How I Reached $10,000 in Investments At Age 21

I've recently crossed what I believe to be quite a milestone for anyone that is pursuing financial independence. After over a year of saving and investing my excess capital into my portfolio of mostly dividend growth companies, I have reached $10,000 in investments with no debt. Why is there an emphasis on the investment aspect of net worth? Well, that's because a $10,000 car or $10,000 of furniture doesn't have the same effect as $10,000 in investments. A $10,000 car will get you to work quite reliably, but a $10,000 portfolio will generate hundreds of dollars of growing income on an annual basis. My money is starting to work for me! Whether you're 21 years old or 41 years old, I believe my story could give you a few key takeaways on how I reached this milestone, and how you can too. Or if you've already passed this milestone months or years ago, this could serve simply as a reinforcement of your beliefs. Without further ado, let's dive straight into the reasons I was able to achieve this milestone.

The First Reason: Supportive Parents

As I alluded to in (How I've Avoided Student Loan Debt), I've been incredibly fortunate to have supportive parents. If it wasn't for my parents, I would be at least $10,000 in debt rather than worth $10,000. I want this site to be completely transparent, and I think it would be a terrible act of omission for me to not mention that my parents have let me live with them rent free. To act as though I have achieved this entirely on my own would be intellectually dishonest. It's this support from my parents that will allow me to graduate debt free with my undergrad degree in accounting next summer. As I've said before, graduating college with little to no debt is virtually the first step on the path to becoming financially independent at an early age. The basic lesson from this is that if you're able to, live with your parents while you are still in college. This will set you up very favorably once you graduate college, and you'll be leaps and bounds ahead of your peers on your path to financial freedom. When you don't have any debt upon graduating college, that leads us into the second component of turbocharging your wealth building.

The Second Reason: Keeping Expenses Under Control

Although my parents have been incredibly generous in letting me continue to live with them, this didn't actually guarantee that I would reach $10,000 in investments at the age of 21. There are only two "levers" to pull to increase your net worth and build wealth. The first of which is to keep your expenses under control. Life is full of choices, and when you're in your 20s like I am, there are often many terrible choices readily available for you to make. The absolute worst choice you could make that has led to the metaphorical and literal demise of many promising young lives includes drugs and alcohol. Fortunately, I've never been the sort of person that is naturally inclined to go out "clubbing" or partying. Not only is it not healthy for the wallet, it's terrible for your health. Society tries to make you believe that these acts of going out and getting intoxicated are really "living," but I believe that to be absolutely false and marketing propaganda used by nightclubs/bars and alcohol companies. The crux of the matter is that when you avoid doing stupid things like seeking to impress people or engaging in "vices," it generally isn't very difficult to save money and get started on the path to financial independence. By doing the above, and by keeping the "Big 3" expenses (i.e. housing, food, and transportation) under control, saving money is very doable.

The Third Reason: Increasing My Income

While I talked about one of the two "levers" you can pull to build wealth, I didn't want to leave out the second which is increasing income. Building wealth can really be this simple. Just before I graduated college in August 2017, I accepted my first "real" job and current job working in the legal field. Before this, I was working part-time as a cashier making barely above minimum wage. Since starting my current job, my pay has increased with 3 raises from $10/hr with no benefits to about $12.75/hr including benefits. Obviously, this has been quite an increase from the roughly $300/month I was making while still attending my 2 year college. This has more than offset the increase in expenses I have experienced since obtaining my 2 year degree, and subsequently starting my current job, as my current expenses with tuition/textbooks/living expenses have increased about $1,400/month while net income has increased $1,550/month.

Takeaways:

When you're in the early stages of building wealth like me, having supportive parents is very helpful. I have been very blessed to have parents that allow me to live with them (and that put up with me lol). If you don't have this support system, it isn't impossible to build wealth, but it's certainly much more difficult! Moreover, the easiest way to begin building wealth is by avoiding debt. I'll be graduating next year with no debt. The final takeaway is pulling the two levers to build wealth. You can either decrease expenses, increase income, or do a bit of both. You can decrease your expenses and keep them under control by refraining from nonsense like drugs/alcohol/gambling or trying to impress others, and by focusing on minimizing your "Big 3" expenses. Lastly, you can increase your income through developing additional skills or taking up a side hustle. As my friends over at DividendDiplomats say, every dollar counts on the journey to whatever dollar amount you are aiming for.

Discussion:

Have you saved your first $10,000 in investments? If so, how long did it take for you to reach your first $10,000 in investments? How much easier was it to accumulate the next $10,000 once you had your wealth building on autopilot? Do you have any other advice to those seeking their first $10,000?

Navigating The Insanity of Transportation Expenses

As readers of this blog or really any personal finance blog are aware, there are 3 particularly large expenses (housing, food, and transportation) that account for over 60% of household spending. We're focusing today on the madness occurring in the transportation category of the budget for many Americans.

For those of you that follow my Twitter account, you may or may not remember a tweet from several weeks back about how the average new vehicle loan is $31,099, while the average used vehicle loan is $19,589. Furthermore, Americans on average spend 16% of their income on transportation. Although I do realize the necessity of a car in many areas of America (try getting to work in a small Midwestern town in the middle of January without a car), I also don't believe it's necessary to take on this kind of debt when purchasing a vehicle or to spend this much on transportation. Maybe I'm a bit biased as my father is quite handy with cars, and we have always purchased cars that were in collisions, and then restored them back to road condition. This has allowed us to use our cars for over 10 years at a relatively low cost in comparison to many Americans. I realize that this isn't something that is an option for everyone, but many Americans without a doubt would benefit from carefully considering their options when it comes to the transportation category of spending.

Option #1: Try To Live Close To Work

I am fairly lucky to live 7 miles/10 minutes each way to/from work. The average American has a commute of 16 miles each way to/from work. With gasoline prices at an average of $2.85/gallon at the time of writing this, I spend $356/year on gasoline assuming working 50 weeks/year and 5 days/week, while averaging 28 miles per gallon. The average American would spend $814/year on gasoline with the same assumptions. Of course, the amazing part is this doesn't even factor in the other expenses that are magnified when one lives further from work. For instance, you'll need to replace your tires sooner, change your oil more frequently, and your car will depreciate at a much more rapid rate the further you need to commute to work. The other not so obvious cost is the added commute time that results from living further away from work. This cuts into your time to relax or pursue side hustles.

Option #2: Purchase A Practical Vehicle

Remember how I assumed that other Americans were also driving vehicles that averaged 28 mpg? It actually turns out that the average fuel economy in the United States is somewhat lower than that at 24.7 mpg according to Reuters. You're probably thinking "Kody, that's only a difference of roughly 13% in terms of fuel efficiency." However, when you drive as much as the typical American drives, it's that extra 13% in fuel efficiency that I'm getting out of my 2012 Chevy Impala that really adds up (I drove mostly highway miles, which is how I arrive at an average of 28 mpg for my commute). Of course, the average fuel economy of SUVs and trucks are still noticeably lower than that of subcompact and compact cars. With the strengthening US economy, stable gasoline prices, and improved design, the uptick in demand for SUVs and trucks has been drastic. Since 2008, the share of SUVs/trucks sold has increased from 49% of sales to 65% in 2017. Before purchasing a vehicle, be sure to evaluate your needs. Nothing is more illogical than to buy a spacier vehicle than you really need. It senselessly drains your wallet and leads to more carbon emissions in the process.

Option #3: Incorporate Opportunity Costs Into Your Spending Decisions

One of the most useful things that I learned from both the online personal finance community, and my economics class is to incorporate opportunity cost into any decision you make. This will help you make an informed decision, and you'll ultimately feel confident in whatever decision you make after analyzing your options. For instance, let's say that you stumble across two barely used cars that are in nearly identical condition in terms of miles, model year, etc. The only difference is that one car is less desirable and perceived as "uncool" by society, whereas the other is viewed as a "status symbol" by society. The "uncool" and undesirable car costs $14,000, whereas the "status symbol" car costs $20,000. When determining which car to pick, it essentially comes down to how much you value validation from your peers. The $6,000 difference when invested for 15 years at a 5% inflation adjusted return turns into nearly $12,500. So at the end of the possible lifetime of both cars, we can see that one choice leads to you having $12,500 in extra wealth, and the other leads to $0.

Takeaways:

Live as close to work as you can provided it doesn't materially impact other spending categories like housing. This will save you time, and money provided you don't spend more on housing (living closer to work) than the reduction in your transportation expenses. If you are really lucky, you may even be able to work from home part of the week depending upon your job. Secondly, be sure to be mindful of your needs when evaluating what vehicle to purchase. How much space do you need from the vehicle you're looking to purchase? What is the fuel efficiency of the vehicle as measured by mpg? What are the safety ratings of the vehicle? All these factors should be taken into account prior to pulling the trigger on purchasing a vehicle. Lastly, be sure to weigh the opportunity costs of one vehicle against the other. Is a prestigious or unnecessarily spacious vehicle that is priced higher than a reliable, workhorse vehicle worth amassing substantially less wealth 10 or 15 years from now?

Discussion:

What are your thoughts on the transportation expenses of the average American household? Do you have any tips that you can think of to reduce transportation expenses?

Lessons After One Year of Investing

For those that are new to the blog, I began dividend growth investing at the beginning of September 2017. As such, I have been investing for just over one year at the time I'm writing this post. Along the way, I have applied much of what I already learned over the years. Although I already knew these lessons, I think it's a bit different to apply these lessons from a practical standpoint versus the theoretical standpoint I had before I began investing. With that being said, let's delve into 3 lessons I've applied after one year of investing.

Lesson 1: Ignore The Noise

When you're first starting out investing, it can be tempting to watch the financial media like CNBC. However, what I've realized about the financial media since investing is that it seems as though they are interested in driving ratings. They do this by playing on the two most detrimental emotions an investor can fall back on in lieu of cold, hard analysis. Those emotions are fear and euphoria. It's these strong emotions that bring back viewers time and time again. It's also these strong emotions that lead to irrational behavior, and disappointing results. For instance, the average investor has substantially under-performed the S&P 500 index over the past twenty years. This is primarily because investors let their emotions get the better of them. When you tune out the noise and focus solely on the fundamentals of your investments, that is when you are able to perform in line with the market or even beat the market. Even recently, investors had to endure a market correction this past February that saw the S&P 500 enter into correction territory, only to battle back and end the month down 3.9%. I'm sure during this time the financial media was selling fear, prompting some investors to exit the market. Unfortunately, for investors that did exit the market at the low on February 8th, the S&P 500 has since rallied 11.3% (as of September 9, 2018). This just proves that nobody can accurately predict the market, and that you shouldn't try to either.

Lesson 2: Capitalize on Market Inefficiencies

No matter what the stock market does, there will always be intelligent investments available to you. We have been in a bull market now for nearly 10 years. As a result of this, it is becoming more difficult to find intelligent investments worth considering. But make no mistake about it, there will always be intelligent investments available for your consideration. For instance, one of those investments at the present is Abbvie. According to the Nasdaq, Abbvie is projected to grow its earnings by 14% a year over the next 5 years on top of the current 4.1% dividend yield. Assuming the valuation multiple remains the same, investors are looking at 18% annual returns over the next 5 years. Even if those growth estimates prove to be inaccurate with the risks of an investment in Abbvie materializing, and the company achieves only 8% growth in earnings during the next 5 years, an investor at today's prices is looking at a roughly 12% annual total return over the next 5 years. Abbvie is one of several companies out there that I believe is trading at a compelling valuation despite the overvaluation in some sectors of the market at present valuations.

Lesson 3: Utilize Diversification

One such reason I advocate for diversification among sectors can be seen in the oil market of 2016. Massive energy companies like Chevron reported a quarterly loss for the first time since 2002, with many MLPs cutting or suspending their dividends altogether. I think it goes without saying that if you derived a large chunk of your income from MLPs during this time, you were absolutely horrified during the most recent bear market in oil. It is for this reason alone that one should be well diversified across all sectors of the US economy. When the economy enters a recession, consumer staples and utilities should hold up well as the anchor of your portfolio, whereas the consumer discretionary and financial stocks in your portfolio will likely be trounced in comparison, possibly resulting in a few dividend cuts, from a combination of generous dividend payouts and a decline in profits that is common during recessionary periods.

Takeaways: The financial media can do a great job in reporting key economic indicators that can give you insight into the state of the economy, but it often tries to sell fear and euphoria. For the most desirable results in investing, tune into the fundamentals of the market, while tuning out the emotions in the market. Secondly, the market will always present attractive opportunities. Although they are scarce in an extended bull market like we're currently experience, they are still out there. As I said before, the market may be up or it may be down, but there will always be intelligent investments available for your consideration. Lastly, owning 30 companies isn't enough if all those companies you own are in one sector of the economy. You must be diversified across all sectors of the economy for adequate diversification. This way a setback in one sector of the economy doesn't jeopardize the entirety of your dividends, but only a small portion.

Discussion: How long have you been investing? What lessons have you put into practice since you began investing?

Money Can't Buy Happiness...But Here's What It Can Buy

How many times have we heard the phrase "money can't buy happiness." It's a platitude that has been embedded into societies across history. As overused as I believe the phrase is, I do believe that there is a grain of truth in it. There's no doubt that money is useful, but as we've seen time and time again, vast amounts of money actually just bring headaches. I believe one of the primary reasons that ultra wealthy celebrities endure divorces as often as they do is because they don't really know who genuinely likes them versus who likes them because of their fame and fortune (ulterior or hidden motives). As Jason over at MrFreeAt33 said in a recent article (and has proven for years now), beyond the basics in life like food, housing, electricity, etc., money really doesn't buy happiness.

What Does Money Not Buy?

Before we delve into what money does buy, I just wanted to briefly discuss what it doesn't buy so we aren't under any illusions. Money isn't some sort of possession that can fix the underlying issues that we may have, such as addiction or insecurities. In other words, it doesn't fix our faults. Those will remain regardless of your net worth until you first admit you have a problem, and seriously work to mend that problem. Moreover, and most importantly, money doesn't buy love. Think of those in your life that are closest and dearest to you. Would they do anything for you because they love you? Yes, of course they would. What separates love from every other emotion is that true love is unconditional. It doesn't matter what your net worth is or what you have to offer in return; true love gives and asks for nothing in return. Conversely, if you have to give somebody money or items of value to do things for you, this doesn't equate to love. It is merely a business transaction.

If Money Doesn't Buy Happiness, What Does It Buy?

When you have enough money working for you (generating passive income in excess of expenses), it is said that you are financially independent. This means that you have the autonomy or the freedom to pursue whatever in life fulfills you, which interestingly enough often brings happiness and meaning to your life.

But How Could This Be? It Seems Paradoxical.

You're probably wondering how we've just said that money can't buy happiness, yet at the same time we've said that it actually indirectly can. I don't actually intend to communicate that money alone is the key to happiness, but I'm trying to convey that once your basic expenses are met, it's that freedom and autonomy that are you afforded that allows you to live the life that you want rather than "job" for a living. Instead, you can "work" on whatever you find delivers value to others without the expectation of making money from it (although eventually you probably will), and as a result, you often find a sense of worth and fulfillment in these pursuits. True happiness originates from a sense of purpose and a feeling of meaning that you attach to your life. 

This is a particularly complex subject, and every person is somewhat different in regards to what makes them happy. With that being said, I believe that most can find happiness in improving themselves, in turn unlocking their full potential, and using that potential to help others learn how they can improve their lives. Quite simply, when you feel content with yourself, you are more pleasant to be around. When you are more pleasant to be around, you indirectly improve the lives of others, and serve as a template for others pursuing happiness because basically everyone wants to be happy. As a result of others seeking happiness, they may ask how you are almost always content with your life. Although no two people want the exact same things out of life, you could be the catalyst that drives others to actually examine in detail what they want out of their life. When you are financially independent, you don't have to be your inauthentic self anymore. That alone should bring you some measure of joy. You don't have to report to a boss or deal with difficult coworkers anymore. You're free to be whoever you'd like to be, or what I like to call your authentic self!

Takeaways

Extraordinary amounts of money to the point that you can't really hide your wealth are actually detrimental, and in these cases, money basically buys "misery." Practicing stealth wealth is ideal and to your benefit if you are able to pull it off (which you should be able to do unless you are on the Forbes list of billionaires). It is difficult to distinguish between hidden motives and those that actually like you for who you are when you are obscenely wealthy, which often leads to trust issues (and further relationship issues). The perfect amount of money is an amount that is enough to allow you to pursue your passions, while also being discrete about your wealth to not attract unnecessary attention. Ultimately, it's up to you to decide what brings you happiness and joy. But just know that money isn't necessarily good or evil, it's just a tool to allow you to pursue what brings you fulfillment when you have enough of it to meet your basic needs. This is the precise reason that I blog about unlocking financial independence through dividend growth investing. 

Discussion

What are your thoughts? Do you believe money can indirectly buy happiness by allowing us to pursue our passions and fill our lives with meaning and purpose?

How I Have Avoided Student Loan Debt

Before we begin this article, I'd like to ask a quick question. What is the second leading source of debt in the United States? I'm sure that you probably guessed it was student loans. Behind mortgage loan debt, student loan debt is the second leading source of debt in the United States. The average student loan debt for Class of 2017 graduates was $39,400. Not surprisingly, as time goes by, these figures will continue to steadily increase. For more information on the extent of the student loan crisis, StudentLoanHero is an excellent source of information.

Fortunately, when I graduate next summer in 2019, I will not be among those graduating with student loan debt. I say this not to boast, but to possibly help those that are younger consider their options. Because when you decide to embark upon the path to financial independence, avoiding debt whenever possible is critical to achieving financial independence at a young age. Admittedly, my story does involve one of privilege because although my parents are normal middle class folks, they have helped tremendously as we'll come to find out. Without further delay, let's examine the actions I took (and the fortunate events that transpired) that allowed me to graduate with no student loan debt.

My First Step: Attending My Local 2 Year College

For those that didn't know, I attended my local technical college (Mid-State Technical College) to obtain my Associate's degree in Accounting in 2017. Shortly thereafter, I utilized a transfer agreement between MSTC and Lakeland University so that I could transfer ALL 72 of my credits at MSTC to Lakeland. Even better, Lakeland has a Blended option that allows me to choose whether I will attend class on any one of their several campus locations besides their main campus location or if I will attend online. This allows me to actually take advantage of the next step.

My Second Step: Supportive Parents

Since graduating high school 3 years ago, I've continued to live with my parents. With rent around this area realistically costing around $550 a month were I to live on my own, I have saved 3 years of rent which would total around (36 months * $550 a month) $19,800. Given that I currently have a net worth of nearly $10,000, I would currently be in debt to the tune of $10,000 if not for my living arrangement with my parents. That's why living with your parents and attending your local community college or state university is often pivotal to graduating with no debt, provided your parents aren't providing much financial support if you are attending university half way across the country. Secondly, my parents have also allowed me to use one of their cars without having to purchase it. The only requirement is that I pay all expenses associated with it, which is more than fair. Although I have received about $3,000 of the total $40,000 from my parents/grandparents that I will spend on books/tuition to attain my undergrad degree in accounting, my parents have saved me an insane amount of money by allowing me to continue living with them (plus they're not that bad either haha).

My Third Step: Earning As Much As You Can Before & During College

Because college will probably cost you at least in the mid 5 figures, it is incredibly important that you earn as much as you can before and during college. In my own story, I didn't earn very much before I started college, as I didn't get a part-time job cashiering until my senior year in high school that I held until I graduated college in 2017. In this regard, I could have done much better as many kids get jobs at the age of 15 or 16. I believe that the benefits of the first step also can be utilized in this step because after you obtain your two year degree from your local community college, you become more marketable to employers. I used my degree to obtain a job that pays over $12.00/hr with benefits (which isn't bad for the small mid-western town that I live in). It is this substantial increase in earnings that is also helping to pay for the substantial increase in expenses associated with attending Lakeland University (it is a private non-profit with tuition nearly triple that of the two year college I attended). With my current earnings against my current expenses (tuition, books, living expenses i.e. food, transportation), I am roughly treading water after accounting for the 7% that I contribute to my retirement account through my employer, and their 3% match. So, through all of this, I am still building wealth at a clip of about $2,000 a year.

Conclusion:

I recognize that I am incredibly privileged and if my story made you a bit nauseous, I can understand that. Obviously, not everyone will be able to take advantage of my second step. I even know of some parents that basically kick their kids out of the "nest" once they graduate high school. I can sort of understand the reasoning, in that it does force your kids to learn to fend for themselves and develop independence. Unfortunately, it is probably one of the primary reasons that kids go into so much student loan debt these days, combined with the fact that it's difficult to even comprehend how much debt $30k or $40k is when you're in your late teens or early twenties, and the consequences of borrowing that kind of money. I've saved almost $20,000 by being able to live with my parents which has made all the difference in being able to graduate with no debt and a roughly $12,000 net worth next summer.

Discussion:

How was your experience with college? Were you able to avoid student loan debt? Did you enjoy privileges similar to mine? Or did you have to really grind it out to graduate with no debt?

August 2018 Dividend Income

The beginning of the month is my favorite time. It's a time to look ahead at increasing your dividends, and a time to reflect on the previous month. Another month has gone by, which means it's time to examine what the dividend portfolio provided for me in dividends for the month of August.

Overall, August was yet another record month for me in terms of dividend income. I collected $41.19 in dividends from 12 different companies. When compared to my dividend income for the middle month of the prior quarter in May, my dividend income grew 21.6% from $33.86 to $41.19! This sort of growth is primarily because I am starting from such a small capital base that even a small investment, along with dividend increases and dividend reinvestment have a measurable impact on my dividend income.

Let's delve into how my income grew from $33.86 in May to $41.19 in August, shall we?

This $7.33 growth in income from May to August can be explained by 3 things. Over the past few months, I've initiated a new position of 4 shares in EQT Midstream Partners LP (EQM) (by selling 3 shares or half my stake in CVS), a new position in Abbvie of 2 shares (ABBV), and a new position in General Mills (GIS) of 4 shares. The addition of ABBV increased dividend income by $1.92, the addition of GIS added another $1.96 in dividends, and lastly the substitution of CVS for EQM added $2.86 in dividend income ($4.36 in income from EQM versus the $1.50 of income from CVS that I gave up when I sold my 3 shares). In total, these transactions alone added $6.74 in dividend income.  Another $0.43 came from the purchase of 1 more share of Enterprise Products Partners (EPD). The final $0.16 in additional income was a result of the dividend raise from Lowe's (LOW) from $0.41/share quarterly to $0.49/share manifesting itself as I own 2 shares.

The great thing about this is that my dividend income in November will be even higher without any additional effort on my part. I recently added to my stake in Abbvie, so that will add another $0.96 in quarterly dividends alone. This doesn't take into consideration any possible dividend increases that will occur among my holdings by November. For instance, EQM has a trend of raising its distributions on a quarterly basis, and I expect this to be no different for the next distribution. Although I won't be able to contribute any new capital to the account that could possibly increase my dividend income for the middle month of the quarter, I will continue to pool my dividends and selectively reinvest into an existing holding. I'm not sure whether it will be a holding that has paid me dividends during this month, or a holding from a different month because I don't know what opportunities Mr. Market will present to me in a couple months. I will, however, continue to contribute to my retirement plan through my employer which will be a nice boost to my end of quarter month income.

How was your August? Did you get any dividends from new names in your portfolio or is your portfolio pretty well established already? What was your quarter over quarter dividend growth from May to August?

Expected Dividend Increases for September 2018

Another month has passed us by, which means it is time for another installment of the expected dividend increases series. Prior to delving into the dividend increases that I anticipate for the DGI portfolio for the month of September, I'll start by recapping the dividend increase(s) from August, and their impact on my dividend income.

For the month of August, I only received one dividend increase. Although it's nice to get multiple raises in a month, a raise is a raise and I'll take it. Especially when the only raise you receive is a double digit increase! Altria Group (MO) raised its quarterly dividend from $0.70/share to $0.80/share, amounting to a 14.3% raise for shareholders. This raise added $1.20 to my forward annual dividend income. As I alluded to in last month's expected dividend increases article, Altria is a company that absolutely creates value by returning its gobs of cash to shareholders. They recognize that their investors are dependent upon them as a source of their income, and they don't disappoint. This company has raised its dividend every year, without fail for the past 49 years. For perspective, Altria (and its predecessor, Philip Morris Companies) raised its dividend through the highly uncertain and litigious 1990s for tobacco companies, through the Great Recession, the Vietnam War, the tech bubble, and despite the smoking prevalence in the US declining from 42% of adults in the early 1960s to 14% currently, the company has been able to achieve this due to the highly addictive and inelastic nature of cigarettes. Fortunately, the company is diversifying into the smokeless segment to combat this shift from cigarettes to e-cigarettes. The company also owns a wine business, Ste. Michelle Wine Estates, and a roughly 9.6% stake in AB Inbev (BUD). Management has been very diligent with managing its dividend over the years as it maintains a target payout ratio of roughly 80%, while using the other 20% of adjusted diluted earnings per share to pay down debt, engage in share buybacks, and to fund its transition away from traditional cigarettes. This attitude of returning cash to shareholders was on display again as the company's annual dividend amounts was raised to $3.20/share against latest 2018 earnings guidance of $3.94 to $4.03/share.

As we get further into the year, dividend increases are clearly becoming sparse. I've found that the vast majority of dividend increases come in the last month of the year, as well as the first couple months of the following year. With that said, I don't expect many dividend increases in September.

Predicted Dividend Increase #1

Realty Income (O) last announced a 0.2% dividend increase this past June. If O follows its trend of raising its dividend every quarter, we should be set for a dividend raise sometime in September. Given that O raises its dividend every quarter, the increase will be smaller than what investors receive from companies that raise their dividend once a year. Having said that, I believe that the raise will be somewhere in the ballpark of 0.3%, increasing the annual dividend from $2.64 to $2.648. The total impact of this dividend raise on my 4 shares of the company would amount to just over $.03 a year. While these dividend increases seem minuscule, one has to keep in mind that the largest dividend increases from O generally come at the beginning of the year to the tune of around 3-4%.

Predicted Dividend Increase #2

Like O, WP Carey (WPC) typically increases its dividend every quarter by a small amount. For the past two years, they have increase their dividend by 0.5% each quarter. I expect this trend to continue into this September. The quarterly dividend should be increased from $1.02/share to $1.025/share. This would increase the annual dividend income that my 3 shares produce from $12.24 to $12.30, for an increase in annual dividend income of $0.06.

Conclusion

Although I am only expecting two small dividend increases this month that will increase annual dividend income by $0.09, the alternate situation of never starting dividend growth investing is much worse. Who could say no to getting raises simply for acquiring shares in a company and holding them as long as the fundamentals of the company remain intact or improve? It's absolutely, without a doubt the most passive source of income out there, and the dividend raises are the gift that keeps on giving.

Discussion

How many dividend raises are you expecting for September? What impact will the projected increase have on your dividend income going forward?