One Raise at a Time | AT&T (T)

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks AT&T 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 Friday last week the Board of Directors at AT&T (T) announced an increase to their dividend.  The quarterly payout was increased from $0.50 up to $0.51 per share.  This increase works out to a 2.0% raise.  AT&T is a Dividend Champion with 34 consecutive years of dividends increases.  Shares currently yield 6.86% based on the new annualized payout.

Since I own 54.246 shares of AT&T in my FI Portfolio this raise increased my forward 12-month dividends by $2.17.  This is the 8th dividend increase I've received from AT&T since initiating a position in 2011.  Cumulatively AT&T's increases have come in at 18.6%.  According to US Inflation Calculator the total rate of inflation over that same time is 12.0%. 

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

Since AT&T yields nearly 7% it doesn't take much dividend growth to make me happy.  However, there's a lot of integration risk going forward coupled with a high debt load that seems to be pushing the share price down and therefore the dividend yield up.  The debt load in particular is the likely reason for the high currently yield.

Since 1986 AT&T's dividend growth hasn't exactly been a barn burner.  In fact since 1984 they've never had consecutive years of 10%+ dividend growth.  The average 10 year dividend growth rate over the last decade has come in at 3.99% and for the last 5 years it's just 3.06%.  Slow dividend growth is likely to be the norm for the next few years while management integrates Time Warner into the fold and most importantly gets their debt reduced.  Time will tell if management truly does reduce their debt to shore up the balance sheet and put the company back on track to deliver faster dividend growth.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1984 can be found in the following chart.  

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

*2019's dividend growth calculations assumes the new payout of $0.9175 per share is maintained for all of 2019.

Wrap Up

This raise increased my forward dividends by $2.17 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.11% this raise is like I invested an extra $70 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.

So far in 2018 I've received 59 dividend increases from 50 of the companies in my FI Portfolio combining to increase my forward 12-month dividends by $476.59.  

My FI Portfolio's forward-12 month dividends increased to $6,742.70.  Including my FolioFirst portfolio's forward dividends of $92.11 brings my total taxable accounts dividends to $6,834.81.  My Roth IRA's forward 12-month dividends remain at $402.37.

Do you own shares of AT&T?  Do you believe management will follow through on their intentions to reduce their debt?

Please share your thoughts below.


  1. This was welcomed news for all of us dividend growth investors right there. The increase isn't large as a percentage, but it made a huge difference as each of our dividend income totals. Maybe next year, we will get a $.02/share increase as they continue to pay down debt

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