Friday, January 15, 2016

Dividend Growth Investing at Work - The First Raises of 2016!


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 at Omega Healthcare Investors (OHI) rewarded shareholders with another increase in the quarterly dividend payment.  The raise was small at just 1.8% growing from $0.56 to $0.57.  However, Omega Health Investors gives smaller increases every quarter instead of one big one once a year.  Compared to last years February payment the dividend payment has risen from $0.53 which is a very solid 7.6% increase.  Even better is that shares currently yield 6.9% so a mid to high single digit annual increase is very solid.  Since I own 72.297 shares of OHI this increase grew my forward 12-month dividends by $2.89.

As I mentioned earlier, OHI typically gives smaller increases each quarter rather than one larger increase.  This actually marks the 15th consecutive increase to the quarterly dividend.  If all the payments are made this year, which I expect them to be, 2016 would be the 14th consecutive year of higher dividend payments.

Omega Healthcare Investors is a real estate investment trust that focuses on skilled nursing facilities.  At the release of Q3 2015 earnings back in November, management was guiding for adjusted funds from operation (AFFO) of $3.06-3.07 for the full year.  That puts the current P/AFFO, the equivalent of a P/E ratio for standard corporations, at 10.8 based on yesterdays closing price of $33.19 which could make OHI an attractive investment given the current valuation.

Yesterday was also a great day for shareholders of Realty Income (O).  The Board of Directors increased their monthly payment to $0.1985 from $0.191.  That's a very solid 3.9% increase from the previous monthly payment and an even better 5.0% increase from 2015's February payment.  Since I own 91.685 shares of Realty Income this increased my forward 12-month dividends by $8.25.

This marks the 84th dividend increase since Realty Income became a publicly traded company in 1994.  Back in October when the company reported earnings their forecast for 2015 AFFO was between $2.72 and $2.74 with 2015 guidance to $2.85 to $2.90.  That puts the P/AFFO ratio for 2015 between 19.0-19.2 and the forward looking 2016 ratio between 18.0-18.3.  Now probably isn't the best time to purchase shares of Realty Income but the premium is well deserved given their best in breed status.  I'd look to possibly add more shares at a P/AFFO of 15 which would correspond to a price between $42.75-$43.50.

My forward dividends increased by $11.14 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.26% this raise is like I invested an extra $341 in capital.  Except that I didn't!  Two 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.

The rest of January looks to be rather quiet on the dividend growth front with only HCP likely to announce an increase, at least based on their historical schedule.

My FI Portfolio's forward-12 month dividends are up to $5,495.98 and including my Loyal3 portfolio's forward dividends of $61.01 brings my total taxable account forward dividends to $5,556.99.

Do you own shares Omega Healthcare Investors or Realty Income?  Do you prefer the smaller raises each quarter or one bigger raise once a year?

Image courtesy of digitalart on FreeDigitalPhotos.net.

6 comments:

  1. Congrats on the raises. I own both O and OHI myself so I'll take the raises too! Excited to see companies still raising dividends that can afford to do so!

    ReplyDelete
    Replies
    1. Adam,

      I really like that they both give multiple raises throughout the year. That's awesome and gets the compounding machine churning just little bit quicker.

      Thanks for stopping by!

      Delete
  2. All the pennies add up. II m looking forward to my dividends raising another 10% for this year.

    ReplyDelete
    Replies
    1. No Nonsense Landlord,

      These raises might not have been fantastic but with their multiple smaller increases they turn out well. And both of them have higher than average yields so I don't expect 10%+ increases to a be regular occurrence from them.

      A 10% dividend raise for your portfolio would be awesome!

      Thanks for stopping by!

      Delete
  3. Always nice to read about a divvy increase. After all that's just one of the reasons for being long term dividend investors. Too bad I don't hold either name though OHI is a REIT I like. Thanks for sharing.

    ReplyDelete
    Replies
    1. DivHut,

      Two increases in the same day sure was welcomed. I had forgotten that both O and OHI were likely to announce increases and was only expecting 1 from HCP at the end of the month. So these raises were a welcomed surprise.

      Thanks for stopping by!

      Delete