When I was first starting my research into government programs that would help the middle class in the United States, it would be an understatement to say I was skeptical. When I found out about individual development accounts, I was overcome by awe. I had never heard about these programs before, and this new realm of knowledge made me want to share it with the world. Compare this with the thousands of articles out there about investing in stocks, and those articles on stocks are comparatively underwhelming due to how common they are.
However, as more of my investments start approaching the five year mark, they are just as incredible in their own right. I have owned Pepsi stock for 4.5 years, and my dividends that have been reinvested have now reached the point where the last dividend I received is 58% higher than the first dividend I received in 2012. At the 5 year mark for these dividends they will, in all likelihood, be approaching a point where they are almost 70% higher. Ask your acquaintances how many of them received a 70% pay increase over the past 5 years. If more than a handful say they have, I want to know where they are working.
Dividend growth investing is one of those extremely fun things to watch once your investments start to hit amounts that matter so that they can begin to change your life. If you own 10 shares of Pepsi, your annual dividend income is going to be $30.10. If PepsiCo increases the dividend by 7%, the next year of dividends will be $32.21. Big whoop. But if you had spent decades of your life systematically building your position so that you had 10,000 shares of Pepsi today , then your dividend would increase from $30,100 to $32,210. That extra $2,100 has real utility that you can use for a vacation to Disneyland. That is money that you could use to go to Yellowstone. Hell you could go to Vegas and bet it all on black if you wanted to.
This is why dividend growth investing has a cult following amongst investors. Once your portfolio reaches a certain size, those dividend increases can result in much more money for you to spend with your family and friends doing something you enjoy. When I write about investing, I am trying to point you to the end goal. When your holdings drown you in cash each year, and when companies increase their dividends, you can use that money to upgrade your life, give it to your kids, or give it to charity.