One Raise At A Time | Banking On More Raises

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Bank of America for another dividend raise!
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 July 26th the Board of Directors at Bank of America (BAC) officially approved of the increased dividend from the latest round of CCAR.  The dividend was increased from $0.12 up to $0.15 per share per quarter.  That's a huge 25% increase.  Bank of America has grown their dividend payment for 4 consecutive years and will be a Dividend Challenger once 2018 ends.  Shares currently yield 1.92% based on the new annualized payout.

The new dividend will be paid out on September 28, 2018 to shareholders of record as of September 7th.  

Since I own 161.817 shares of Bank of America in my FI Portfolio this raise increased my forward 12-month dividends by $19.42.  This is the 4th dividend increase I've received from Bank of America since initiating a position in 2011.  Over that time Bank of America has grown the dividend payment by 1,400% cumulatively.  According to US Inflation Calculator the total rate of inflation over that same time is just 12%.

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

With Bank of America being a financial institution, and some ill advised acquisitions, they suffered plenty from the housing bubble/financial crisis.  So it's no surprise to see that the dividend was reduced to just $0.01 per share in order to retain capital.  After the balance sheet was shored up the dividend increases have restarted and have been coming in huge.  I still expect to see dividend growth above 10% per year for the next few years barring another significant economic/financial crisis.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1993 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 $0.15 per share is maintained for the rest of the year.

I also own 105.967 shares of Bank of America in my Roth IRA which saw the forward 12-month dividends increase by $12.72 due to the dividend raise.

Wrap Up

This raise increased my forward dividends by $19.42 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.94% this raise is like I invested an extra $660 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 37 dividend increases from 35 of the companies in my FI Portfolio combining to increase my forward 12-month dividends by $334.76.  

My FI Portfolio's forward-12 month dividends increased to $6,390.18.  Including my FolioFirst portfolio's forward dividends of $87.01 brings my total taxable accounts dividends to $6,477.19.  My Roth IRA's forward 12-month dividends are at $366.95.

Do you own Bank of America in your portfolio?

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