Wednesday, January 18, 2017

Dividend Growth Investing at Work - Realty Income Strikes Again!

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Realty Income for the dividend increase!
Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?  Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.

The wonderful thing about dividend growth investing is that sometimes you get surprised with a pay raise you weren't really expecting.  That's exactly what happened yesterday.

On Tuesday the Board of Directors at Realty Income Corporation (O) announced another raise to their monthly dividend payout.  The new dividend is $0.2105 which is a solid 3.95% increase from the previous payout of $0.2025.  Assuming the dividend is maintained at this level for the remainder of 2017 this will represent 24 consecutive years of dividend growth giving them the title of Dividend Contender.  Shares currently yield 4.20% based on the new dividend rate.

Realty Income is one of a few companies that like to give multiple raises throughout the year which makes them even more attractive of a company.  Especially when the first raise comes to nearly 4%.  As such you can't just look at the raise from the previous payout and need to look at the year over year raise to really see the power of Realty Income's dividend growth.  Compared to February 2016's payout of $0.1985 the recently increased dividend is a 6.05% increase.

Since I own 91.685 shares of Realty Income in my FI Portfolio this raise increased my forward 12-month dividends by $8.80.  This is the 4th consecutive year of dividend increases that I've received from Realty Income since initiating a position in mid-2013.  This is also the 18th dividend increase that Realty Income has provided over that time.  Cumulatively my Realty Income dividends have risen by 16.0% from dividend growth alone!  According to USInflationCalculator the total rate of inflation over the same period is just 3.6%.  




A larger version of the chart can be found here.

As I mentioned earlier Realty Income typically gives investors multiple raises throughout any given year.  So looking at any one raise in particular could paint a much different picture than examining things over a longer time frame.  I prefer to look at dividend growth rates across various time periods to encapsulate the various fluctuations and the multiple raises over time.


dividend growth investing, dividend increase, financial independence
Realty Income Corporation (O) Annual Dividend and Rolling Dividend Growth Rates
*2017's annual dividend assumes 10 additional payments at the $0.2105 per share per month rate.  

An interactive graphical version of the previous chart can be found here.

Wrap Up

My forward dividends increased by $8.80 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.91% this raise is like I invested an extra $302 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way.  

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

Thus far in 2017 I've received two dividend raises from the companies that I own increasing my forward dividends by $11.92.

My FI Portfolio's forward-12 month dividends increased to $5,568.92.  Including my Loyal3 portfolio's forward dividends of $67.01 brings my total taxable accounts dividends to $5,6235.93.  My Roth IRA's forward 12-month dividends remain at $242.54.

Previous Raises This Month

Omega Healthcare Investors (OHI)

Do you own shares of Realty Income?  Do you think it's an attractive purchase at these levels?

Please share your thoughts below.

Image source

10 comments:

  1. That's fantastic! Another dividend increase? That is just fantastic. You have to be over the moon with that. Off to a flying start in 2017

    ReplyDelete
    Replies
    1. BHL,

      A raise of any kind is always a welcomed sight. Especially so when it's a bit unexpected and a bit larger than normal. Those are 2 good problems to have.

      Thanks for stopping by!

      Delete
  2. I own Realty Income and I'm always buying, I care more about the stability of the income and growth prospect than micro analyzing the share price to see a few bucks.

    Are you buying your full position at one time or do you average in?

    ReplyDelete
    Replies
    1. D4F,

      I typically average in over time unless I see something that's extremely compelling. In the case of O I think it's currently on the high side of fair value so it's not exactly something I would want to go into very heavy but it's a defensible buy right now for the stability and consistent growth of the dividend.

      Thanks for stopping by!

      Delete
  3. I love O for a lot of the same reasons you listed. Increasing the dividend (including multiple times during the year) helps you buy more shares of O (if you are using DRIP) and even if the stock price drops, the dividend goes even further in buying more shares! As you said, all of this for little to no work on your part.
    Visit me at TheDividendLife.com!

    ReplyDelete
    Replies
    1. TDL,

      O is a staple in many dividend growth bloggers' portfolios and for good reason. No the dividend isn't likely to move forward by leaps and bounds, but there's something to be said about a relatively high yielding company that has built in increases to their rents which translates to consistent dividend increases over time. If Realty Income ever cuts its dividend you know things are going really bad in the financial world.

      Thanks for stopping by!

      Delete
  4. Gotta love dividend increases, especially when a company pays monthly dividends.

    ReplyDelete
    Replies
    1. IH,

      Most definitely. Even though the rest of the raises throughout the year usually aren't that big it's great seeing multiple raises come each year.

      Thanks for stopping by!

      Delete
  5. Good size raise don't have many shares way less than you but it all adds up in the end

    ReplyDelete
    Replies
    1. D&H,

      Every little bit helps and Realty Income is definitely high up on the quality list. Just stay focused and keep investing and you'll build your position up in no time.

      Thanks for stopping by!

      Delete