The Impact of Dividend Increases through September of 2018

When talking about dividend increases, this is us talking about dividend investing, at it’s finest!  Given another quarter-end had recently passed, I wanted to reflect on what occurred over the last 9 months.  I do not mean just any old reflection, but I am going to be specifically talking about dividend increases and their impact on my portfolio this year.  Tax reform has been rewarding, as companies have been sending portions of the cost savings to their shareholders.

 

Person Touching Macbook Pro

Why dividend increases matter

Why does this matter?  Why would dividend increases matter to my investment journey?  The next section will describe the importance of dividend increases.  In short, the reason is the increase in cost of goods (food, energy, shelter, etc.), over a span of time.  This is what you hear, when, “inflation”, is discussed.

Why do dividends increasing in the future matter from companies that we own?  When the price of goods are increasing, don’t you want your income to continue to grow, in order to offset or “trump” the inflation?  Now, as the community knows, uninterrupted dividend increases are a quality we look prior to investing in a company.  We don’t just invest for current income, but we are investing for a larger, future income too!  For example, Johnson & Johnson (JNJ) increased their dividend 7.15% back in April.  The 7.15% dividend increase outpaces the rate of inflation, which has been stated at 2.3% 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 or income each year, but they also increase their dividend in a way that outpaces or should outpace the increase in costs/prices or “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, to say the least, and have seen a rampage of dividend increases this year, that far outpaced any raise that I received, that’s for sure.

Dividend Increase Impact Through Nine Months

Now, with all of that being said, what have dividend increases done for my portfolio through the end of September 2018?  I’ll list out each dividend increase from the monthly dividend income 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 9 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.  Additionally, Norfolk (NSC) has had 2 MASSIVE dividend increase announcements, after being quiet for so long.  They sure are making noise.  Also – McDonald’s almost 15% raise had me screaming, “I’m lovin’ it”, and I know I am not the only one to feel that way.

Based on my forward income, at year-end of 2017 ($9,733.93), this $413.67 was a 4.25% add!  Of course, one can annualize the percentage and equate to 5.67%.  In order to add the $413.67 to your forward dividend income, based on a 3.50% dividend yield, one would have to invest a whopping $11,819!!  Please re-read that.  I would have to invest ALMOST $12,000 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, “clicks”.  This is in line with why we think the power of the dividend growth rate is real!

Dividend Increase nine 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, my goal is to drive home that dividend investing is extremely powerful, to the community.  As you noticed above, not every dividend increase is gigantic, in fact, approximately 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 $413.67 (an increase of $83.83 from June) and it would take almost a $12,000 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, wouldn’t 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!

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24 thoughts on “The Impact of Dividend Increases through September of 2018

  1. Great article! I love distinguishing and tracking passive versus active portfolio income. MCD and JNJ are two of my favorites.

    I also track this, and after two years of investing, 34% of my forward income generated in 2018 is due to dividend increases. That’s huge. I know there are a few good ones coming up in December too.

  2. Great article! $413.67 in added annual dividend income from dividend increases alone is incredible. This really serves as a reminder how powerful dividend growth investing is, especially when one sticks with it for years.

  3. My wife retired recently. We had several mutual funds which never pay dividends in my wife’s 457 and sold them. We transferred the money into an Ira in our brokerage account to buy dividend paying stocks. Instead of paying fees for holding mutual funds we are now receiving dividends from top notch companies. Our goal was to generate enough money so that we could take the cash from our combined accounts, if we needed to do so, with out ever having to sell our holdings. Mission accomplished.

    In 10 months when I retire I will do the same with my 457.

    • Lou –

      That is what I’m talking about! It’s a hard decision, but easy one in the long-run. Now – you have the income stream coming in, that builds fast and strong. Can’t wait for you to do that to yours. Congrats my man.

      -Lanny

  4. That is absolutely fantastic, and a real testament to the power of the DGI approach! I’m looking forward to the day when the dividend raises and reinvested dividends are outpacing my capital investments, and hence why I think of each as one leg of the dividend tripod!

    I’ve only received about $50 this year due to raises, but that is because I didn’t start investing until the end of May. Quite a few of the companies I purchased had already announced healthy raises earlier in the year, so I am looking forward to next year and capturing a full year of raises.

    Keep up the amazing work, and reaping the rewards of those raises!

    • Divvy D –

      It is true, it is true – this works. The dividend raises are not only powerful, but very real. This is a strong leg to the tripod.

      Your 2019, with a full year, should be fairly fruitful. Let’s keep the focus on now, investing as much as we can, to get to a better tomorrow.

      -Lanny

  5. Great article on a subject I think most people don’t really appreciate (unless they’re already a DGI).
    As you mentioned, the tax cuts have lead to serious increases from many companies in the portfolio. MCD is definitely a standout.
    Raking in +$400 in forward annual income (and you’re not even finished with the year yet) is fantastic. Doing the work on the front end to identify a high-quality company and then letting it reward you over and over as the years roll by feels great. It won’t be long before you’re rolling over four-figure passive increases every year.

    Take care,
    Ryan

    • GRB –

      Hopefully now they can see the proof in the pudding, you know?! I wonder what the 2019 div hikes will be, 1 year post the savings from the tax cuts…

      Excited for the last quarter’s results, wonder if it’ll bridge over the $500 mark on the year… craziness!

      -Lanny

  6. I’m definitely picking up what you are throwing down. At this point in the life of my portfolio I can’t invest enough to generate more forward dividend income than I’m getting from dividend raises. It’s a testament to the power of the raises.
    Terrific post…thanks for sharing.

    • ED –

      Loving it. WHat you just said is a statement right there, “Can’t invest enough to generate more than the dividend raises”. WOW – I can’t wait to get on your level… that’s all I can say.

      -Lanny

  7. Amazing list of companies with amazing results! It really speaks volumes about the wonders of DGI. I was trying to have a discussion with a financial advisor around how DGI is superior to your standard 10% bond, 30% stock, blah blah blah. I should pull this out and show her that the proof is in the pudding.
    Side note, You need to Update this and add SYY increase into the fray! Boost those figures even more!

    • Diligent –

      It’s funny, I just scrolled back through and that’s a helluva a lot of companies, right? The stock market is rewarding heavily this year, so we are damn lucky.

      Bodda Bing Bodda Boom – what did the advisor have to say? I am damn curious, haha.

      -Lanny

  8. $413 additional dividend I come just from increases this year alone. That’s just incredible lanny. As you mentioned it’s the equivalent of investing nearly $12,000. Plus this amount alone exceeds majority of my months dividends. It’s watching the progress of those ahead of us that keep us motivated to continue on this journey to attain financial independence. Keep up the awesome investing Lanny. These increases are definitely going to help you get their faster.

    • Dr. Dividend –

      I know how hard $12,000 is to come with to invest and how lucky am I to receive this benefit? Took time, consistency and perseverance, but I am here. If I can do it, you can do it. We are getting there, one day and dividend at a time.

      -Lanny

  9. Lanny,
    Its amazing how just with 1 stream its only a small amount of water. But when you start to combine them and add in a little rain, they can become rivers. The same logic applies to passive income and time.
    I really should go back one year and analyze the total effect of increases on my dividend totals, mainly just because the end result would be pretty spectacular.
    – Gremlin

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