One Raise at a Time | The First of Many
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.
A week ago yesterday the Board of Directors at Realty Income (O) approved another increase to their monthly dividend payment. The dividend was increased from $0.2125 per share per to $0.2190. That works out to a 3.06% increase from the prior payout. Realty Income is a Dividend Contender with 24 consecutive years of dividend increases. Shares currently yield 4.88% based on the new annualized payout.
Realty Income is a different breed of dividend growth stock. For starters they pay monthly dividends rather than the more typical quarterly payout. However, another thing that distinguishes them is that they typically give investors multiple smaller raises throughout the year rather than a larger increase just once per year. Fortunately for shareholders, the January increase is typically their larger increase during the year and this one was no different at 3.06%. However, compared to the same period from last year the annual dividend growth comes in at 4.04%.
Since I own 95.857 shares of Realty Income in my FI Portfolio this raise increased my forward 12-month dividends by $7.48. This is the 23rd dividend increase I've received from Realty Income since initiating a position in July 2013. Cumulatively since I first bought shares of Realty Income my dividends have increased by 20.63% through organic dividend growth alone. According to US Inflation Calculator the cumulative rate of inflation over that same time is just 5.8%. That's dividend growth investing in a nutshell.
A full screen version of this chart can be found here.
I like to examine the dividend growth rates that a company has doled out over time in order to see whether dividend growth is holding steady, increasing or decreasing. Looking at this gives you an idea of the possible future direction of dividend growth.
Realty Income is one of the premier dividend growth companies out there. They have paid and raised dividends every year since becoming a publicly traded company in 1994. Dividend growth might fluctuate from year to year; however, over time it should be around the 4-5% per year level. Considering the shares typically trade at an initial yield of 4-5% that's solid, steady eddy performance that is hard to overlook.
|Realty Income (O) Annual Dividend and Rolling Dividend Growth Rates|
My forward dividends increased by $7.48 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 2.57% this raise is like I invested an extra $291 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.
This was the first of many dividend increases for 2018 for companies held in my FI Portfolio.
My FI Portfolio's forward-12 month dividends increased to $5,866.08. Including my FolioFirst portfolio's forward dividends of $77.03 brings my total taxable accounts dividends to $5,943.11. My Roth IRA's forward 12-month dividends are at $323.45.
Do you own shares of Realty Income?
Please share your thoughts below.