One Raise At A Time | Dividend Champion In The Making

Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Microsoft for the 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.

Yesterday the Board of Directors at Microsoft Corporation (MSFT) approved an increase to their dividend payment.  The quarterly dividend was increased from $0.42 up to $0.46 per share.  That's a 9.5% increase.  Microsoft has now increased dividends for 15 consecutive years giving them the title of Dividend Contender.  Shares currently yield 1.63% based on the new annualized payout.

The new dividend will be paid out on December 13, 2018 to shareholders of record as of November 15th.  

Since I own 41.150 shares of Verizon in my FI Portfolio this raise increased my forward 12-month dividends by $6.58.  This is the 6th dividend increase I've received from them since initiating a position in May 2013.  Over that time the dividend has doubled.  According to US Inflation Calculator, the cumulative rate of inflation is just 8.2%.  

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

Since initiating a dividend in 2003, Microsoft's dividend growth has been fantastic.  Year over year growth has routinely come in between 10-20% with the "worst" being 5.8%.  Over the longer time periods we see some of the fluctuation smooth out with annualized dividend growth above 10% per year for every rolling 3-, 5- and 10-year periods. 

Honestly I'm a bit disappointed with this most recent increase because I expected more.  Now I'm not really complaining about a 9.5% pay increase, but I expected to see $0.47 or $0.48 which would have pushed the growth up over 10% for this increase.  

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.

Wrap Up

This raise increased my forward dividends by $6.58 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.86% this raise is like I invested an extra $230 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 45 dividend increases from 41 of the companies in my FI Portfolio combining to increase my forward 12-month dividends by $399.24.  

My FI Portfolio's forward-12 month dividends increased to $6,507.62.  Including my FolioFirst portfolio's forward dividends of $91.10 brings my total taxable accounts dividends to $6,598.72.  My Roth IRA's forward 12-month dividends are at $395.42.

Do you own Microsoft in your portfolio?  Do you think the dividend increase was just right?

Please share your thoughts below.