The Cash Just Keeps Rolling In


In early December 2012, the Inflation-Protected Income Growth portfolio was launched. That real-money portfolio seeks out companies that pay dividends, have raised their dividends, and look capable of continuing to raise their dividends over time.

The portfolio's goal is to build an income stream that grows at least in line with inflation. While it will take years to tell whether the plan is ultimately successful, while we're waiting, the portfolio does get paid cold, hard cash to sit and wait patiently for that future to come. Waiting is still hard to do, but getting paid increasing amounts of cash in order to wait makes it a worthwhile endeavor.

Who showed us more money?
Indeed, sometimes waiting can be incredibly rewarding. For instance, as anticipated in an update at the beginning of this month, portfolio selection Air Products and Chemicals raised its dividend last week. Investors -- including the iPIG portfolio -- will receive $0.71 per share in May, versus the $0.64 dividend rate prior to the increase. That's a nearly 11% raise, just for being patient. That raise marks the company's 31st consecutive year of increases.

Likewise, fellow iPIG pickRaytheon bucked the fears of the federal government's defense-spending sequester and boosted its dividend earlier this month. The new rate of $0.55 per share is a welcome 10% increase from the prior $0.50 a share. While Raytheon's dividend growth record currently sits at nine years, they did have a decent dividend growth record until the mid-1990s and managed to maintain their dividends even when they weren't increasing.

Similarly, iPIG selectionTeva Pharmaceutical paid its first dividend at its new, higher rate in March. After currency translation from the Israeli shekel to the U.S. dollar, the payment of $0.31 per ADR share beat last year's $0.267 per ADR share by a respectable 16%. American investors face a 15% Israeli withholding tax on dividends paid by Teva, but they faced a similar tax last year, making the increase worthwhile on a cash-on-cash basis. Teva's dividends have been increasing for 13 years.

As if that weren't enough, March also saw NV Energy pay its first increased dividend since being selected for the iPIG portfolio. While this power company's dividend growth history only goes back to 2007, one of its predecessor companies had a decent dividend growth record until an energy deregulation effort caused it to drop its payment.

And while this story would likely get boring if there weren't money attached, fellow iPIG investmentUnited Parcel Service also made good on its promise to pay an increased dividend in March. The company's $0.62 dividend is 8.8% higher than a year ago. Remarkably, UPS has been consistently increasing its dividend since not long after the company went public.

And others keep on marching on
Of course, a fair number of iPIG selections also paid or declared dividends for March that were "merely" continuations of prior-quarter amounts:

  • JM Smucker's dividend stayed constant at $0.52.

  • Aflac's dividend held steady at $0.35.

  • Mine Safety Appliances' dividend remained at $0.28.

  • United Technology's dividend continued at $0.53

  • Walgreen's dividend paid out $0.275

  • Microsoft's dividend provided $0.23

  • CSX's dividend held firm at $0.14

  • McDonald's dividend was a consistent $0.77

  • Becton Dickinson's pending dividend will be a steady $0.495

All those companies paid or will pay at the same level they had paid in the previous quarter, and none had cut their payments. As long as they raise their payments at some point this year, they'll still keep their streaks of increases alive. That's important to the iPIG portfolio, which is relying on companies increasing their dividends in order to meet its goal of creating an income stream that grows at least as fast as inflation.

Only time will tell whether the strategy will continue to work over the long haul. In the meantime, though, it sure is nice getting paid to wait -- and even nicer to get significant raises for waiting patiently.

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Fool contributor Chuck Saletta owns shares of every company mentioned in this article. The Motley Fool recommends Aflac, Becton Dickinson, McDonald's, Mine Safety Appliances, and United Parcel Service. The Motley Fool owns shares of McDonald's, Microsoft, and Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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