Monday, March 14, 2016

Dividend Growth Investing at Work - 100+ Years of Dividends Without Reduction


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?

I missed this during the week but on Tuesday, March 8th the Board of Directors at General Mills (GIS) approved an increase to their quarterly dividend.  The new dividend rate is $0.46 which is a solid 4.6% increase from the previous payout of $0.44.  The dividend has been increased 13 consecutive years and shares of General Mills currently yield 3.01%.

I own 65.276 shares of General Mills in my FI Portfolio so this dividend increase grew my forward 12-month dividends by $5.22.  This is the 3rd dividend increase I've received from General Mills since initiating a position in November 2013 with a cumulative dividend increase of 21.1%.  According to USInflationCalculator the total inflation for that same time period sits at 1.7% so General Mills is crushing inflation with its dividend growth.

The average analyst estimate for earnings for fiscal year 2016 is $2.86.  Based on the new quarterly dividend rate the payout ratio is 64.3%.  On 2017 earnings estimates the payout ratio is 60.1%.  Based on TTM free cash flow and shares outstanding the trailing free cash flow payout ratio is at 52.6%.  The dividend looks to be pretty well covered by both earnings and free cash flow.  Although growth might continue around these levels since the 5 year estimated growth rate is just 5.6%.  General Mills does derive about 1/4 of total revenues from international sources so the U.S. dollar strength has led to a decline in reported earnings potentially providing even more security for the dividend.


My forward dividends increased by $5.22 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.07% this raise is like I invested an extra $170 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash 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 through fresh capital investment as well dividend increases from the companies you own.

I've now received 12 dividend increases thus far in 2016 adding $63.44 to my forward 12-month dividends.

My FI Portfolio's forward-12 month dividends are up to $5,479.54 and including my Loyal3 portfolio's forward dividends of $62.85 brings my total taxable account forward dividends to $5,542.39.

Do you own General Mills in your own dividend growth portfolio?  Are you fine with the lower dividend growth for this year?

Image courtesy of digitalart on FreeDigitalPhotos.net.

7 comments:

  1. 12 increases already in the first two months of 2016 is a great number! If only we could all be so bless ;). Keep it up and keep investing in quality companies that know that paying their shareholders first should always come first!

    ReplyDelete
    Replies
    1. Reaper,

      I'm pretty happy about all of the raises through the first 2.5 months of the year. Especially since I can't say that I've received anything close to some of these increases from my day job. Quality will win out over the long run.

      Thanks for stopping by!

      Delete
  2. Congrats on another raise, JC.

    Best wishes
    R2R

    ReplyDelete
    Replies
    1. R2R,

      I'm definitely excited about all of the dividend increases so far this year. And some of the bigger hitters and payers haven't joined the party yet so I should be able to make even more progress as the year goes on.

      Thanks for stopping by!

      Delete
  3. Congrats on the raise! I don't own shares of GIS but the company is on my watch list. Perhaps I should own GIS -- looking at a longterm price chart, GIS has been an impressive overall performer! Best of luck and keep up the good work, JC!

    ReplyDelete
    Replies
    1. Ferdi,

      I always love to see a dividend increase! GIS is solid and it's been a pretty strong performer for my portfolio although future growth is likely going to be in the 4-7% range barring an acquisition. That's still good enough for me though.

      Thanks for stopping by!

      Delete
  4. One more time: congrats on the raise! I began to be interested in the capital investment not long ago but I've found another good one http://phuket9.com/phuket-property-for-sale/vip-kata-condominium . You can find there very profitable propositions!

    ReplyDelete