Thursday, January 26, 2017

Dividend Growth Investing at Work - Realty Income Strikes Again!

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.

The wonderful thing about dividend growth investing is that sometimes you get surprised with a pay raise you weren't really expecting.  That's exactly what happened yesterday.

On Tuesday the Board of Directors at Realty Income Corporation (O) announced another raise to their monthly dividend payout.  The new dividend is $0.2105 which is a solid 3.95% increase from the previous payout of $0.2025.  Assuming the dividend is maintained at this level for the remainder of 2017 this will represent 24 consecutive years of dividend growth giving them the title of Dividend Contender.  Shares currently yield 4.20% based on the new dividend rate.

Realty Income is one of a few companies that like to give multiple raises throughout the year which makes them even more attractive of a company.  Especially when the first raise comes to nearly 4%.  As such you can't just look at the raise from the previous payout and need to look at the year over year raise to really see the power of Realty Income's dividend growth.  Compared to February 2016's payout of $0.1985 the recently increased dividend is a 6.05% increase.

Since I own 91.685 shares of Realty Income in my FI Portfolio this raise increased my forward 12-month dividends by $8.80.  This is the 4th consecutive year of dividend increases that I've received from Realty Income since initiating a position in mid-2013.  This is also the 18th dividend increase that Realty Income has provided over that time.  Cumulatively my Realty Income dividends have risen by 16.0% from dividend growth alone!  According to USInflationCalculator the total rate of inflation over the same period is just 3.6%.  



A larger version of the chart can be found here.

As I mentioned earlier Realty Income typically gives investors multiple raises throughout any given year.  So looking at any one raise in particular could paint a much different picture than examining things over a longer time frame.  I prefer to look at dividend growth rates across various time periods to encapsulate the various fluctuations and the multiple raises over time.


dividend growth investing, dividend increase, financial independence
Realty Income Corporation (O) Annual Dividend and Rolling Dividend Growth Rates
*2017's annual dividend assumes 10 additional payments at the $0.2105 per share per month rate.  

An interactive graphical version of the previous chart can be found here.

Wrap Up

My forward dividends increased by $8.80 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.91% this raise is like I invested an extra $302 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.

Thus far in 2017 I've received two dividend raises from the companies that I own increasing my forward dividends by $11.92.

My FI Portfolio's forward-12 month dividends increased to $5,568.92.  Including my Loyal3 portfolio's forward dividends of $67.01 brings my total taxable accounts dividends to $5,6235.93.  My Roth IRA's forward 12-month dividends remain at $242.54.

Previous Raises This Month

Omega Healthcare Investors (OHI)

Do you own shares of Realty Income?  Do you think it's an attractive purchase at these levels?

Please share your thoughts below.

This article was written by Passive Income Pursuit. If you enjoyed this article, please consider subscribing to my feed.

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