Selected Dividend Increases in July

Several Dividend Aristocrats have increased or decreased their dividends in July. The companies are listed below.








Expected dividend increases in August

Based off historical information from this spreadsheet, I would expect that only DOV will increase its dividend in August.
These dividend aristocrats have increased their dividends during every month of February over the past 4 years. Upon a closer examination of the dividend growth stock behavior of the 60 dividend aristocrats, it seems that every month there is at least one company that raises its dividend. It’s nice to get a pay raise every month. The only company that has increased its dividend twice in one year is STT- State Street.

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- Selected Dividend Increases in June
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My Dividend Growth Plan - Diversification

In my previous article I started discussing my dividend growth plan in more detail, by focusing on my stock selection criteria. Today I will be focusing on the diversification part of my plan.

Diversification is important, because it generally insures investors up to a certain point that they won’t lose all of their money at the same time. In general it is not a good idea to put all of your eggs in one basket. In terms of diversification, I am trying to own anywhere from 30 to 100 dividend paying stocks, which generate an ever increasing dividend income stream for me. The stocks should fit the criteria which I mentioned in the previous articles that I wrote. I will be trying to get a representative sample of as many sectors as possible; I will however try to own dividend stocks which are representative for the ten sectors that comprise the S&P 500 index. These sectors include Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Telecom and Utilities. Financials, Telecom and Utilities are stocks which traditionally have paid solid dividends. I will try to not be overly concentrated on specific sectors and instead try to be as equally weighted sector wise as possible.
Another important sector to look into is real-estate. Luckily there are plenty of REIT’s out there to satisfy the dividend investor’s appetite. I am also looking into getting some timber exposure, by purchasing shares in timber REIT’s like PCL, RYN, and POPE.

My portfolio will not be diversified without adding some foreign stock exposure. At this time this has been my weak point. It is difficult to find foreign companies which have increased their dividends consistently for more than 10 years. In addition, not all foreign dividend achievers are readily available to buy in the US. There are other taxation issues, which could potentially turn foreign stock investment into a complicated matter.

Another matter to look into is that most dividend paying stocks are established large cap corporations. Thus further diversifying into small and mid caps will be a tougher challenge.

Last but not least, a 20-25% exposure to fixed income could smooth the equity curve of my portfolio and reduce volatility. I wouldn’t start contributing to fixed income until I have ten years to retirement however. Even a modest exposure to bonds would have been helpful if you were invested in US stocks at the onset of the Great Depression or in Japanese stocks at the end of the 1980’s.

Next Week, I will discuss the last part of my dividend growth plan - Money Management.

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I got a 10% raise from CSL (Carlisle Companies)

I was checking my stocks when Street Insider reported this news yesterday:

Carlisle Companies Inc. (NYSE: CSL) today announced that its Board has approved a 10% increase in its quarterly dividend from $0.14 to $0.155 per common share, payable on September 1 to shareholders of record on August 15.

This marks the 32nd consecutive year of dividend increases for Carlisle shareholders.Carlisle Companies Incorporated engages in the manufacture and sale of construction materials in the United States and internationally.

That's a pretty nice raise to get - 10% just for identifying a solid company with a sound business model. You could check my analysis of CSL here.

Using the dividend tool that Dividend Investing Blog has on his blog, I was able to easily get the annual dividend payments for CSL.


A 7.60% average dividend growth over the past decade is not bad at all. In fact if CSL achieves a similar dividend growth over the next decade, the annual dividend payment per share will double.

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Realty Income (O) Dividend Analisys

Realty Income Corporation engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators. As of December 31, 2007, it owned 2270 retail properties located in 49 states, covering approximately 18.5 million square feet of leasable space.

The company is a dividend achiever as well as a component of the S&P 1500 index. It has been increasing its dividends for the past 14 consecutive years. From 1998 up until June 30 2008 this dividend growth stock has delivered an annual average total return of 14.90 % to its shareholders.

At the same time company has managed to deliver a 5.50% average annual increase in its FFO since 1998. FFO is a common measurement for a REIT. It is an alternative non-GAAP measure that is considered to be a good indicator of a company’s ability to pay dividends.

The ROE has been decreasing from its 2001 highs around 13% to about 9% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 5.1% annually, which is slightly lower than the growth in FFO. A 5% growth in dividends translates into the dividend payment doubling almost every 14 years. If we look at historical data, going as far back as 1994, O will have managed to double its 1994 monthly dividend payment of $0.0775/share by 2009.

Realty Income is one of the few companies which make monthly dividend payments to shareholders. The company is so proud of its ability to raise dividends several times per year, that it calls itself the Monthly Dividend Company.

If we invested $100,000 in O on December 31, 1997 we would have bought 9465 shares (adjusted for a 2:1 split in 2005). In January 1998 your monthly dividend check would have been for $757. If you kept reinvesting the dividends though instead of spending them, your monthly dividend income would have risen to $2774 by June 2008. For a period of 10 years, your monthly dividend payment would have increased by 72 %. If you reinvested it though and took advantage of the monthly compounding effect, your quarterly dividend income would have increased by 266%.

The payout from funds from operations has remained at the 80%-87% range for the majority of our study period. One of the reasons why I wasn’t enthusiastic about the stock in february was because of this high payout. Do not repeat the same mistake as me however – In order to maintain their tax status as a REIT for federal income tax purposes, they generally are required to distribute dividends to our stockholders aggregating annually at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and by excluding net capital gains), and are subject to income tax to the extent we distribute less than 100% of the REIT taxable income (including net capital gains). In addition to that, the fact that the company has managed to keep increasing its profits and dividends while keeping the payout form operations stable is a positive sign.

One potential risk for the company is if it is unable to meet its financing needs from debt markets. I believe that we have seen most of the bad news in the financial markets. Since O managed to do just fine during the financial crisis that started last summer, I believe that it should do well in the future as well.

Another potential risk could be that the softening economy could have an adverse effect on some retailers and restaurants, which occupy O’s buildings. The vacancy ratio is about 96.8% as of July 28 2008, versus 98.6% as of June 30, 2007.

Overall I think that Realty Income (O) is another dividend stock that should be in every long term dividend investor’s portfolio. It is nice to have another asset class in your portfolio in order to achieve diversification.

Disclosure: I own shares of O

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How much money do you really need to achieve financial independence?

I am constantly being asked by people about the amount of money they have to invest in order to achieve a stable dividend income stream. I am primarily discussing low current dividend, higher dividend growth stocks in my blog, which have the potential for at least market average stock price appreciation.

So how much money do you need to invest, in order to generate the amount of dividend income that will set you free from the 9 to 5 job? Well, a good starting point would be first to track analyze your expenses for the past twelve months.Unless you live in Canada, you might have to purchase your own health insurance, which might have been previously subsidized by your employer.

Another additional expense that you might want to consider will be your hobby, assuming that you will retire and do what you really like to do. Some people might like to spend their time fishing, while others might like traveling. Try brainstorming with your spouse about any additional expenses that you might think about, and then add them to your income requirements.Assuming that you won’t be working a full-time job anymore, you will need to subtract from your income requirements the amount of money that you currently spend on transportation to your job, as well as other work related activities like buying suits, restaurant meals, professional dues, courses etc. You should also subtract the amount of money you are currently saving for retirement through a 401K, IRA or in a simple savings/brokerage account. I would also recommend that it would be a good idea to cut back on certain fixed and recurring expenses such as your mortgage payment or student loans before you retire. And last but not least, the taxes that you will be paying on your dividend income will be much lower than the income taxes that you are currently paying.

After you have determined exactly how much you really need to live comfortably in retirement now comes the fun part – investing in the right dividend stocks for you.Let’s say to you have determined that you need $20,000/year in retirement before taxes. You have identified several diversified income producing portfolios yielding from 1% to 10%. So how much do you need to save? It all depends based off the dividend yield (I am assuming that the dividend growth will at least equal inflation, so that inflation would not decrease your standard of living).

Yield Amount to invest
1% $2,000,000.00
2% $1,000,000.00
4% $ 500,000.00
6% $ 333,333.33
8% $ 250,000.00
10% $ 200,000.00

Based off these calculations you would need to save and invest anywhere from $200,000 to $2,000,000. It is easy to find stocks which yield 2%-4%. Getting to stocks that pay 6% and even 8% consistently, who also increase their dividend payments is getting even harder. Finding enough high-yielding stocks in order to construct a stable dividend income producing portfolio, whose income increases each year in order to compensate for inflation, is a pretty difficult task in today’s environment. You might get there however, by buying strong dividend growers whose yield is at least equal to the yield on the S&P 500.

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