Dividend Increases: Steady Income Without Market Volatility



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This is the sixth post in the Dividend Increases series.

I think dividend-investing is one of the few free lunches left in investing. Most people looking for higher returns are often confronted with persistent market volatility, but it doesn’t always have to be that way. The strongest driver behind my investing in dividend-paying stocks is the steady and growing income stream that accompanies the strategy, but without the baggage of market volatility.

Take Johnson and Johnson for example. Today, the Board is delivering, yet, another mundane pay raise to shareholders by boosting dividends for the 46th consecutive year. 46 years is a long time. The best part about being a Johnson and Johnson shareholder is that your income is immune to the jittery stock market awash with doom and gloom prognoses in every corner. The stock may be up 5% today and down 5% tomorrow, but as long as dividends are flowing in, investors have no reason to panic and sell low. For this reason, I feel that the dividend investing strategy does a terrific job at stimulating good investment habits for certain individuals.

Below, I have charted Johnson and Johnson’s historical share prices followed by dividend payments from the past decade. When you retire, would you rather live off of the capital gains or dividends?

Dividend increases since my last portfolio update:

  • TD - 3.5% (11.3% from last year)
  • North West Company - 18.5% (45% from last year)
  • Johnson and Johnson - 10.8% (10.8% from last year)
  • Husky Energy (non-core) - 21% (60% from last year)
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Comment Number:
1
Written by:
Dividends4Life
Posted on:
April 25, 2008 at 12:15 am

Great series! I think I like this post best so far. Keep ‘em coming!

Best Wishes,
D4L

Comment Number:
2
Written by:
Dividend Growth Investor
Posted on:
April 27, 2008 at 3:43 am

Great post. Who cares if your stock is up or down today when your dividend income has more than tripled over the past 10 years..

Comment Number:
3
Written by:
Jude Brown
Posted on:
April 29, 2008 at 12:25 pm

What’s up FG? Definetly miss things in Vancouver. I spent time in New West, Burnaby and the West End just off Robson - those were some good times. Now working as an accountant in Thunder Bay. Fantastic place to come if you cen get a job. Wife is a nurse so we have the dual income flowing directly to some debt we recently incurred. Then we pay off our house in a few years (cost of 88K after fees etc) all the while pounding as much cash into dividend stocks as possible. I have never purchased a dividend stock but will finally be jumping on onboard this June/July. The plan is to do this for 30 years and then live off the income stream. Of course we need to save lots of cash too as we are headed back to the coast eventually. Great site keep it up!

Comment Number:
4
Written by:
Roman
Posted on:
May 1, 2008 at 2:59 pm

Thats some great information , are your using a DRiP to invest your money?

Comment Number:
5
Written by:
Financial Jungle Guy
Posted on:
May 1, 2008 at 9:09 pm

Jude - Only $88k for a house in Thunder Bay? I envy your situation. The average detached in Vancouver is $800k-$900k.

Roman – I haven’t bought stocks on DRIP for 2 reasons: (1) it’s an accounting nightmare to track the adjusted-cost-base. (2) I prefer to buy on dips. Some issuers offer 3 to 5% discounts on DRIP, but they don’t make much sense if the stocks aren’t cheap to begin with. I much rather pool all my dividends together and buy a big block of shares when they’re a bargain.

Comment Number:
6
Written by:
Team - O2I
Posted on:
May 2, 2008 at 7:14 am

Hi,

We need a permanent text link from your navigation part.
We want the link to our financial section of our website

Please send me the rate for a permanent link.

With regards,
Team - O2I

Comment Number:
7
Written by:
ADS Team
Posted on:
November 4, 2008 at 12:14 pm

Good example of Johnson and Johnson. Do you use any evaluation software or technique for Mutual fund investment?

Comment Number:
8
Written by:
Derrick
Posted on:
March 3, 2009 at 6:55 am

Great article. I also believe in dividend investing, as you are pretty much ‘paid’ to wait out the current market turmoil. Another good dividend paying stock is P&G - great company.