Thursday, September 15, 2016

Dividend Growth Investing at Work - Sin Is In

Concept of how dividend growth investing works
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Phillip Morris 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.

Yesterday, the Board of Directors at Phillip Morris (PM) announced an increase in their quarterly dividend payment.  The dividend was increase to $1.04 from the previous payout of $1.02.  That's a 1.96% boost.  Phillip Morris is a Dividend Challenger with 8 consecutive years of dividend increases.  Shares currently yield 4.22%.

Since I own 62.61 shares of Phillip Morris in my FI Portfolio this raise increased my forward 12-month dividends by $5.01.  This is the 4th dividend increase I've received from Phillip Morris since initiating a position in late 2012.  Cumulatively my income from Phillip Morris has increased by 22.4%!!!  According to USInflationCalculator the total rate of inflation over the same time period is just 4.8% so Phillip Morris is crushing inflation in terms of increasing my income.

I also own 13.455 shares of Phillip Morris in my Roth IRA.  This increase boosted my forward 12-month dividends in that account by $1.08.


Phillip Morris' dividend growth has varied considerably in its few short years as a standalone company.  While the dividend growth might fluctuate it continues to come year after year.

dividend growth investing, dividend growth rates, Phillip Morris
Phillip Morris Annual Dividend and Growth Rates Since 2008
Like I mentioned above, year over year dividend growth has fluctuated tremendously.  From 17% raises down to just 2% raises.  Although Phillip Morris isn't exactly a company you should be expecting banner dividend growth from, rather it's a solid and consistent grower.  There's also a valid reason for Phillip Morris to slow their dividend growth down.

In case you don't know Phillip Morris is a sister company of Altria (MO) except they only operate internationally.  As such, foreign exchange rates play a big role in the cash flow of the company when everything gets converted back into greenbacks.  It's no secret that the USD has gained ground against a basket of foreign currencies which is hurting Phillip Morris' excess cash flow to give back to investors.  Until the USD gives up some ground the slow and steady approach is what you can expect going forward.

Wrap Up


My forward dividends increased by $5.01 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.04% this raise is like I invested an extra $165 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 38 increases from 30 companies increasing my forward 12-month dividends by $210.53.

My FI Portfolio's forward-12 month dividends increased to $5,472.62 and including my Loyal3 portfolio's forward dividends of $65.06 brings my total taxable account forward dividends to $5,537.68.  My Roth IRA's forward 12-month dividends increased as well to $272.79.

Previous increases announced this month:

Verizon Communications (VZ)
Realty Income (O)

Do you own shares of Phillip Morris?  Are you disappointed or happy with the relatively low dividend growth from the last 2 increases?

Please share your thoughts below.

Image courtesy of digitalart on FreeDigitalPhotos.net.

7 comments:

  1. What we did to deserve this pay raise would have gotten us fired from the J O B. Sat here doing nothing. What a deal ! !

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    Replies
    1. Anon,

      Exactly! That's what's so great about DGI. If you slack off and do nothing at your job you'd be lucky to not get fired, yet here we are getting a 2% pay raise for doing nothing.

      Thanks for stopping by!

      Delete
  2. PIP -

    You got it right, though I was disappointed with the last 2 increases, they are increases nonetheless. Altria punched up their increase, but PM again is behind. Let's keep the focus hat on and be pleased with this, as it's more income.

    -Lanny

    ReplyDelete
    Replies
    1. Lanny,

      The last 2 raises have been disappointing to me but they're still raises and they're completely justifiable given the USD strength. PM is also very leveraged which leaves them little wiggle room so conservative raises are needed.

      Thanks for stopping by!

      Delete
  3. It'll probably take years and years but it would be amazing to see a time where your annual income is more than your original investments!

    ReplyDelete
    Replies
    1. Evan,

      I'd love to see that but it reality I don't know if I have enough compounding time to get to that point. Realistically you would need to start investing very early to let the DG compound and build your passive income up. But that doesn't mean I won't stop trying!

      Thanks for stopping by!

      Delete
  4. It's very important to make investments that you can count on once you get old. Just make sure that you know the ins and outs of the investment. I love reading useful info about investing like this one, because it give me ideas on to properly handle my investments.

    ReplyDelete