Realty Income Corp (O) Giving Shareholders a 4% Raise in the New Year
One of the first things we look for when screening income stocks is if they have a strong history of raising dividends each year.
If the answer is no, then we move on to the next stock in our screen.
On the other hand, if a company consistently raises their dividend each year, then we take a closer look.
‘What is the dividend growth rate‘ of the company is the next question we ask?
At what percentage do they grow their dividend on average for the past 5 years? 10 years?
Typically, if the company averages at least 6% growth year to year … then we investigate even further for other metrics like payout ratio, dividend yield, etc.
One of the awesome benefits of doing these screens and investing in stocks that meet the criteria, are the future raises that you will receive.
It wasn’t that long ago when I wrote a post about getting a small raise from one of the stocks we own in the Money Sprout Index – Realty Income Corporation (O).
Well … one month later, we are back and talking about another raise from this company. Only this time it is a much larger raise!
High Yield Real Estate Income Trusts
Investing in Real Estate Income Trusts (REIT’s) is a bit different than traditional dividend stocks for us.
First, these types of investments don’t fit with our dividend stock selection requirements.
Most of the time, a REIT will have a payout ratio much greater than 60%. For the majority of stocks we purchase, the dividend payout ratio is well below that threshold.
Since REIT’s offer an alternative to traditional dividend stocks, we needed to tweak our stock screening criteria to allow a few of these companies to be added.
At the time of this writing, high yielding REIT’s make up about 12% of our portfolio from 2 different stocks (O, and OHI).
In the case of Realty Income Corporation (O), they currently pay out a monthly dividend and normally give their shareholders a raise several times per year.
Investing a small portion of our portfolio in REIT’s has allowed us to increase our dividend yields.
Investing in Dividend Stocks – Realty Income Corporation (O)
We made our initial investment of Realty Income Corporation (O) back in April 2015, by purchasing 5 shares. Since that time, we have made additional investments and have increased our total shares up to 40.
Our total cost for these 40 shares was $1,930.50, which gives us an average share price of $48.26.
Each of these shares were purchased through our Robinhood account, which means we didn’t spend any additional dollars on brokerage commissions or fee’s. That has allowed us to spread our investment dollars further.
To date, we have earned $142.56 in dividend income from owning shares of Realty Income Corporation (O). Since Robinhood does not offer DRIP, we have used this income to reinvest into various companies.
Overall, we have earned back about 7.4% of our original investment just from dividends.
We Got a 4% Raise
Just last month, I wrote about getting a .25% raise in January for our shares of Realty Income Corporation (O).
While not a huge raise, I will take any increase we can get … especially knowing that we didn’t really do any work to get that raise.
Well now that the month is almost over, the company recently announced another dividend increase … but this time much larger.
Realty Income Corporation plans to give shareholders a monthly dividend increase of 3.95%!
We will receive $.2105 in dividends this coming February (2017) for each share that we own … instead of $.2025 last month. It may not seem like a huge increase, but month to month I think that is great!
This latest increase bumps the annual dividend for O up to $2.526 per share (from $2.43). That is a 3.95% increase.
Combined with last months increase, these dividend hikes add up over the course of a year.
Looking back at the start of 2016 … the company was paying $.1910 per share. Since that time, the company has raised it’s monthly dividend by over 10%!
I got a raise last year from my employer … but certainly not a 10% raise. Plus I had to work hard for that raise at work. I didn’t really do much other than buy and hold shares of Realty Income Corp. to get their raise.
How Much Extra Income?
This latest dividend increase has pushed our 12 month forward dividend income for O up to $101.04, compared to $97.20 last month.
Our future annual dividend income last January on 40 shares would have been $91.68, which shows good growth compared to last year. The increases over the past year have pushed our future dividend income amount up by almost $10.
This latest increase is another reminder that our dividend income stream is constantly growing without any extra work from us.
And if everything goes well with the company, there is a very good chance they will continue to raise their monthly dividend in 2017.
This most recent increase (along with several others) has helped to push our projected annual dividend income up to $2,241.72.
Every little bit counts when it comes to building this portfolio and dividend income stream. I just love to see this slow and steady growth!
No matter how large or small, I will always celebrate a dividend increase from one of the 29+ stocks we own. These small dividend increases represent mini raises to our income that are spread out through the year.
It doesn’t matter if the raise is .25% like we got from Realty Income Corp. last month or the 4% raise this month … they all add up over the year.
For every increase … we take one step closer to reaching our long term goals.
In the short term, we have a goal to grow our 12 month forward dividend income to $3,000 by the end of 2017. This latest increase will help us continue to push towards that goal.
Do you own any stocks that pay monthly dividends? Do you get excited about these small monthly increases that add up over a year?
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – O. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.