One Raise at a Time | Patience Will Be Rewarded

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks T. Rowe Price 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.

I have to admit I was wrong, at least so far, for dividend increases seeing a boost due to the business tax cuts late last year.  I expected most of the tax savings to go towards share buybacks rather than to dividends since dividends are much stickier than buybacks.  Investors don't really bat an eye if share buybacks are completed or postponed, but when that dividend comes into question look out.

On February 13th the Board of Directors at T. Rowe Price (TROW) announced an increase to their quarterly dividend payout.  The dividend was increased from $0.57 per share up to $0.70 per share.  That's a whopping 22.8% raise.  T. Rowe is a Dividend Champion with 31 consecutive years of dividend increases.  Shares currently yield 3.31% based on the new annualized payout.

Since I own 21.353 shares of T. Rowe Price in my FI Portfolio this raise increased my forward 12-month dividends by $11.10.  This is the 4th dividend increase I've received from T. Rowe since initiating a position in March 2015.  Cumulatively, the organic dividend growth from T. Rowe Price has amounted to 34.6% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 4.0%.  Now that's dividend growth investing at work!

A full screen version of this chart can be found here.

T. Rowe Price has been a great dividend growth company with a rich history of...making their investors rich.  One of those ways is by rewarding them with higher dividend payments year in and year out for over 30 years.

Despite a relatively lengthy dividend growth streak, dividend growth has been remarkably consistent over longer stretches of time.  The lowest 5- year dividend growth rate since 1986 comes in at 9.63% for the year ending 2013 while every rolling 10-year dividend growth rate has been over 10% with the lowest being 11.30%.  That's speaks to the strength and stickiness of their business model.

A full screen version of this chart can be found here.

*2018's dividend assumes the new quarterly payout of $0.70 per share is maintained for the rest of the year.

Wrap Up

This raise increased my forward dividends by $11.10 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.81% this raise is like I invested an extra $395 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 2018 I've received 10 dividend increases combining to increase my forward 12-month dividends by $119.82.  

My FI Portfolio's forward-12 month dividends increased to $6,012.78.  Including my FolioFirst portfolio's forward dividends of $78.03 brings my total taxable accounts dividends to $6,090.81.  My Roth IRA's forward 12-month dividends remain at $336.46.

Do you own shares of T. Rowe Price?  What about any other asset managers?

Please share your thoughts below.


  1. JC, I have looked at TRP in the past, but have never purchased. Crazy, but the industry reminds me of tobacco. Mature and maybe in decline, but throwing off tons of cash. Tom


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