Compound interest is what occurs when interest previously earned is added to the principle and is considered when calculating future interest - i.e. earning interest on interest. So, what's more powerful than compound interest? Compound dividends! Compound dividends are like compound interest on steroids - you are not only earning on reinvested dividends, but the dividend rate is increasing.

Here are several big-name companies compounding their dividends by raising their cash distributions to shareholders:

• Honeywell (HON) Boosts Qtr. Dividend 10% to $1.21/Share (3.50%)
  
• AT&T (T) Raises Qtr. Dividend by 2.5% to $0.41/Share (6.05%)
  
• Waste Management (WMI) to Increase Qtr. Dividend by 7.4% to $0.29/Share (3.48%)
• Boeing (BA) Raises Qtr. Dividend by 5% to $0.42/Share (4.21%)
  
• Eli Lilly (LLY) Increase Qtr. Dividend from $0.47 to $0.49 (5.45%)
  
• ITT (ITT) Management To Recommend 22% Dividend Increase (1.58%)
• BB&T (BBT) Boosts Qtr. Dividend 2.2% to $0.47/Share (6.58%)

LLY was reviewed on 7/7/2008. However, I currently rate it as a 5 Star-Strong Buy. BBT was reviewed on 3/3/2008 with a 5-Star Strong Buy. It currently has a 4-Star Buy rating.

After running the remaining companies through my D4L-PreScreen.xls model, the Dividend Achiever T with a NPV of MMA Differential of $8,911 is one that I have on my watch list. WMI with a NPV of MMA Differential of $5,991, BA with a NPV of MMA Differential of $18,730 and ITT with a NPV of MMA Differential of $17,946 are ones worthy of additional consideration. None of the other companies' NPV of MMA Differentials were close enough to warrant a more complete evaluation.

Disclosure: Long LLY, BBT.

(Photo: Steve Woods)


Related Articles:

• Rising Dividends = Rising Returns
• Sometimes Being Right Is Just Wrong
• Turbo Charge Your Portfolio With Reinvested Dividends
• My Unique Investing Process
• Who is Charles Mangum and Why Should We Listen to Him?