Dividend Increase | Digital Realty Trust (DLR)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Digital Realty 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 February 26th the Board of Directors at Digital Realty Trust (DLR) approved an increase in the quarterly dividend payment from $1.12 up to $1.16.  That's a decent 3.6% raise.  Digital Realty is a Dividend Contender with 17 consecutive years of dividend growth.  Shares currently yield 3.52% based on the new annualized payout.

The new dividend will be payable March 31st to shareholders of record as of March 15th.

Since I own 37.385 shares of Digital Realty in my FI Portfolio, this raise increased my forward 12-month dividends by $5.98.  This is the 3rd dividend increase I've received from Digital Realty after initiating a position in 2018.  Total organic dividend growth over that time has been adequate at 14.9%.

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

Digital Realty initiated their dividend in 2005 and have been raising it every year since.  Admittedly dividend growth has been a bit slower than I expected when I first bought in.

Dating back to 2005 Digital Realty has offered year over year dividend growth ranging from 3.3% to 43.7% with an average of 11.3 % and a median of 7.6%.

Over that time there's been 12 rolling 5-year periods with annualized dividend growth ranging from 5.0% to 20.2% with an average of 11.7% and a median of 9.0%.

There's been 7 rolling 10-year periods during Digital Realty's streak with annualized dividend growth ranging from 6.0% to 14.3% with an average of 11.2% and a median of 12.3%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 2005 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.

Digital Realty's 5-year average forward dividend yield is 3.47% which corresponds to a share price of $134 based on the new annualized payout.  

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 $122 - $149 and suggests that Digital Realty is trading around fair value.

Wrap Up

This raise increased my forward dividends by $5.98 with zero effort on my part.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.44% this raise is like I invested an extra $245 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.

I've now received 16 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $138.20.

My FI Portfolio's forward-12 month dividends are $7,892.73  Including my FolioFirst portfolio's forward dividends of $114.36 brings my total taxable accounts dividends to $8,007.09.  My Roth IRA's forward 12-month dividends are $706.80.  My Rollover IRA's forward dividends are $3,578.86.  Across all accounts I can expect to receive $12,292.75 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.  Digital Realty'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 Digital Realty?  Do you think dividend growth will return to the 5-10% range over time or will it keep drifting lower?

Please share your thoughts below.