How to Get Pay Raises from Companies You Don’t Work For

By TradeSmith Research Team

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By Lucas Downey, Contributing Editor, TradeSmith Daily

There may be no better annual event than a nice pay raise.

Sure, Christmas is great. Thanksgiving dinner with your family and loved ones never gets old. Super Bowl Sunday? I’ll never miss one.

Anniversaries… birthdays… These are all some of my favorite annual celebrations.

But if we’re being honest, even they struggle to beat the pay raise.

Especially because, when you own the right stocks, you might get more than one pay raise a year…

You see, I’m not talking about my salary. In fact, I’m getting raises at companies I don’t even work for.

I’m talking about owning the elite class of stocks that continually grow their dividend.

And on Tuesday, one of my top dividend growth holdings boosted its payout, something it routinely does each year. That gave me a nearly 8% raise.

When you hold elite income-growth giants like this one, you’ll focus less on the daily gyrations of the market and more on the quarterly earnings calendar.

And when you hold a portfolio full of them… you’re more than twice as likely to beat the market than someone who shuns these elite stocks.

Today, I’m going to walk you through one of the greatest dividend growth stocks of all time. And I’ll show you why owning dividend growth companies towers over the more common non-dividend payers.

To do that, let’s visit Tuesday’s earnings announcement from Home Depot (HD)…

Home Depot Just Gave Me a 7.7% Raise

At first glance, home-improvement retail giant Home Depot had a modest earnings announcement.

For the fourth quarter, revenues came in at $34.79 billion, with earnings per share (EPS) of $2.82.

These results basically came in line with expectations, handing investors an initial selloff, which turned into a slight gain by the close.

This ho-hum price action could make you yawn, especially when looking at the price of the stock over the last five years.

Take a look at the chart below, with HD’s share price since 2019 along with its dividend yield.

One look above and you may believe this stock is for retirees or grandmas…

But, you couldn’t be more wrong.

You see, this top-level view of HD masks the beautiful celebratory story that’s existed for years. And that story is one of dividend growth.

The much bigger takeaway from HD’s earnings announcement on Tuesday was a 7.7% dividend raise. The company took its quarterly payment from $2.09 per share to $2.25.

If you aren’t familiar with dividends, think of them as a company’s way of paying investors a cut of the profits. As an investor, you can take this as cash… or put it right back into the stock.

Dividend payers are a great way to build wealth. But the elite dividend payers are the ones with a long history of raising their payouts year after year.

Home Depot’s latest raise marks the 148th consecutive quarterly payment! And it’s raised its dividend every single year for more than two decades.

To understand just how rare that is, let’s visualize what those payments look like annually.

Below details the annual dividend per share payments since 1987 through the estimated 2024 distributions.

Folks, continual dividend growth paves the road to riches:

What’s most important is the continual large dividend raises.

Let’s take 2018 as an example. Back then, the annual dividend stood at $4.12 per share.

Then each year annually in February, the company kicked off more juicy payments:
  • 2019 saw a 32% raise to $5.44
  • 2020 notched a 10% ramp to $6
  • 2021 jumped 10% to $6.60
  • 2022 climbed 15% to $7.60
  • 2023 rose 10% to $8.36
  • And now 2024 is projected at $9, another 7.7% raise
In other words, HD’s dividend has more than doubled in just six years.

Increasing dividend payments tells us a couple important things.

First, the company feels comfortable in the business and is willing to share more and more profits with investors.

And second, these payout increases are attractive to yield-hungry investors. A visual of Warren Buffett should instantly pop in your head.

But there’s also a historical precedent to consider when owning these powerful passive-income machines.

Turns out, dividend growth stocks have a history of outperformance.

As I shared recently after Meta Platforms (META) initiated its first dividend, dividend growers and initiators have outperformed non-dividend payers since 1973:

When it comes to dividend choices, focus on the initiators and growers… Nothing else comes close.

Every year I’m sure your calendar marks birthdays, anniversaries, and other holidays.

Maybe after seeing this proof, you’ll be celebrating those income raises, too.

Oh, and one important note: it’s vitally important that you not chase the biggest dividend yields out there…

I’m talking about the 7%… 9%… even 10%-plus yields. More often than not, those are ripe for trouble.

You want to focus on best-of-breed companies with the cashflows to back continual payouts that jump year after year. Companies like HD fit that bill perfectly.

Using software, like what TradeSmith offers, will help you spot them.


Lucas Downey
Contributing Editor, TradeSmith Daily