Wednesday, November 11, 2015

Dividend Growth Investing at Work - Upping the Ante With the Happy Meal


Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?

Yesterday the Board of Directors for McDonald's Corporation (MCD) announce another raise to their dividend.  The new quarterly dividend rate is $0.89 which is a 4.71% increase from the previous payment of $0.85.  Assuming the dividend is paid on the normal basis all through 2016 that will mark the 40th consecutive year of growing dividend payments to shareholders.  Since I own 84.906 shares of McDonald's this raise will increase my forward 12-month dividends by $13.59.

The dividend increases are still coming in as expected although the growth rate has dropped significantly.  The 10 year growth rate was 19.6% per year and the 5 year growth rate was 9.9% per year but after last years 4.9% increase and this years 4.7% increase the rapid growth party is probably behind us.  A lot of the phenomenal growth had been a combination of growing earnings as well as increasing the payout ratio as the payout is expected to 70.8% based on the analyst estimates for FY 2015 earnings.  McDonald's is also in the midst of trying to turn the company around as they had been seeing flat or declining same store sales for the last couple years so a lower dividend raise was expected.

My forward dividends increased by $13.59 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.29% this raise is like I invested an extra $412.82 in capital.  Except that I didn't!  One of the companies I own just decided to send more of the profits my way.  That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  That's the beauty of the dividend growth investing strategy because you build up your dividends by fresh capital investment as well dividend increases from the companies you own.

I had forgotten that McDonald's had told us they were moving their dividend increase announcement to November so it was a pleasant surprise to see the raise come in my email.  I've already received an increase from Emerson Electric this month and with Becton, Dickinson & Company expected to announce towards the end of the month November should bring about three different raises for my portfolio.

Check out the Emerson Electric dividend stock analysis here.

My FI Portfolio's forward-12 month dividends are up to $6,025.05 and including my Loyal3 portfolio's forward dividends of $60.03 brings my total taxable account forward dividends to $6,085.08.

Are you disappointed with the smaller increase from McDonald's Corporation?  Are your other holdings picking up the dividend growth slack?

Image courtesy of digitalart on FreeDigitalPhotos.net.

7 comments:

  1. Ronald McDonald has seen a real change of fortune this year. Great buy!

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    Replies
    1. FV,

      I haven't purchased MCD in a long time and probably won't be adding any due to its weight in my portfolio already being quite hefty. The company looks to be doing well on their turnaround though which should keep the dividends flowing and growing.

      Thanks for stopping by!

      Delete
  2. I would buy, but I think it is overvalued at the $114 price tag. I should have got in when it was hovering around $100

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    Replies
    1. Anon,

      Yeah the run up to $110+ has sucked a lot of the value out of the shares. The $100 level seems like a pretty good place to shoot for adding some to your portfolio.

      Thanks for stopping by!

      Delete
  3. It's amazing how MCD has come back from the grave in just about one year. Not that long ago everyone was writing off this company/stock and no one wanted to touch it. Now at all time highs and a continued legacy of dividend increases, albeit small, things seem to be headed in the right direction once again for MCD. A good company is a good company and when the headlines scream 'sell' it's moe often than not a time to buy. Happy to be a fellow shareholder with you and enjoy the additional passive income.

    ReplyDelete
    Replies
    1. DivHut,

      The swings in investor sentiment are usually exaggerated on both sides. Essentially they hardly see a middle ground which is usually how things play out. Will MCD return to 10%+ growth in operations, no. But they aren't going anywhere anytime soon either.

      Thanks for stopping by!

      Delete
  4. "it was a pleasant surprise to see the raise come in my email" I always feel like I'm the last to know about dividend raises and the like (or I get inundated with noise trying to stay on top of things). Who emailed you about the raise? MCD directly?

    ReplyDelete