One Raise at a Time | The First of Many

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Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Realty Income for yet another 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.

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.
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Realty Income (O) Annual Dividend and Rolling Dividend Growth Rates
*2018's dividend assumes the current monthly payout of $0.219 per share is maintained for the rest of the year.

A full screen interactive version can be found here.

Wrap Up

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.

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Comments

  1. JC, Big fan of O. Have been enjoying the monthly dividends for about 10 years. About 5% current dividend yield plus I expect about 4-5% in annual dividend growth going forward as a nice combination. I do get a little concerned about their exposure to bricks and mortar retail and the threat of more shopping going online effecting future growth. Tom

    ReplyDelete
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    1. Tom,

      10 years of monthly dividends is awesome. My first purchase will be turning 5 years old in July so I've got a ways to go to reach that 10 year status. There's a lot to like about Realty Income, yeah they aren't going to wow you with dividend growth most of the time, but 4-5% growth is all I really want from something that consistently is trading around that 5% yield.

      All the best.

      Delete
  2. Congrats on another dividends raise. My first raise of the new year was OHI, another REIT company that raises multiple times a year. I'm not comparing the two other than that , OHI has a lot more risk with the SNF outlook. Anyways it's great to see these raises and it just reinforces DGI. You won't see those kind of raises at a normal job and it certainly beats inflation. Brent @ AAI

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    Replies
    1. Brent,

      I also own shares of OHI and was glad to see that $0.01 per share increase yet again. OHI is definitely more risky in my book, but I think it's share price is already discounting that in some. If there happens to be a 50% dividend cut you're still looking at around a 5% yield.

      All the best.

      Delete
  3. PiP -

    Always fun accepting and taking in a new increase from O!

    -Lanny

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    Replies
    1. Lanny,

      It's always great to see that reinforcement every month.

      All the best.

      Delete
  4. Hi Passive -

    The Monthly Dividend Income Company is a great choice - especially if one has been long for 10 years like Tom above!

    The monthly frequency also just feels so much better than quarterly.

    Nice recap - thanks for sharing. - Mike

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    Replies
    1. Mike,

      You don't get to claim the name of "The Monthly Dividend Company" without having the goods to back it up. So far Realty Income has done just that and Tom's 10 year holding period is phenomenal. I'm coming up on 5 myself and there's no complaints from me about those monthly dividends.

      All the best.

      Delete
  5. Congrats on the raise. O seems like a great stock at a nice price atm. Cant wait for my tax return, o is a big candiate for that money currently. . Cheers

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    1. Passive Canadian,

      O has historically been a solid investment. It's hard to complain about a 4-5% yield that grows 3-5% per year. If I didn't already have a decent chunk of capital there O would be near the top of my list as well.

      All the best.

      Delete
  6. Wow that's a nice chart of dividend increases for O! Congrats on the raise! All seems too easy hey- no hard work or performance reviews required!

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    Replies
    1. Frankie,

      That dividend chart for O sure is nice. I love that they refer to themselves as the Monthly Dividend Company. It really makes you think that management is on the side of shareholders.

      All the best.

      Delete

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