

  53. DR,

    Absolutely. Valuation is very important, but I think quality is even more important. If you stick to buying and holding high-quality businesses and you don’t routinely overpay, you should do really, really well over the long haul. And that’s whether you get the absolute best price or not. The best price is something that can only be known in hindsight anyway.

    Thanks for stopping by!

    Best regards.

  54. DF,

    This is where the “secret sauce” is. Organic income growth that’s completely hands-off. I didn’t have to do a thing other than just continue holding stock I bought a long time ago. About the easiest pay raise you’ll ever come across. 🙂

    Have a great weekend over there.

    Cheers!

  55. olli,

    Yeah, you make a great point there. Many, many retirees here in the US rely on Social Security income, which is somewhat akin to what you’re talking about over there. And income growth there is pretty limited. You’re relying on the government to tell you which way your income is going to go and by how much – generally limited to the inflation numbers (it’s a 1.7% increase for 2015). I’d rather not be in a situation like that. Companies in general have a much better track record at dealing with money than any government I’ve run into. And I think I quite like my chances at seeing my income far outpace inflation when we’re talking about these high-quality dividend growth stocks versus government income. 1.7% isn’t bad, but 7% is quite a bit better. 🙂

    Cheers!

  56. ZTZ,

    Thanks so much. Glad you’re enjoying it. I wish I would have been doing these updates all along. Better late than never! 🙂

    I think these posts really show the power of this strategy. You’re seeing income growth happen without any input on your part, and looking at it in terms of how much capital would be necessary to invest to achieve the same effect really puts it into perspective. Over $5,000 of capital that basically “got invested for me”, effectively. And we’re only halfway through the year. That’s like a new stock purchase every month that I didn’t have to worry about. It’s amazing stuff.

    Thanks for the support. Keep up the great work over on your end as well!

    Best wishes.

  57. Judith,

    Thanks so much!

    Academic studies and theoretical backtesting can shed some light on things, but it’s of limited use, in my opinion. We operate in the real world where the future isn’t yet known. So this is where “the rubber meets the road”, if you will. Real-life performance in real-time. 🙂

    Appreciate the support. I’ll keep writing if you keep reading.

    Best regards.

  58. DW,

    No problem at all. Hope you found some value in the post.

    It’s great to look at how much income growth is coming from the dividend raises themselves. Really tells you where you’re at relative to inflation, which can be a nice little yardstick to pay attention to along the way. If you’re killing inflation, you’re in a great spot in terms of purchasing power over the long term. 🙂

    Cheers!

  59. Spoonman,

    Absolutely. I sleep like a baby, as I’m sure you do, too. Stock prices go up and down. But our aggregate dividend income tends to only move in one direction – up! 🙂

    And what’s great about the spread between dividend growth and inflation – besides the obvious increase in purchasing power – is that it gives you this massive margin of safety over time that only grows and grows. So if a dividend cut does occur, your income is increasing fast enough to offset that anyhow.

    Thanks for stopping by!

    Best wishes.

  60. RA50,

    Thanks so much for the kind words!

    The millionaire club sounds cool and all, but I’m really looking forward to the financially independent club. Much more exclusive. However, the latter begets the former anyway. Life is good. 🙂

    Have a great weekend over there.

    Cheers.

  61. Great results over there! I think the real question is what are you going to do with that extra $5700? Perhaps you’re going to go wild and spend that money left and right….…on more dividend stocks?

    Sincerely
    ARB–Angry Retail Banker

  62. DF UK,

    I’ve thought about setting up a forum here. I think that’d be really fantastic. However, I’m maxed out with what I’m doing already. So I’m loath to add anything else to the plate. And I’m also not technically gifted. The fact that I even run this website at all is pretty crazy to me.

    I’m with you over there. I don’t really worry too much about what the stock market is doing. It goes up. It goes down. But my dividend income only knows the direction of up. The tangible and reliable nature of dividend and dividend growth is one of the most attractive features of this strategy. Bills tend to be pretty reliable. I know what rent’s going to be. I know about how much I’m going to spend on transportation and food. So I like having a pretty good idea as to what kind of income I should expect to pay those bills. This strategy allows you to “right-size” your income, in line with your expenses. I have no idea what Coca-Cola’s stock price is going to be next week, next month, or next year. But I know exactly how much my dividend check is going to be. And I’m pretty confident that check is going to be bigger and bigger every year, likely outpacing the increase in my expenses. That leads to a runaway snowball of income. Life is very good. 🙂

    Thanks for stopping by!

    Best wishes.

  63. fiveoh,

    Yeah, you’re right on that. I included it twice because of the prorated dividend. The full $0.54 could have been counted in either quarter, but I included the move to $0.54 in the Q1 update. I’ll edit that. Thanks for pointing that out! 🙂

    Cheers!

  64. Added to XOM and CVX @ close to $80 and $90. Energy sector is reacting like it did back in 2008, but at that time we had financial crises along with oil price collapsed that forced more liquidations. I can’t pass up on CVX yielding 4.75%. I have to trust the fact that CVX will fine based on its entire history.

    Do you have any thought on CMI?

  65. Sundeep,

    Thank you. I think these articles are really insightful. I wish I would have been showing how this works all along. But I’ve still got a few years left in this journey, so lots more to come. 🙂

    The extrapolation doesn’t quite work like that. The $200 is YTD, and more than half the stocks in my portfolio (including some of my biggest payers) have already increased their dividends. So the second half probably won’t be quite as strong. But we’ll see! If I can double that organic growth and see an extra $400/year in dividend income, I’d be ecstatic. That’s more dividend income than I made in the entirety of my first year at this. That would be something.

    Have a great weekend. Thanks for the support!

    Best wishes.

  66. AJ,

    CMI has excellent fundamentals across the board. Cyclical, obviously, but they manage that well. It’s a specialized play on engines, so it’s just a decision as to whether or not you want to be in that kind of business or not (and how well you understand it). I prefer more diversified plays when looking at something industrial/manufacturing.

    Cheers!

  67. I think this guy might have said it best: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” ― Albert Einstein

    For those of us who started out poorly with finances, overspending, debt, etc. we learned how compound interest works to our determinant with debt and credit cards. Not well. It just keeps digging a deeper hole!

    Once we evolved in our money management skills, we found the reverse effect with compounding to be true, observing our net worth grow. You are now enjoying the benefits of owning solid companies, increasing their dividends, and giving you built in raises.

    Thanks for sharing your updates with us Jason. Take care!

  68. Bryan,

    I hear that Einstein guy was pretty smart. 🙂

    You’re absolutely right there. Compound interest is blind to whether it’s working for you or against you. It only knows how to do what it does. It’s agnostic as to whether it’s debt or investments. But if you get it on your side and put it to work for you, it’ll absolutely change your life for the better.

    Thanks for stopping by!

    Best wishes.

  69. Dividend increases are indeed awesome. I enjoy having to update my spreadsheet by INCREASING the numbers whenever I log on my account to check, the feeling is great. Now in contrast, my work salary doesn’t increase as often if ever at all but that’s not so bad- it’s why we Early Retirement Folks invest our net income, we get long lasting benefits in the form of passive income that is far more secure than any job can be.

    Plus, no coworkers (I distrust them greatly) to waste precious time around.

  70. Arthur Dayne,

    I’m with you. Not long before I left my full-time job last year, they brought on another guy to compete with me… which, of course, led to less income potential for me. I don’t need to worry about competing with other shareholders for growing dividends, though. More than enough to go around. 🙂

    Enjoy that extra passive income over there. I know I will!

    Cheers.

  71. StockBeard,

    Absolutely. And there’s a possibility I could get hit by a car when crossing the road. There’s a possibility for global war. So on and so forth.

    But in all seriousness, the possibility of many of these companies reducing their dividend payouts is quite low. If a company increases its dividend for decades on end – through economic cycles, the financial crisis, etc. – then the odds are pretty good they’ll continue to do so for many years to come. It all comes from underlying operations, though, which is why I focus on high-quality companies. If you’re able to write incrementally larger checks year after year, that’s because you’re running a very profitable and successful business. I don’t see why that would change all of the sudden for any of these companies specifically, and certainly not when looking at it holistically. I diversify heavily so as to mitigate the risk of one or two dividend cuts. Factoring in dividend growth, my income probably wouldn’t even notice a dividend cut or two, even from a major holding. And eliminating dividends outright is pretty rare.

    The odds, overall, are much higher that, in aggregate, a collection of dominant, high-quality businesses sell more products/services and increase their respective dividends for years on end. Just playing the odds. 🙂

    Cheers!

  72. Hi Dm,

    Nice article, it really shows the magic of compounding. Even a man as rich as John D. Rockefeller did love his dividends coming in.

    Have a great weekend!

    Cheers,
    G

  73. Jason,

    I love this article, I don’t really have anything more to say than that haha The new dividend income from dividend growth was the equivalent of investing $5,700….Amazing when you think about it like that. It puts what we are doing into perspective and motivates me to continue pushing and growing my portfolio this year. Whats funny is that I have investing just under $11,000 into the market this year and you were able to essentially achieve 50% of that total without lifting a finger. WOW. I am pumped to keep on investing and one day reach your level so I can sit back and watch the power of dividend re-investing in full force.

    Keep up the great progress and keep on reaching towards financial freedom!

    Bert

  74. Bert,

    You’ll be in this same spot (and beyond) before you know it. Stick with it and the dividend raises themselves will start to do some pretty heavy lifting for you. 🙂

    Appreciate all the support. Have a great weekend!

    Best regards.

  75. Sorry I should have been clear. I agree they raised it in q2 but the total raise ytd is higher than the 1.9 you had listed. They’ve raised it 3x this year(imo). Just formalities. Great stock. Long OHI as well.

  76. Fiveoh,

    No, it’s correct now. You’re getting ahead of things. The third quarter hasn’t come to pass, so I’m not reporting on the new $0.55. That’ll show up in the next update, which should come in three months. 🙂

    The Q1 update lists the change from $0.52 to $0.54 (which includes two raises). That’s correct. My mistake was in including it here as well, since both raises were declared in the first quarter. The prorated dividend thew the report off because part of it occurred in Q2. But it’s correct now.

    Cheers!

  77. Hello,

    Companies can indeed reduce or eliminate dividends but the chances are extremely low when investing in high quality companies with high operating cash flow that can more than cover dividends.

    That’s why a lot of us tend to invest in companies like PG, JNJ, KMI, PM, MO, T etc because those companies have pretty wide moats/competitive advantages, long histories of dividend raises, shareholder support and solid revenue, cost controls => positive net income and generally healthy operating cash flow, sometimes high amounts of free cash flow after capital investment.

    Good management is a vital factor too. But generally your chances of getting reduced or chopped dividends is minimal with huge profitable companies that play it conservatively and safe (where good management comes in). Personally I find PM and MO to be as riskless as it gets.. PG and JNJ, the yields may be under 3.2% but they too are as riskless or low risk as you can get.

  78. I’m still building my DGI portfolio, but want to track organic growth SO BAD. I set up my Google Sheet so on 12/31/15 I would input what I hold and then on 12/31/16 I would see what the organic dividend growth is. But I’m so impatient, I almost want to go to your quarterly method so I can see the growth sooner! But with only 17 holdings so far, probably not worth it, I can likely keep track of it in my head!

    With that said, so many good companies I still want. KMB, CL, CLX, UL, DEO, etc etc. Not enough money, too many investments. And when you have money, the valuations aren’t always there. One can only be so lucky to be in our position!!

  79. It is wonderful to be able to read thins like this. I have considered keeping track of the dividend growth rates of my own portfolio. However, i have not found the time yet. It is a great way to see–even when you can’t add much new capital–just how much progress you’re making!

    Amazing to think that you’d need another $5,700 at 3.5% to match that income growth from fresh capital.

    Keep up the good work!

  80. That’s amazing to see the results all laid out like that, I dont remember the last time I got a 24% pay rise at work…

    Long time reader from the UK & always wanted to ask a question, do you ever worry about sector allocation/ hold any non dividend stocks? I find myself with great dividend payers, but have found that my sector weighting is very unconventional.For example 5% Healthcare & 5% tech, being 23, I feel that those sectors are going to grow year over year in my lifetime but only hold a small holding so far.

    Either way, keep up the amazing work, More young people need to know this life changing idea!

  81. Just found your article in May about the sector subject, great reading.

    Anyway, keep it up

    Alex

  82. Stephen,

    Always more stocks than available capital, my friend. A great first world problem to have. But a problem, nonetheless. 🙂

    I wouldn’t worry about tracking the dividend growth quarterly. I do it so as to provide the updates and value here on the blog, but I’ve never looked at it quarterly before. An annual look at it will be less time consuming and just as insightful.

    Every day is a new opportunity to build out that portfolio. Takes time, but it happens sooner than you might think. Keep at it!

    Best regards.

  83. TDD,

    Absolutely. It’s a great way to think about just how much these dividend raises impact your real money. The tangible nature of dividends themselves is one thing that’s so wonderful about this strategy. And when you’re receiving a “pay raise”, it’s real cash money we’re talking about. Just a lot of fun, and it keeps things rolling along even if you’re not on it 100%. The more money you have working for you, the more you can scale back and still enjoy the progress.

    Thanks for stopping by!

    Best wishes.

  84. Alex,

    Thanks for following along. Appreciate the readership. 🙂

    Glad you found the article. Sector allocation is really an individual call. But as your portfolio grows, you’ll surely find your rhythm. I find holdings mirror an owner’s interests and values, when it’s all said and done. Of course, you go where the value is, but value tends to move around over time.

    Thanks for all the support! Doing my best to spread the word and inspire.

    Cheers.

  85. Hi Jason!

    Thanks for the dividend growth update! Is Fastenal Company (FAST) on your radar? I understand that among other things they make literally nuts and bolts. Sounds pretty boring but hey I love boring! It’s supposed to be a wide moat business but I have yet to investigate what makes it a wide moat company. I quickly checked that their latest dividend increase was 12% and yield 2.80% which sounds attractive. Does the yield + dividend growth = total return apply with this company, cause I’d be getting pretty nice returns if it does 🙂 Enjoy the rest of the weekend!

  86. Sampo,

    Yeah, Fastenal is a great company. I researched it a while back when writing an article for Daily Trade Alert. It’s in that pile of 50 or so stocks that are fantastic, but just haven’t bought yet. You can count the likes of MMM, CL, BDX, and SBUX in there as well. A lot of high-quality stocks out there.

    Interesting that Oberton is coming back. I’ve read great things about Oberton, so that’s exciting. But they’ll have to find a succession plan that works at some point.

    Cheers!

  87. Thanks for the reply! Do you have a link to that Daily Trade Alert article? I’d be interested to check it out.

  88. Hi Jason,

    Great progress on your payouts and you have explained this in a way that is very easy to grasp.

    I have a question for you unrelated to this topic:

    Many of the dividend growth payer receive a significant portion of their revenues and profits internationally. It is my understanding that companies keep this money out of the USA so they can avoid paying corporate tax on this. However when companies have a payout ratio of 60% or more it would seem that they would need to repatriate this money (at least a good portion) to pay out their dividends. Have you come across on how companies, let’s take KO as an example, are doing this in practice?

    I’ve been wondering about how they do this.

    Thanks,

    Mike

  89. Thanks Jason! That’s quite clever to bring in the money using this mechanism, and the balance sheet doesn’t suffer in the process.

    The weekend here is progressing wonderfully. I hope you are having a nice weekend in SW Florida. It’s actually a bit cooler here in Bangkok than out there this time of the year.

    -Mike

  90. Hey!

    I would first like to thank you for an extremely inspiring blog. I read it daily and the links course from my own blog.
    I live in Sweden and is 29 years old. I have never been “interested” in the economy until the summer of 2013. All of a sudden, I got aware of what savings (in funds / stocks) can do. Quite honestly, I have until the summer of 2013 just had a savings account. Then I have a thrifty living and that I am not the guy who “spend wildly” I have managed to build up a good capital (everything is relative). I am completely debt-free, living in a condominium, and has about 1.3 million in capital = $ 151 287. I have a job that becomes ”long-termed” now in August. I work as a teacher and has studied for 5 years for this. Right now I am reading for a Masters course as I partly want to broaden my knowledge, and become scientist / doctor in the future.

    My goal with my savings is that at age 40 (ie, 10.5 years) have the choice to live 50 % of my income / dividends and work 50%. Your blog is very inspiring for this and that is after a year of mixed strategies, I now come to the realization that a dividend machine / money machine is the strategy I consider best for me. I do not have time to swing / day-trading. I check my account 1-3 times / day just to see if any news of my holdings come. As for prices, they go up – and down. Up and down. Such is the market. However, my focus is all the time + 10 years and more. Then play rate fluctuations, no significant matter as long as the dividends will as well, which is desirable, is raised. The money I invest ‘I do not need “of 10 years or more.
    Right now my annual dividend is about 30 000 = $ 3,491.

    Of my total capital is about 70% of my portfolio and 30% are in my war chest. However, I am considering to shrink it to about 20%. Here, I wonder what you think about this? I know that it is I who make the decisions and that your opinion does not have a significant role. However, it is always good with feedback from knowledgeable and comp exam investors.

    My second question: I have begun to look at American companies. The downside for me who lives in Sweden is partly that we have negative interest rate right now (-0.35%) and the dollar is very high. FED has been flagged for a raise and what happens in Sweden are few who know. Sure, the interest rate to be raised, but when? Probably about 1 year’ is what most people thinking.

    My question is: I’m very interested in J & J (Johnson & Johnosn), SBUX (Starbucks) and KIM (Kinder Morgan). Both have nice dividend history. I am most negative to SBUX, which has grown very well recently and the question is whether the “train has gone.” Certainly remains Asia, and more, but still I am doubtful. Do you think that J&J and Kim is worth buying at the current level and that I should have them in my machine that will work +10 years? Or should I be cold and wait for the Fed’s hike/action (which may not come for a while)?

    I know and understand that you get a lot of emails, comments, etc., and that your time is limited who is also valuable. However, I wonder if you could give me some tips / advice to think ang. my questions? I know Björnemark spirit will come … eventually and I’m mentally prepared for this. It will be tough but it is just to keep on holdings and buy – not sell! I have written down the different ways of thinking, made calculations, etc. for this to be “calm” me when it happens.

    Similarly, if you have other advice, ideas, tips ect. to give, I would be eternally grateful.

    Regards

    Ps. I used googletranslate for this. My english is ”ok” but although i preferd to use this service. I hope that my text is ”readable” and ”understandable”.

  91. Yes, I had 1 k to finish out the wife’s Roth for the year and was planning on buying more BBL or maybe even trying the southy32 ?
    But we’ve got more than enough oil and Energy exposure …so when Apple went down after its report I talked myself into buying more of that!

  92. Sofokles,

    Thanks for writing!

    You’re in a really great spot over there for only being at it for two years. Much more progress than I made over a two-year period, that’s for sure. I’m confident that if you keep at it, you’ll be where you want to be at 40.

    As far as your first question goes, I think you answered it yourself.

    If you really believe this:

    “As for prices, they go up – and down. Up and down. Such is the market. However, my focus is all the time + 10 years and more. Then play rate fluctuations, no significant matter as long as the dividends will as well, which is desirable, is raised.”

    Then you want to have maximum exposure to the market, relative to what you’re comfortable with. But only you can answer how much you really believe that statement. It’s one thing to write it out. Another thing to actually live it. Some investors feel comfortable with significant (I’d call 30% significant) allocation to cash. That’s really an individual call. I’ve long felt comfortable with almost zero.

    As far as your second question goes, I actually answered this not long ago:

    https://www.dividendmantra.com/2015/05/four-stocks-that-arent-on-my-radar-but-perhaps-should-be-on-yours/

    I specifically mentioned KMI and JNJ there.

    So it’s just really up to you whether or not you’re looking at stocks with the perspective of long-term income growth or short-term price fluctuations. But if you’re really paying attention to the former, then the latter doesn’t really make that much difference for you. If the value and quality is there, and I have capital, then I buy. To worry about a better price that might come down the line would be a waste of my time, worrying about something that isn’t in my control. Besides, buying JNJ at $95 or $100 will surely matter very little over the next 30 years. I doubt those who bought it 30 years ago are now upset because they bought it at $3 instead of $2.80.

    Hope that helps. Keep up the great work!

    Best regards.

  93. Hello

    Thank’s for your good and adequate answer. As you write: deep inside me I know what’s the right decision!

    Regards

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