Your diversified investment portfolio should contain partly of Perpetual Dividend Raisers, stocks that raise their dividends every year. That’s because by lifting the dividend every year, their managements have set the bar very high. Imagine what would happen if after six decades of annual dividend increases, e.g. American States Water (NYSE: AWR) would not hike its dividend? I guess the days at the company’s helm would be numbered for the CEO. Investors in these type of companies expect annual dividend increases, and the management teams work very hard to be able to provide them. If, after 20 or 30 years, dividend boosts suddenly would come to a halt, that would suggest a drastic change in the company’s business or prospects.
Assuming, you have a $100,000 portfolio of dividend stocks with an average yield of 4%, and it climbs by the historical average of the S&P 500. You reinvest the dividend:
After 10 years, your $100,000 will be worth $278,544. You will receive about $5,300 per year in dividends.
After 20 years, your $100,000 will be worth $668,103. You will receive about $6,100 per year in dividends.
But by reinvesting the dividends of Perpetual Dividend Raisers helps you to compound your income drastically.
Assuming now, instead of earning a flat 4%, your Perpetual Dividend Raiser also starts off yielding 4% but then boost their dividend on average by 8% every single year, the result increases significantly:
After 10 years, your $100,000 will be worth $310,764 (instead of $278,544). You will receive about $11,780 (instead of $5,300) per year in dividends. This is more than double the dividend if the companies had not boosted the pay outs.
After 20 years, your $100,000 will be worth $978,406 (instead of $668,103). You will receive about $38,290 (instead of $6,100) per year in dividends. At that point, if you’re ready to stop reinvesting the dividends and take them as income, you’ll receive $38,290. That’s is more than 6 times the amount you would get without the dividend increases.
Perpetual Dividend Raisers are a great way to get some income today and an even larger later.
Sven Franssen