Dividend Growth Investing at Work - 38 Years of Dividend Growth


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?

Somehow I missed this announcement last week but the Board of Directors at Air Products & Chemicals (APD) announced an increase to the quarterly dividend.  The new payment will be $0.86 per share compared to the previous payout of $0.81.  That's a solid 6.17% increase.  Air Products & Chemicals has now increased dividend payments for 38 consecutive years and shares currently yield 2.41%.  Their 38 year dividend growth streak places them well into Dividend Champion territory.

I own 18.481 shares of Air Products & Chemicals in my FI Portfolio so this dividend increase grew my forward 12-month dividends by $3.70.  This is the 3rd dividend increase I've received from Air Products & Chemicals since initiating a position in April 2013.  In total my dividend payments on the original shares have increased by 21.13% from raises alone.  According to USInflationCalculator the total inflation for that same time period sits at 1.8% so I'm more than happy with Air Products & Chemicals' ability to increase my purchasing power.

The dividend appears to be well covered with a 56.9% trailing twelve month payout ratio.  Based on the 2016 estimate of $7.41 in earnings per share the new dividend would only represent a 46.4% payout ratio.  However, based on free cash flow things look less appealing.  For the trailing twelve months free cash flow amounted to $1,006 M.  Based on the 218 M shares outstanding the new payment would eat up 74.5% of free cash flow.

Dividend growth has historically been pretty strong but the last two years have been a bit lackluster.  Given the high expected free cash flow payout ratio I'd be surprised to see dividend growth exceed the mid single digits unless management can start to really grow the cash flow through the company.  Based on this cursory analysis of the company I think it's about time that I take a more in depth look at the financials to see how things are going.


My forward dividends increased by $3.70 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.05% this raise is like I invested an extra $121 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 5 dividend increases in March and 14 dividend increases thus far in 2016 adding $67.69 to my forward 12-month dividends.

My FI Portfolio's forward-12 month dividends are up to $5,484.01 and including my Loyal3 portfolio's forward dividends of $62.86 brings my total taxable account forward dividends to $5,546.87.

Do you own Air Products & Chemicals in your own dividend growth portfolio?  What about any other front end industrial process companies?

Image courtesy of digitalart on FreeDigitalPhotos.net.

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