One Raise at a Time | Drilling Down For Dividends

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

On Tuesday the Board of Directors at EOG Resources (EOG) announced an increase to their quarterly dividend payout.  The dividend was increased from $0.1675 per share up to $0.185 per share.  That's an excellent 10.4% raise.  EOG Resources was previously a Dividend Contender with 16 consecutive years of dividend increases; however, dividend growth was put on hold in 2015 and this is the first increase since then.  Shares currently yield 0.72% based on the new annualized payout.

Since I own 8.098 shares of EOG in my FI Portfolio this raise increased my forward 12-month dividends by just $0.57.  This is the 5th dividend increase I've received from EOG Resources since initiating a position in August 2011.  Cumulatively, the organic dividend growth has totaled to 131.3% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is 10.2%.  That's dividend growth investing at work.

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

One of the issues with investing in companies that deal with commodities is that there's no real differentiation between the commodity that one company produces as opposed to another.  Therefore the business is largely at the mercy of the price of the underlying commodity to determine their results.  So it should come as no surprise that EOG froze their dividend after oil collapsed over the last few years.

Despite the freeze, EOG still has some impressive dividend growth rates.  The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1994 can be found in the following chart.  

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

*2018's dividend assumes the new quarterly payout of $0.185 per share is maintained for the rest of the year.

Wrap Up

This raise increased my forward dividends by $0.57 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.79% this raise is like I invested an extra $20 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 15 dividend increases combining to increase my forward 12-month dividends by $138.63.  

My FI Portfolio's forward-12 month dividends increased to $6,024.72.  Including my FolioFirst portfolio's forward dividends of $78.47 brings my total taxable accounts dividends to $6,103.19.  My Roth IRA's forward 12-month dividends remain at $336.46.

Are you comfortable investing in dividend growth companies that are tied heavily to an underlying commodity such as oil?  What do you do in the case of dividend freezes from those companies?

Please share your thoughts below.


  1. Commodity plays do put uncertainty into dividend investing JC. It's a tough call, but I try to stick with the industry leaders in essential commodities like XOM and ADM. I have been burned in the past with the likes of Freeport and BHP. Tom

    1. Tom,

      That's my general strategy too for commodity based plays. Stick with the largest companies because they should be best suited to withstand any downturn and come out the other side unscathed.

      All the best.


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