Dividend investing at it’s finest! I thought now would be a great time to reflect on what has occurred over the last 6 months in the dividend income portfolio of mine. I do not mean just any old reflection, but I am going to be specifically talking about dividend increases and what the impact has been on my portfolio this year. Tax reform has truly showed their colors and companies have been sending the savings, or part of, to their shareholders.
Why dividend increases matter
Why does this matter? Why would dividend increases even matter to my investment journey? This is where a little bit of a breakdown needs to occur. The cost of goods increasing; say milk, gas and food or for what we hear in the news, “inflation” has gone up and usually continues to go up over time. Now, as the community knows, dividend increases are typically a requirement for when we invest! We don’t just invest for current income, but we are investing for the future potential income too!
Why do dividends increasing in the future matter from companies that we own? When the price of goods are increasing, don’t you want that income to continue to grow, in order to offset or “trump” the inflation? For example, Johnson & Johnson (JNJ) increased their dividend 7.15% back in April. The 7.15% dividend increase far outpaces the rate of inflation, which has been stated at a tad over 2% over the last year. Does this start to make sense now? Buying a dividend income stock, that increases their dividend every year, not only pays you a solid rate each year, but they also increase their dividend in a way that outpaces or should outpace the enemy called, “Inflation” (see Our Top 5 Foundation Stocks for great dividend income stocks that have increased their dividend each year for 25+ years!).
Here is the other kicker that I wanted to mention. Most of us are all working for employers and, if we are lucky, receive a raise from our employer or from our clients. However, sometimes the raise doesn’t touch the rate of inflation or sometimes we don’t receive a raise, depending on performance of what we do, how the company or even how our clients are doing. A dividend income stock that increases their dividend, each year, can also take care of that. I have been lucky and blessed to have the ability to invest into dividend income companies.
Dividend Increase Impact Through Six Months
Now, with all of that being said, what have dividend increases done for my portfolio through the end of June 2018? I’ll list out each dividend increase from the monthly posts, the rate of increase, each dollar impact and the total. My goal is to show the community, the readers and those that are curious about dividend investing, how wonderful of a plan that it is! They say proof is in the pudding and here, my friends, is proof that the dividend increases impact my portfolio in a massive way. Here are my dividend increase results through 6 months of 2018:
The dividend increase announcements that these companies have had this year have been nothing more than remarkable. Kinder Morgan (KMI) has had the most intense increase of 60%, adding over $40 to my dividend income portfolio. Further, the unexpected dividend increase announcement from not just Philip Morris (PM), but from John Deere (DE) and Caterpillar (CAT), were well received and tremendously impacted my forward income.
Based on my forward income, at year-end of 2017, this $329.84 was a 3.39% add! Of course, one can annualize the percentage and equate to 6.78%. In order to add the $329.84 to your forward dividend income, based on a 3.50% dividend yield, one would have to invest a whopping $9,424!! Please re-read that. I would have to invest ALMOST $10,000 into the stock market in order to generate that much forward income. What did I have to do, in this case? Not a DAMN thing. Obviously I had to commit the up-front capital, in order to make the investments into high quality dividend income companies, but each dividend increase did not take a decision from me. This should be the point where it all, for a lack of a better way to phrase it, “clicks”. This is in line with why we think the power of the dividend growth rate is real!
**to note – this article was written before Kroger (KR) announced a dividend of increase, which would have added $4.28 to the above total!
Dividend Increase Six Month Summary
First, I am lucky to make enough money and to save as much as I can, to make investments into dividend growth stocks. However, I hope that my goal of driving home that dividend investing is extremely powerful. As you noticed above, not every dividend increase is gigantic, in fact, about half are below the double digit mark. The huge BUT here, is that each dividend increase when added together, produces incredible results. Each of those dividend increases above, added up to $329.84 and it would take almost a $10,000 investment for that to happen! Does it take saving, investing and patience? Hell yes it does and a “whole lot of it”, in this game. However, with these results, could you do it, too?
Thank you everyone for coming by to read another dividend investing lesson with the proof in the pudding example above. I love to be full disclosure, especially if it helps beginners, experiences investors or readers who simply want to learn more. Have you been enjoying each and every dividend increase announcement? Are you experiencing the same benefits above? Does this help show the benefits of being a dividend investor? Please comment below and, as always, good luck and happy investing!
-Lanny