Get Raises for Doing Nothing

Wouldn't it be nice to get paid ever-increasing amounts of money for doing absolutely nothing? If only there were a way for someone to hand you more and more money while you just sat there, cashing the checks. Believe it or not, there is a way to do just that. By buying shares of stock in and becoming a partial owner of companies that pay and have regularly raised their dividends and look likely to continue that trend, you can be in just that enviable position. You can get raises for doing nothing.

All it takes is finding and buying the right sort of companies. Sure, you'll want to watch your businesses as time goes by to make sure they don't fall by the wayside. But as long as their finances remain sound and their operations strong, you can continue to get more and more cash, just for sitting there and holding on to those companies.

Believe it or not, literally hundreds of companies want to give you this opportunity -- many of which are household names. In fact, the table below shows a handful of well-known firms that have distributed higher regular payments to shareholders every single year for at least the past 10 years. Between 1995 and 2005, in fact, every last one of these companies has more than tripled its payout. I bet you've heard of at least half of them, and you may even be a customer of some.

Dividends per share, based on ex-dividend date (split-adjusted)

Could you imagine seeing your salary jump that far in 10 years while you sat around and twiddled your thumbs? Of course not! You work hard for your money, and you know darn well that you're not getting those kinds of raises without more effort. Don't you think it's time to make your money work hard for you? Wouldn't you like to get paid for someone else's work for a change, rather than only for your own?

Why this works
Most companies are at least partially owned by their executives. Those executives want to be well paid for their work. Yet excessively high salaries and options grants generally raise significant complaints from outside shareholders -- the folks who own the rest of the business. Dividend hikes not only give those executive shareholders additional money for their efforts, but they also ensure that the rest of the owners are rewarded for the company's success. Increasing dividends is by far the most shareholder-friendly form of executive compensation, so it is usually cheered, rather than jeered, at annual meetings. From the executive perspective, it's a great way to have your cake and eat it, too. The execs get paid more and make the shareholders happy at the same time.

In addition to the direct payout, a sustainable, rising dividend tends to pull a stock's price up with it. Consider a company that paid a 4% dividend 10 years ago whose dividend has tripled since then. Without accompanying share-price growth, that company would now be yielding around 12%! Keep up the hikes for a few more decades with no share-price growth, and the business would soon be paying out more every year than its new investors would be paying for their stakes in the firm.

Company executives love the impact that rising dividends have on their net worth, through their direct payment and through the indirect rewards they get from share-price growth. Either way, as an investor, you stand to benefit from the same factors. You get paid while they work.

Start getting paid
If this opportunity sounds interesting to you, you're not alone. My friend and colleague Mathew Emmert certainly thinks you deserve to get paid for the work other people do for you. As the lead analyst of Motley Fool Income Investor, he actively seeks out companies that pay their owners, and pay them well. Many of those businesses also give their shareholders regular raises for doing nothing more than sitting still and holding on to their stakes in the firms. It's a great way to invest. Better yet, not only has it rewarded its practitioners with cold, hard cash, but it has also given them market-beating overall returns. Click here to be my guest for 30 days and see for yourself exactly how he does it. Subscribe today, and you'll also get a copy of Stocks 2006, the Fool's guide to investing in the year ahead, absolutely free.

This article was originally published on Jan. 26, 2006. It has been updated.

At the time of publication, Fool contributor Chuck Saletta owned shares in Johnson & Johnson, and his wife owned shares in Harley-Davidson. Home Depot is a Motley Fool Inside Value recommendation. The Fool has adisclosure policy.