Sunday, October 30, 2016

Dividend Growth Investing at Work - Ducks and Dividends

Concept of how dividend growth investing works, Aflac, AFL, insurance
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Aflac for another 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.

On Thursday, October 27th the Board of Directors at Aflac, Inc. (AFL) announced another dividend increase.  The new quarterly dividend payout is $0.43 compared to the prior payout of $0.41.  That's a solid 4.87% raise.  Aflac is a Dividend Champion with 33 consecutive years of dividend growth.  Shares currently yield 2.51%.

Since I own 73.411 shares of Aflac in my FI Portfolio this raise increased my forward 12-month dividends by $5.87.  This is the 4th dividend increase I've received from Aflac since initiating a position in early 2013.  Cumulatively my income from Aflac has increased by 23%!!!  According to USInflationCalculator the total rate of inflation over the same time period is 3.6%.  While Aflac's dividend growth has been more of the slow and steady type it's far outpacing the rate of inflation.




A larger version of the chart can be found here.

Dividend growth has clearly slowed from it's heyday; however, the raises keep coming and a steady 5% raise is fine by me.  Aflac is a bit of a different company wherein they do the majority of their business in 1 foreign country, Japan, yet are incorporated in the United States and convert everything back to the greenback for reporting.  So a strong U.S. dollar hurts their results.  But raises keep coming which keeps me happy while they figure out a way to grow and expand their supplemental insurance business.
dividend growth investing, dividend growth rates, Aflac, AFL, insurance
Aflac, Inc. (AFL) Annual Dividend and Rolling Dividend Growth Rates Since 1993
An interactive graphical version of the previous chart can be found here.

Wrap Up

My forward dividends increased by $5.87 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.06% this raise is like I invested an extra $191 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 better than hearing news of a dividend increase.  So far this year I've received 46 increases from 37 companies increasing my forward 12-month dividends by $261.00.

My FI Portfolio's forward-12 month dividends increased to $5,403.21 and including my Loyal3 portfolio's forward dividends of $65.46 brings my total taxable account forward dividends to $5,468.68.  My Roth IRA's forward 12-month dividends remain at $240.84.

Previous Raises this Month:
Omega Healthcare Investors (OHI)
Visa, Inc. (V)
AT&T, Inc. (T)
Chevron Corporation (CVX)

Expected Raises in October:

Starbucks (SBUX)

Do you own shares of Aflac?  

Please share your thoughts below.

Image courtesy of digitalart on FreeDigitalPhotos.net.

7 comments:

  1. I own shares of AFLAC and I get so pumped when good companies raise dividends. Especially when they are healthy raises :) I usually just DRIP them into more shares since I like the companies that I bought. Hopefully over time I will be able to reap the long term rewards of all those dividends

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    Replies
    1. MSM,

      I used to DRIP all dividends, but swapped to selectively reinvesting when I was much more active with new capital coming in each month. I'm leaning towards turning more of the DRIPs back on though now that investment capital is a bit lighter that I'd prefer.

      Always got to love seeing solid steady dividend raises. Aflac didn't give a spectacular raise, but 5% is a solid bump higher.

      All the best.

      Delete
  2. PiP -

    Yep, and let the div increases keep rolling!! I own quite a bit and this maintains their aristocrat status and still leaves PLENTY of room of consistent growth for their dividend future.

    -Lanny

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    Replies
    1. Lanny,

      Aflac should continue to hand out raises. Although I need to check into their expansion either within Japan since they're largely focused there or how the expansion to other markets is doing. I know they were trying to build up the US business which based on the number of duck commercials it has to be doing somewhat well.

      All the best.

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  3. AFL has been in my portfolio since I became a dividend growth investor back in 2007. It's been trading at such a nice value and yield for a very long time I'm surprised that it hasn't been added to more portfolios. I would still like to buy more but this is my largest holding and I need to stay diversified. Thanks for sharing.

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    Replies
    1. Keith,

      I can't wait to get some of my holdings up to 9-10 years long. I only really started investing in earnest in 2011 so I don't have quite as much history with my purchases. But eventually they'll get there. I think Aflac is probably one of those overlooked companies that just doesn't get a lot of love because it isn't all that fancy. But year after year solid dividend boosts keep coming in.

      Thanks for stopping by!

      Delete
  4. Sweet! Seeing the increases coming in are a great motivation to stick with it. It is easy when you are rewarded just for owning shares. Keep it up.

    -Brian

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