What I mean by snowball is that as the account size increases, the amount
of dividends increases along with it.
It's a great result, reflecting an average 8 % annual
dividend increase for every stock in the portfolio.
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.
If you can not rely
on dividend increases in the future, they you are not building a dividend compounding portfolio.
A conservative payout ratio like this not only leaves a wide margin of safety, but also gives management plenty of room for
future dividend increases.
An improving balance sheet and consistent cash generation from its operations have allowed management to reward investors with annual
dividend increases over the past three years.
A
small dividend increase like this will not affect my income a whole lot since I don't have a large position in the company.
In most cases, the annual
dividend increase comes in the form of a 5 % stock dividend, which the company has done since 1994.
I'm looking forward to some
big dividend increases from some of these companies so the snowball should really take off!
Because of compounding, the annual increase in income from the portfolio actually exceeds the
average dividend increase of the stocks in the portfolio.
If the dividend yield gets closer to 1 % either through a sell - off or
further dividend increases we'll most likely be an active buyer at that time.
Further due diligence should be conducted on each stock in the list and past
dividend increases do not guarantee they will continue.
High - yielding dividend stocks typically suffer more when rates rise than dividend growers — quality companies with enough free cash flow to
sustain dividend increases over time.
If you want to own a basket of good dividend stocks with a solid history of consecutive
dividend increases using an ETF is an efficient way to do this.
We've constantly calling and texting each other the minute we find out that our
forward dividend increased without lifting a finger!