Note that, in this illustration, the income continues regardless of the direction of stock prices. Perhaps more importantly, dividend payments continue to grow even if stock prices fall.
The Power Of Five
A $100,000 investment, assuming reinvestment, would have hypothetically grown to more than $307,000 in 20 years—and produced total dividend income of more than $207,000 with a simple 5 percent annual dividend increase per share—even if the market did not appreciate.
Retirement portfolios should concentrate on stocks with a long track record of steadily increasing dividend payouts each year, and the earnings capacity to sustain that track record. The increasing dividend is a key component in generating an increasing income that persists even when stocks are down, and even during times of economic recession.
The Power To Create Income In Down Markets
Many times, investors and the financial media seem to forget a key concept in dividend investing: actual cash income from dividends doesn’t fall just because stocks fall.
Cash dividend payouts are an independent variable from stock prices.
As of this writing in 2019, there were 57 companies within the S&P 500 Index that have increased their dividends every year for the last 25 years in a row, according to Standard & Poor’s.
These companies increased their cash payouts during the worst of the collapse of the Internet bubble in 2000, the stock market crash and Great Recession of 2008-2010, and the stock market correction and increase in volatility that occurred at the end of 2018. Even throughout the most severe market down turn and economic turmoil since the Great Depression, companies with a track record of increasing dividend payments continued to generate greater and greater income per share for their investors.