Why You Need A Dividend Raise Right Now

Is there anything that makes an income-focused investor happier than an increase in their dividends?

That’s why Dividend Aristocrats have become a well-loved group of stocks since the era of low interest rates began.

A Dividend Aristocrat is a member of the S&P 500 that has raised its dividend for 25 years in a row or more.

It’s an impressive track record. There are some companies that have raised their dividends for more than 50 years.

Coca-Cola (NYSE: KO) has done it for 55 years. American States Water (NYSE: AWR) has raised its dividend each year for an incredible 62 years. When that streak started, Dwight Eisenhower was president and Mickey Mantle was roaming centerfield for the New York Yankees.

I’ve always liked Dividend Aristocrats and other stocks with solid dividend-raising histories. (I call them Perpetual Dividend Raisers.) That’s because by lifting the dividend every year, their managements have set the bar very high.

Imagine what would happen if after six decades of annual dividend increases, American States Water did not hike its dividend. As Ricky Ricardo from I Love Lucy (in its fourth season 62 years ago) might say, the CEO would have “some ‘splainin’ to do.”

A CEO who did not raise the dividend after a long streak should probably get his or her resume together. Investors have come to expect annual dividend increases in these companies, and management teams work very hard to be able to provide them. If after 20 or 30 years, dividend boosts suddenly come to a halt, that suggests a drastic change in the company’s business or prospects.

Companies that raise their dividends every year help investors fight inflation.

Though inflation is low today, the historical average is more than 3% per year. That can meaningfully eat away at a person’s buying power. If prices rise just 3% per year, what costs $1 today would cost $1.34 in 10 years.

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