Have you gotten a pay raise lately?
Probably a better question is: are you working at the level you’re capable/trained for, or are you just grateful to have a job with benefits?
I got a pay raise at work. It was good, relatively speaking based on anecdotal evidence and my own personal observations.
Even so, my Elephant’s raise is more than three times the raise I received. Crazy! Where I got a 3% adjustment at work, my portfolio is getting close to an 11% pay raise this year (and that’s a conservative measurement).
Better yet, I can expect similar results next year. And the year after. And the year after.
It’s all about the raise
Let’s not confuse raise with return. I know what my average dividend return is (3%).
I can’t predict the future to know what my portfolio return will be in the future, and I don’t like to speculate. I’m confident over the long arc of time the portfolio will rise and that I benefit by being invested as long as I’m patient. But I’m not talking about guesses for future expected returns of the portfolio.
I’m talking about the raise to the Elephant’s Paycheck. The portfolio (the Elephant) provides a dependable & predictable paycheck through dividend payments.
It also provides dependable and predictable paycheck raises.
My sample Elephant’s current projected raise is 10.9%. The total raise he’s received over the past three years & one month that I’ve been tracking my sample Elephant’s Paycheck portfolio is 48.95%. (You can see the details of the Elephant’s Paycheck sample portfolio in this Google Spreadsheet and find out more about the methodology by signing up for the free email course that teaches you the basics of the Elephant’s Paycheck Blueprint.)
That’s much better than 3% a year. Much better.
That’s the power of the Elephant’s Paycheck Blueprint.
It gets better
If my employer decides not to give raises next year, or I get laid off, or am bored and want to do something new, my salary increases are at risk.
The Elephant’s Paycheck Blueprint invests in companies that have raised their dividend payouts every year for at least 25 consecutive years. That’s not a guarantee of future raises, but… these companies have those increases built into their operating models and incentives. It has to be really bad for those dividend raises not to happen, or worse, for the dividends to be cut.
Of course, that’s not an impossible situation — it happened to a few Dividend Aristocrats in 2008/9 during the meltdown. That said, 2008/9 was a pretty infrequent situation. And dividend cuts (and skipped dividend increases) mostly affected financial companies (and GE). If you were diversified you’d quite possibly still come out ahead overall, even through that extreme recession and market drop.
Actual return is a powerful motivator to stick to the Blueprint
I’ve created a metric to give a perspective on what this means for people invested with the Elephant’s Paycheck Blueprint.
Brokerages and everyone think in terms of the return based on today’s stock prices. If you look at the sample portfolio, I have this illustrated right on the front page of the spreadsheet with three items:
- Original return.
- Current return.
- Actual return.
The original return was the percentage dividend return that the portfolio was earning the day it was invested. We invested $60,000 in our sample portfolio for about $1,764 in income. A rate of 2.94%.
The current return is the return you’d get if you started this portfolio today by investing in the same companies at market prices. The current return is 2.98%. That’s what most people would look for to understand how their portfolio is doing. The current portfolio is worth about $88,000 and has about $2,627 in dividends.
The thing is, we didn’t start with $88,000. We started with $60,000. Because we were disciplined and kept to our blueprint, that $60,000 now earns $2,627 in dividends. Earning $2,627 in dividends from $60,000 is 4.38%. That’s besides any gain (or loss) in the underlying value because “the market” goes up or down.
Remember, the market going up or down doesn’t affect the Elephant’s Paycheck dividend earnings. Those go in one direction only, up until the dividend is reduced (which happens rarely because of the Dividend Aristocrats we invest in).
The Actual Return metric that I’ve created is meant to give a satisfying perspective on the long-term success of investing with the Elephant’s Paycheck Blueprint. Change your perspective, change your experience.
Doing your own research
Want to see what sort of raises you might get from your Elephant?
Go to your brokerage account and head to the stock research section where you can look at dividend info. For example, check out the public Fidelity stock research pages for P&> or Aflac. Scroll down on either of those pages to the section titled ‘dividend analytics’. You’ll see a line item called ‘Annualized Dividend’ — read over to the right for the number in the ‘5‑year growth’ column. Both these companies have an average annual dividend growth of over 6.5% over the past five years.
Again, think of that in terms of the raises you’re getting at work.
Have you gotten, on average, over 6.5% a year, each year, over the past five years?
Don’t forget that growth compounds… but that’s the subject for another post.