A Retirement Pay Raise You Don’t Have to Ask for
If you’re retired (or will be soon), you’ve likely recognized the limitations of getting your income from savings rather than a paycheck. For one, it’s much harder to secure a raise — especially on a fixed income, like through Social Security and bonds. The biggest benefit of this setup is also the biggest downside: Since it’s fixed, it doesn’t go down; but it can’t go up either, which is challenging when everything you need or want is getting increasingly more expensive. The result? Slowly running out of purchasing power. In other words, getting poor slowly throughout your retirement years.
But what if there were a way to raise your income during retirement — one that doesn’t require working or selling off your possessions? Let me introduce you to the quiet but powerful concept of dividend growth.
Imagine you’re a landlord who owns a handful of rental properties. You’ve spent decades maintaining them, selecting tenants, and collecting rent. Every year, your tenants voluntarily increase their rent—not because you ask, but because the neighborhood is booming, the homes are in great shape, and they love living there. That’s what dividend growth can feel like to an investor.
For those unaware of the term, a dividend is a portion of profits distributed to the business owners. Say, for example, Company XYZ Corp did really well last year and has an extra few million dollars for their efforts. They choose to distribute a portion of that to shareholders in the form of cold hard cash sent directly to their accounts. That’s a dividend! The amount each shareholder receives is usually a percentage of the share price, essentially saying that for each share an investor owns, they receive X percentage as a dividend. Mature, stable businesses that have progressed beyond extreme growth phases typically pay regular dividends as a way to entice investors and encourage long-term ownership.
Dividend growth occurs when a business not only pays you regular income through dividends, but increases those dividends over time. Effectively, you get a raise for being a shareholder. No asking, no lobbying, no effort on your part. Just more income over time.
Healthy companies try to consistently pay and grow their dividends. Through thick and thin — economic recessions to hardcore bull markets — a steadily growing dividend can signal strength, durability and confidence. Understand that companies are not required to pay dividends, and they can cancel at any time, which makes those going the extra mile to establish a consistent track record even more appealing.
What does dividend growth look like? Consider these two key metrics:
- Consecutive years of dividend increases
- The rate of growth in those dividends over time
The first is a measure of reliability. A business that’s been raising its dividend every year for 10, 20, or even 50 years has weathered every kind of economic storm and kept rewarding its shareholders throughout. This shows their business has a durable competitive advantage and thoughtful, shareholder-friendly management.
The second demonstrates not just strength but growing strength. Bigger increases suggest the business is growing profits — with enough cash flow to share their success with you, the owner.
There’s something critical to understand about dividends: They don’t lie. Unlike earnings, which can be massaged with accounting tricks, dividends are paid in cold hard cash. If a company can regularly raise its dividend with a proven track record of consistency, they’ve built, by most definitions, a successful business. The dividend is a result of real cash flow. As an investor, these are the businesses I want to own.
Dividend growth investing isn’t flashy. It won’t dominate the financial headlines like AI stocks or crypto. But over time, it quietly does its job and helps deliver rising income to combat the long-term headwind of inflation. Things get more expensive, but your growing income accounts for it.
For retirees, that’s a powerful one-two punch. Your income increases to meet your living needs, and the long-term growth helps to preserve your purchasing power.
We understand the value of predictable, growing income. Dividend growth is one of the few investing strategies that has historically delivered both higher returns and lower volatility than the broader market. That’s a rare combination.
So next time you’re reviewing your portfolio, don’t just look at what a stock price did last quarter. Ask yourself: Is this business committed to rewarding its shareholders over time? Is it increasing its dividend? And if so, by how much and for how long?
The best kind of raise is the one you never have to ask for, especially if you’re retired. And the only way to protect your future purchasing power from inflation is with rising income. We believe dividend growth investing is one of the best ways to work toward that goal, year after year.
If you’re curious about how a dividend strategy might work in your portfolio, we encourage you to give us a call for a complimentary conversation.
Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of Blind Spots: The Mental Mistakes Investors Make and Intelligent Investing: Your Guide to a Growing Retirement Income and a regular columnist in The Denver Post. He was recently named a Barron’s Top Financial Advisor and recognized as a Forbes Top Wealth Advisor in Colorado.
