Friday, April 15, 2016

Dividend Growth Investing at Work - 2 More Increases


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?

Thursday was a great day for dividend increases with 2 of my holdings announcing raises.  First up was Unilever (UL) which increased their payout, in euros, from 0.302 to 0.3201.  That's a solid 5.99% increase.  Due to currency fluctuations Unilever won't be found on the CCC list.  However, they have increased dividends for 7 consecutive years in their home currency which is a solid accomplishment.  Shares currently offer a 3.12% to U.S. investors.

I own 30.277 shares of Unilever in my FI Portfolio so this raise grew my forward 12-month dividends by $2.47 based on the current exchange rate of 1 USD: 1.1258 euros.  This is the 3rd dividend increase I've received from Unilever since initiating a position in 2014.  In total my dividend payments on the original shares have increased by 19.0% from raises alone.  According to USInflationCalculator the total inflation for that same time period sits at 0.6% so I'm quite happy with Unilever's ability to increase its dividend.

The dividend history for Unilever is like a mystery novel with all sorts of twists and turns.  In fiscal year 2005 the company restructured which put an end to a solid 6 year dividend growth streak.  Coming out of the restructuring Unilever stayed with the 2 semi annual dividend payments and racked up 3 consecutive years of growth.  Then management decided part of the way through fiscal year 2009 to swap to quarterly payments from semi-annual payments which put us on the streak we're now on.


The payout ratio for Unilever is a bit high so I expected around 5-6% dividend growth for this raise and I was right on the money on the high end of my forecast.  Analysts expect Unilever to earn 1.90 euros for fiscal year 2016 and the new dividend would represent a 67.5% payout ratio.

Thursday afternoon we heard from Omega Healthcare Investors (OHI) and they announced yet another increase to their dividend.  The dividend was raised to $0.58 from $0.57 which is a solid 1.8% increase from the previous payout.  Since OHI has historically increased their dividend payment every quarter the better comparison is to May 2015's payment of $0.54.  Compared to the year ago period that's a solid 7.4% increase.  Omega Healthcare Investors is a Dividend Contender with 14 consecutive years of dividend increases.  This increase also marked the 15th consecutive increase to the quarterly dividend payment which is truly amazing.  Shares currently yield 6.63%.

I own 73.745 shares of Omega Healthcare Investors in my FI Portfolio so this raise grew my forward 12-month dividends by $2.95.  This is the 4th dividend increase I've received from OHI since initiating a position in early 2015.  In total my dividend payments on the first shares purchased have increased by 7.4%.  According to USInflationCalculator the total inflation for that same time period is just 0.5% so Omega Healthcare Investors is soundly beating inflation and growing my purchasing power.

*The 2016 payment assumes 1 x $0.57 payment and 3 x $0.58 payments

Not bad for a stodgy, old real estate company.  I nailed this dividend increase exactly, although I won't get too excited about it because this was by far the easiest one to forecast.

Management is guiding for $3.25-$3.30 in full year 2016 AFFO, the equivalent of earnings for real estate investment trusts.  The new $0.58 dividend payment would represent a 70.3%-71.4% AFFO payout ratio.  That's high for other business structures, but for a real estate investment trust that's a fairly conservative payout.

My forward dividends increased by $5.42 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.99% this raise is like I invested an extra $181 in capital.  Except that I didn't!  Two 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.

Three of my holdings have announced increases so far in April which leaves 4 more to go and possibly a 5th.  So far this year I've received 17 dividend increases from 15 companies  increasing my forward 12-month dividends by $74.92.

Previous April Increases:
Procter & Gamble (PG)

My FI Portfolio's forward-12 month dividends are up to $5,510.49 and including my Loyal3 portfolio's forward dividends of $63.31 brings my total taxable account forward dividends to $5,573.80.

Do you own either of these companies?  Are you happy with the dividend growth they've provided?  How many other companies are you expecting raises from in April?

Image courtesy of digitalart on FreeDigitalPhotos.net.

7 comments:

  1. Curious to how you estimate your 12 month forward divs for UL since they fluctuate every month?

    ReplyDelete
    Replies
    1. Race to the Crown,

      In my spreadsheet I just have the current EUR:USD exchange rate automatically pull and it updates everything. Although it's something I'm not too concerned about since UL doesn't account for a big portion of my dividends. Hope that helps.

      Thanks for stopping by!

      Delete
  2. Nothing like getting pay raise, while doing nothing! Glad to hear you're doing well. Hope you have a great weekend buddy!
    -Bryan

    ReplyDelete
    Replies
    1. Bryan,

      Pay raises for doing nothing are always welcomed here. I hope to be going back to work this weekend but who knows what's going to happen. We have just a handful of jobs but plenty of hands sitting at the house. Hope you have fun on the road.

      Thanks for stopping by!

      Delete
  3. JC,

    Nice calls. I am excited by the UL increase as I hold a few less shares than you. OHI has looked good for a while, if I could only buy all the stocks I wanted immediately this problem would be solved already. Thanks for the update!

    - Gremlin

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  4. The UL increase was a pleasant surprise. I know most weren't happy about the PG raise but there are near term headwinds affecting that stock and I always say a raise beats a cut. Always nice getting a bump in pay without literally having to do anything. No fresh capital, no reinvestment. Just more cash rolling our way. Thanks for sharing. Happy to own PG and UL.

    ReplyDelete
  5. I think Unilever and Omega are 2 great stocks that should have a great long term future. Considering their yields, size and the current economy uncertainty, both increases are very welcome.

    Tristan

    ReplyDelete