Wednesday, October 26, 2016

Dividend Growth Investing at Work - The Streak Continues!

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

Well, well, well look who's streak continues on.  Yesterday Today the Board of Directors at Chevron Corporation (CVX) announced a much anticipated dividend increase.  The new dividend payout is $1.08 per share compared to the previous payout of $1.07.  That's a tiny 0.93% raise, but it keeps the streak alive.  Chevron is a Dividend Champion with 29 consecutive years of dividend growth.  Shares currently yield 4.27%.

Since I own 58.901 shares of Chevron in my FI Portfolio this raise increased my forward 12-month dividends by $2.36.  This is the 2nd dividend increase I've received from Chevron since initiating a position in mid 2013.  Cumulatively my income from Chevron has increased by 8%!!!  According to USInflationCalculator the total rate of inflation over the same time period is 3.6%.  Despite a major slump in the price of oil for much of the time I've owned Chevron the organic dividend growth is still more than twice as much as inflation.




A larger version of the chart can be found here.

This was the first raise from Chevron after keeping the dividend steady for 10 consecutive quarters.  However, the streak continued due to the timing of the payouts.  This is a fairly normal occurrence in Chevron's history with several periods of dividends that are kept the same for more than 4 quarters while the calendar payouts continue to show dividend increases.
dividend growth investing, dividend growth rates, Chevron, CVX
Chevron Corporation (CVX) Annual Dividend and Rolling Dividend Growth Rates Since 1985
An interactive graphical version of the previous chart can be found here.

As you can see by scanning through the dividend growth table the annual dividend growth fluctuates wildly.  That's not surprising considering the business that their in, oil and gas, can see drastic changes in the price of the underlying commodities.  The past couple years are a great example of that.  While the annual dividend growth sometimes disappoints, as with 2016's small 0.23% increase from 2015, the 10 year growth rates are all much better.  

The route in oil prices appears to be on the mend; however, prices still aren't stable by any means due to global oversupply continuing to suppress prices.  Eventually prices will normalize and Chevron can return to high dividend growth, although it will be important to keep an eye on how management balances future cash flow with the debt that has been taken on during this most recent downturn.  Luckily, this dividend increase bought Chevron time to officially keep the streak alive and oil prices to normalize by not having to announce another dividend increase until the 4Q 2018 payment.

Wrap Up

My forward dividends increased by $2.36 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 $77 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 45 increases from 36 companies increasing my forward 12-month dividends by $255.13.

My FI Portfolio's forward-12 month dividends increased to $5,397.04 and including my Loyal3 portfolio's forward dividends of $65.40 brings my total taxable account forward dividends to $5,462.44.  My Roth IRA's forward 12-month dividends remained at $240.84.

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

Expected Raises in October:

Aflac (AFL)
Starbucks (SBUX)

Do you own shares of Chevron?  Did you think they would keep the dividend growth streak in tact?  Do you consider annual payouts to keep a streak alive or only increases announced every year?

Please share your thoughts below.

Image courtesy of digitalart on FreeDigitalPhotos.net.

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