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More Dividend Raisers Add Extra Springtime Value 04/15/15

More Dividend Raisers Add Extra Springtime Value

Over the last couple of months, we've presented companies that have histories of raising their dividends year after year, along with an explanation of how they provide extra levels of compounding for diligent investors. Here again is a reminder of the logic behind this strategy, along with new lists of companies that either have recently raised their payouts or are about to do so (again):

 

Enhanced Compounding with DRIPs

 

Many investors understand that “the miracle of compounding” plays a major role in Total Return, especially over time. Much of that comes from dividends, which provide a steady flow of cash that can be reinvested in more shares of stock. Using a company-sponsored Direct Investment (or Dividend Reinvestment) Plan, dividends are automatically used to purchase more shares (and fractions) so that every penny of the payout is used to create a growing stake in the underlying company. (Keep in mind that dividends are taxed at favorable rates, whether received or reinvested.) But there are at least two things that can give DRIP investments an extra boost:

 

1. Owning companies that consistently raise their dividends every year

2. Buying additional shares just before the Ex-Dividend Date.

 

Currently, there are almost 300 DRIP companies that have raised their dividend for at least five straight years, and company-sponsored DRIPs offer not only the ability to reinvest dividends, but also the option to buy additional shares directly. What's more, many of these companies accept investments of as little as $25 so it is efficient to invest regularly and build holdings over time in no-fee DRIPs.

 

Owning such companies gives shareholders an additional level of compounding by using reinvested dividends that are steadily rising to generate their own dividends. The second enhancement the ability to purchase new shares just before the Ex-Dividend Date is a simple refinement of the plans' cash purchasing feature, which often allows purchasing as often as weekly, as well as the ability (for most plans) to set up automatic monthly bank drafts. By purchasing just before the Ex-Dividend Date, the shareholder's new shares qualify for the next dividend that will be paid, usually about a month later, rather than waiting 90 days between quarterly payments.

 

The companies shown below all offer direct investment plans (DRIPs) and have recently declared a dividend increase. We've included the number of consecutive years the company has raised its dividend rate and other information to help you get the benefit of buying additional shares just before the ex-dividend date.

 

Note that we have excluded yields and most-recent-increases of less than 2%. Also note that Ex-Dividend Dates generally recur every three months, so, for example, a company with an Ex-Dividend Date of March 15 would also have Ex-Dividend Dates around the 15th of June, September, and December an important cycle for anyone trying to add DRIP shares just prior to the quarterly cut-off.

 

 

No.Yrs=Consecutive years of higher dividends

DRIP Fees= Company-sponsored Dividend Reinvestment/Stock Purchase Plan (Y/N=Fees? For Dividend Reinvestment (DR) or Stock Purchase (SP)

MR%=Most Recent % change

DGR=Dividend Growth Rate

For a list of No-fee company-sponsored DRIPs, click here: http://www.directinvesting.com/search/no_fees_list.cfm

 

Anticipating dividend rate increases:

 

Another useful “tweak” to the strategy is to anticipate companies that are about to increase their dividend rates. Since these firms typically do so about the same time each year, being aware of that history can help to anticipate the next increase. Here's a sampling of candidates for that distinction:

 

 

Note that it may take several weeks to complete the enrollment in a company's DRIP, so becoming a participant in the plan may mean missing the next dividend, but the important thing to remember is that another dividend is just around the corner, so patience - always important in long-term investing will pay its own dividend over time.

 

For a list of No-fee company-sponsored DRIPs, click here: http://www.directinvesting.com/search/no_fees_list.cfm