How To Increase Your Dividend Income Without Lifting A Finger | personal finance

(Charlene Rhinehart, CPA)

Dividend stocks offer one of the most convenient ways to earn extra income while you sleep. All you have to do is select the dividend-paying stocks you want in your portfolio and watch those dividend deposits flow into your account. The best part is that you can qualify for an automatic increase in dividend income without doing anything extra on your part.

Below, we’ll dive into a proven strategy to help you grow your dividend income for years to come.

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Start Earning Dividend Income

If you are ready to launch your dividend trip, you will need invest in companies that reward shareholders with dividends. Not all companies do this, so you’ll have to do something fast. research to make sure some of the companies on your watch list pay dividends.

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Is that how it works. When a company makes money, it can do two things:

  • Reinvest the money in the company
  • Reward shareholders with additional income

Some companies will do a bit of both. Drink Microsoft (NASDAQ: MSFT), for instance. This trillion dollar tech powerhouse continues invest in your cloud business, while paying an annual dividend of $2.48 per share (as of June 2022) to shareholders. But if you want to win your first $1,000 in dividends from Microsoft, you will need approximately 404 shares. At Microsoft’s current stock price, you’ll need to dole out six figures for that to happen.

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That’s why you want to identify your goals and risk tolerance, and then research companies that align with that. If your goal is to invest in companies that increase their annual dividends each year, and you want diversify your portfolio With companies beyond technology, you’ll want to turn your attention to a special class of stocks. We will discuss that below.

Unlocking Dividend Growth Opportunities

Some companies stick to the same annual dividend payment every year. Other companies have a history of steadily increasing their dividends. These companies can be part of the Dividend Aristocrats either dividend kings club if they have been in the game for some time.

Dividend Aristocrats has demonstrated its commitment to shareholders by offering dividend increases every year for at least 25 consecutive years. Here are some examples of companies that have made it to the list:

  • Chevron
  • cardinal health
  • Caterpillar

Then there is an elite group of dividend payers on the list who have paid and increased their base dividend for at least 50 consecutive years. Here’s a preview of the Dividend Kings:

  • Procter & Gamble
  • Colgate-Palmolive
  • Johnson and Johnson

Increase your income while you sleep

Suppose you invested in a company that has been crowned Dividend Aristocrat. The company paid an annual dividend of $3.48 per share last year and plans to increase the amount to $3.65 per share this year. It may not seem like much, but it all adds up.

If you have 1,000 shares of the company, you would have earned $3,480 last year. This year’s dividend increase will bring it to $3,650. That means he made an extra $170 without moving a muscle.

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Imagine getting a dividend increase every year for the next 20 or 30 years. If the company continues to increase the annual dividend, your income will automatically increase, as long as you hold on to the stock.

Investing in dividend growth stocks can set you up for automatic pay raises for the rest of your life. Although past performance doesn’t always guarantee future success, these companies have a proven track record that can help you start your journey.

Diversify your portfolio with dividend growth stocks

Establishing a dividend income growth strategy does not mean you have to abandon other types of actions and investments. Dividends can fit in a welldiversified portfolio of assets that align with your goals and risk tolerance.

Start creating your watch list, make your research, and keep an eye out for companies that are increasing their dividends. Those small dividend increases each year can net thousands of extra dollars in the long run. The best part is that you won’t have to lift a finger to earn your rewards.

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Charlene Rhinehart, CPA has positions in Caterpillar and Microsoft. The Motley Fool has positions and recommends Microsoft. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.