How to Give Yourself a Raise Every Year with Dividend Investing

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How much of a pay raise did your employer give you last year? I personally did not receive any kind of raise, bonus, or cost of living increase from my full-time job last year. I have actually only received a small cost of living increase once from my employer in the past 4 years! To…

How much of a pay raise did your employer give you last year? I personally did not receive any kind of raise, bonus, or cost of living increase from my full-time job last year. I have actually only received a small cost of living increase once from my employer in the past 4 years! To be honest, if I factor in rising healthcare costs and parking increases (yes I pay for parking) from last year – I actually took a sizable pay cut.

Pay Raise through InvestingSo am I stressing about the situation? The answer is – NO. While I certainly would have welcomed any kind of pay increase from my employer last year, I made sure that I gave myself a raise at the very least. Instead of relying on my employer for a raise, I am taking steps to build an income stream that guarantees a pay increase every single year.

I have been giving myself a raise for the past 4 years by slowing building a portfolio of blue chip dividend stocks. Why would I put my future in the hands of my employer when I can guarantee an annual pay increase regardless of the economy? I don’t know about you but I certainly don’t want to put my future in the hands of something I can’t control.

Giving Yourself a Raise

I currently own positions in 16 stocks that have a strong track record of increasing dividends annually. Each of these 16 companies gave their shareholders a pay raise in the form of dividend increases during the past year.

Overall, I received an 8.7% pay increase as a result of dividend increases from companies I own stock in. The annual dividend increases ranged from 1.6% on the low end and 21.7% on the high end. By diversifying my investments in only the best blue chip stocks, I was able to give myself a nice little pay raise this past year.

I don’t think I have ever gotten a raise from an employer for anything close to 8.7%!

Here is a look at a few of the companies that I own that helped fuel my raise this past year –

  • Johnson & Johnson (JNJ) – 8.2%
  • McDonald’s (MCD) – 5.2%
  • Procter & Gamble (PG) – 7.1%

The percentages above only represent annual dividend increases and not any increase (or decrease) in the overall value of the stock. The nice thing about investing in blue chip stocks is that over time, most of your shares will increase in value as well.

So my original 15 shares of Procter & Gamble I purchased over 4 years ago are now worth $20 more a share. Not only has the company been giving me a raise for 4 years in a row, they have also increased the value of those shares.

There is certainly a chance your investment could go the other way in a down market. However, provided you are investing in only the best managed companies – there is a good chance you will still get that nice raise in the form of a dividend increase. A down market can also be a great time to add shares if you have done your research on the company. (See Dollar Cost Averaging for why down markets can be good for investors with a long term investment horizon).

Guaranteed Annual Pay Raise

The really nice part of owning shares in well managed dividend paying companies is that the raise won’t stop after this year. I fully expect to get another pay increase next year and the year after that. In fact, I expect to get an annual raise for the next decade (and beyond) just from owning shares in companies like Johnson & Johnson (JNJ), McDonald’s (MCD), and Procter & Gamble (PG).

The companies mentioned above are certainly not exciting high growth investments. However, they are all established, well managed companies that give their shareholders a raise year after year. Most of the time, investors of these companies don’t need to worry about a weak economy or short term losses in the stock market. Instead, they look to add to their position when the stock market is down and know they will be getting that nice raise during the year.

Final Thoughts

Instead of worrying if your employer will give you a raise this coming year, why not take matters into your own hands? It can be frustrating when you don’t get a pay increase after putting in a lot of hard work for your employer. However, you can still guarantee a modest raise each year by building a portfolio of quality dividend stocks.

Full Disclosure – At the time of this writing I own shares in JNJ, MCD, and PG. These stocks are listed only to show the types of companies to look for and should not be considered a recommendation to buy. It is important to do your own research on stocks before investing.

What stocks do you own in your portfolio that offers an annual raise?

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About John Schroeder

John Schroeder writes about investing and other topics at The Money Sprout where he shares his goals on how to create passive streams of income so he can spend more time doing the things he enjoys, and less time working.

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  1. Bryce @ Save and Conquer says

    Larry Swedroe has a counter to high dividend strategies. He wrote, “While the financial media touts high-dividend stocks strategies as alternatives to other prudent investment strategies — such as equity strategies or high-quality fixed income portfolios — there are several issues you should consider. First, a high-dividend strategy is far riskier than a high-quality fixed income approach, so comparing the two is like comparing apples to oranges.

    Second, a high-dividend strategy is essentially a value stock strategy, which involves buying companies that have low prices relative to earnings, book value, dividends or some other accounting metric. However, the high-dividend approach to a value stock strategy has historically had the lowest returns, and returns (meaning dividend payments plus capital appreciation) are ultimately what should matter.”

    I am happy to own the total stock market with a low-cost passive index fund. The total market index includes the dividend stocks you mentioned, plus a lot of growth stocks. I would rather have more diversification and less volatility by owning the total stock market index.

  2. AWB says

    Another technique to use is dollar cost averaging dividend paying stock with a dividend reinvestment plan or DRIP. In theory and often in practice, this helps offset any downside risk or capital loss while steadily increasing income However, for that method to be most effective, the stock should rise in value, which is more likely over the medium to long term. This is more likely to occur when stock is chosen in a secular bull market or bull market in tandem with good due diligence.

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