Thursday, July 21, 2016

Dividend Growth Investing at Work - 17 Straight Quarters of Higher Dividends

Concept of how dividend growth investing works
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Omega Healthcare Investors for another pay raise!
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?  Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.

Last week there was another dividend increase from one of my FI Portfolio holdings.  This time Omega Healthcare Investors (OHI) joined in on the fun raising the quarterly payout from $0.58 to $0.60.  That's a 3.5% increase.  Omega Healthcare Investors is a Dividend Contender with 14 consecutive years of increases.  Shares currently yield 6.88%.

That 14 year streak of increases is impressive but what I really like is that management typically gives smaller raises each quarter rather than one large increase each year.  In fact they've now increased the quarterly payout for 17 straight quarters.  That's since the 3rd quarter of 2012!

The raise might seem a bit small at just 3.5%; however, OHI has typically given investors a raise every quarter rather than one large increase each year.  Compared to the year ago payment the dividend has increased a whopping 9.1%!  

Since I own 75.066 shares of Omega Healthcare Investors in my FI Portfolio this raise increased my forward 12-month dividends by $6.01.  This is the 5th dividend increase I've received from Omega Healthcare Investors since initiating a position in early 2015.  Cumulatively my income from Omega Healthcare Investors has increased by 11.1%!!!  According to USInflationCalculator the total rate of inflation over the same time period is just 1.7% so Omega Healthcare Investors has increased my income 7 times faster than inflation.
Omega Healthcare Investors (OHI) Quarterly Dividend Payment History Since 2003
Omega Healthcare Investors (OHI) Quarterly Dividend Payment History Since 2003
The graph of Omega Healthcare Investors' dividend payments is a thing of beauty.  The longest stretch without an increase was during 2008-2009 which was understandable considering everything that was going on at the time.  While it looks like the dividend isn't moving too much because of the consistent march forward the annualized growth rate really is impressive.
Omega Healthcare Investors Annualized Growth Rates Since 2003
Omega Healthcare Investors Annualized Growth Rates Since 2003
Omega Healthcare Investors has been a boon for dividend growth investors.  As a REIT it's typically carried a yield well above the markets' yield and dividend growth has consistently been in the 9-10% annual range over the rolling 5 year periods.  

Based on managements' guidance for fiscal year 2016 the dividend is well covered by funds available for distribution.  The FAD guidance range is $2.95-3.00 per share.  Assuming 4 quarters of the new dividend payment the dividend ranges from an 80-81.4% payout ratio which is very safe for REITs.

Mondelez International (MDLZ) also boosted their dividend on Tuesday.  The previous dividend was $0.17 per share and the new rate is $0.19.  That's a solid 11.8% increase.  

I only own 8.5291 shares of Mondelez within my Loyal3 Portfolio.  The dividend increase boosted my forward 12-month dividends by $0.68.

Wrap Up

My forward dividends increased by $6.69 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.90% this raise is like I invested an extra $207 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!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

For a dividend growth investor there's not much that's better than hearing news of a dividend increase.  So far this year I've received 30 increases from 25 companies increasing my forward 12-month dividends by $171.47.

My FI Portfolio's forward-12 month dividends increased to $5,616.39 and including my higher Loyal3 portfolio's forward dividends of $64.29 brings my total taxable account forward dividends to $5,680.69.

Previous increases announced this month:

Cummins Inc (CMI)
Walgreens-Boots Alliance (WBA)

Do you own shares of Omega Healthcare Investors?  Do you prefer smaller dividend increases every quarter or one larger increase each year?

Image courtesy of digitalart on FreeDigitalPhotos.net.

8 comments:

  1. Great post. I'm long OHI. I'm also selfishly hoping the stock takes a few more dips so I can buy more on sale :-).

    ReplyDelete
    Replies
    1. IH,

      In the current market environment I think everyone that I talk to is hoping their investments will take some dips. But OHI is solid and you got to love those steady increases every quarter especially since they're adding up to 8-11% raises year over year.

      All the best.

      Delete
  2. I am also long on OHI. The great thing is that I just recently started a position.... and I was only counting on the $0.58 so I am definitely loving the immediate raise to $0.60. Any pullback below my cost basis and I will add to this position. Thanks for sharing!

    ReplyDelete
    Replies
    1. More Dividends,

      OHI is one of the rare companies that gives raises most quarters rather than just one big raise. And I love it!

      Thanks for stopping by!

      Delete
  3. enjoy your writing. I think there is an error though in chart, dividends for 2011 totaled 1.55 not 1.50 (.37, .38 and then two quarters at .40) been buying and dripping since 2012......

    ReplyDelete
    Replies
    1. HMI,

      Thanks for catching that. That was a bit of laziness on my end, but it's now updated.

      All the best.

      Delete
  4. Great post, long OHI as well.
    Would like to own CMI as well, but would like to get a discount.

    ReplyDelete
    Replies
    1. DFS,

      OHI has been great for me and it's really awesome to see those dividend increases quarter after quarter. The fact that they've added up to over 11% is just icing on the cake.

      I definitely don't consider CMI a buy here but that turmoil late last year that saw it go down, I think, to the high $80's/low $90's was a great opportunity. Sadly we didn't have any cash to make a bolt on purchase.

      All the best.

      Delete