Dividend Increase | Realty Income (O)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Realty Income for the dividend increase!
There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  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.  

On December 10th the Board of Directors at Realty Income (O) approved an increase to the monthly dividend payment.  The dividend was increased from $0.227 up to $0.2275 per share.  That's just a 0.2% increase, but a raise nonetheless.  Realty Income is a Dividend Champion with 26 consecutive years of dividend increases.  Shares currently yield 3.73% based on the new annualized payout.

The newly increased dividend will be payable on January 15th to shareholders of record as of January 2nd.

This dividend increase might seem disappoint; however, Realty Income doesn't call themselves the monthly dividend company for nothing.  They typically give multiple small raises throughout the year with a larger increase announced in January.  Compared to the same dividend declared last year this raise represents a 2.94% increase.  Not bad for a stock that usually gives a starting yield around 4-6%.

Since I own 102.726 shares of Realty Income in my FI Portfolio, this raise increased my forward 12-month dividends by $0.62.  This is the 32nd dividend increase I've received from Realty Income since initiating a position back in 2013 and the organic dividend growth over that time comes to 25%.

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

Of the 25 1-year periods during Realty Income's streak annual dividend growth has ranged from 0.9% to 21.2%.  The average of the the 1-year growth rates comes to 4.7% with a median of 3.7%.

Of the 23 rolling 3-year periods annualized dividend growth has ranged from 1.3% to 8.6% with an average of 4.8% and a median of 4.7%.

Of the 21 rolling 5-year periods annualized dividend growth has ranged from 2.6% to 7.4% with an average of 4.9% and a median of 4.7%.

Of the 16 rolling 10-year periods annualized dividend growth has ranged from 4.0% to 6.2% with an average of 5.0% and a median of 4.9%.

Realty Income is much more of the tortoise that follows the slow and steady approach.  While dividend growth isn't likely to come in all that high I'm more than happy to have a very consistent 3-5% annualized dividend growth rate over the long term especially since my YOC is nearly 6.5%.

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.

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 5 year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are greater than a 20% deviation from the average.

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

Realty Income' 5-year average forward dividend yield is 4.32% which corresponds to a share price of $63.19 based on the newly raised dividend.  With a current yield of just 3.73% shares are overvalued by ~14% based on dividend yield theory.

I consider the fair value range based on dividend yield theory to be the 5-year moving average yield +/- 10%.  That gives a fair value range of $57 - $70 which suggests shares are currently trading above the fair value range.

Wrap Up

This raise increased my forward dividends by $0.98 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.89% this raise is like I invested an extra $34 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.

My FI Portfolio's forward-12 month dividends are $7,771.10.  Including my FolioFirst portfolio's forward dividends of $101.12 brings my total taxable accounts dividends to $7,872.22.  My Roth IRA's forward 12-month dividends are $629.93.  My Rollover IRA's forward dividends increased to $2,327.16.  Across all accounts I can expect to receive $10,829.31 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Becton, Dickinson & Company's can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Realty Income?  How has dividend growth for your holdings fared in 2019?  Better or worse than you expected?

Please share your thoughts below.


  1. Income portfolio strategy is a popular investment strategy for london stock market used by investment professionals and individual investors alike. The strategy is a semi active one and aims at dividend earnings rather than capital gains as the main source of returns on share prices UK and their portfolio.



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