Today Royal Bank of Canada (RY) announced a 19% increase in earnings from the third quarter of last year. They also raised my pay (AKA their dividend) by 9% to $0.50, this has been a semi-annual raise. This reminds me of a phenomenon in dividend investing that I believe is extremely powerful and lucrative.
Probably the most powerful part of a dividend growth investment strategy is below. Check out this example of Royal Bank as of today:
Bought in May, 2006 Cost = $47 / share. Dividend at that time was $0.36 / share so the stock was yielding 3.1%
Since then they've raised their dividend from $0.36 to $0.50 (as of today)
The shares now trade at around $55 / share. So they yield 3.6%.
BUT THE ACTUAL YIELD THAT I AM RECEIVING ON MY INVESTMENT IS:
$0.50 (current dividend per share) x 4 / $47 (my investment per share) = 4.3%
These dividends are also getting reinvested, so that adds a whole other benefit to the strategy which employs a compounding effect.