Tuesday, November 22, 2016

Dividend Growth Investing at Work - Healthy Raises from the Healthcare Sector

Concept of how dividend growth investing works, Becton Dickinson & Company, BDX, Health Care
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Becton, Dickinson & Company 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.

Yesterday sure was a great day with the Board of Directors at Becton, Dickinson & Compnay (BDX) announcing a solid dividend increase.  The dividend was boosted from $0.66 up to $0.73.  That's an excellent 10.6% increase.  Becton, Dickinson & Company is a Dividend Champion with 44 consecutive years of dividend growth.  Shares currently yield 1.70%.

Since I own 8 shares of Becton, Dickinson & Company in my FI Portfolio this raise increased my forward 12-month dividends by $2.24.  This is the 2nd dividend increase I've received from Becton, Dickinson & Company since initiating a position in April 2015.  Cumulatively my income from Becton, Dickinson & Company has increased by 22%!!!  According to USInflationCalculator the total rate of inflation over the same time period is 2.0%.  I'll gladly take a company growing my cold, hard cash payments 11x faster than inflation.




A larger version of the chart can be found here.

Becton, Dickinson & Company has an impressive history of rising dividends that dates back to 1962.  I'd venture to guess that's longer than many of my readers, myself included, have even been alive.  
dividend growth investing, dividend growth rates, Becton Dickinson & Company, BDX, health care
Becton, Dickinson & Company (BDX) Annual Dividend and Rolling Dividend Growth Rates Since 1962
An interactive graphical version of the previous chart can be found here.

The previous chart was created based on calendar year payout and don't necessarily sync up with fiscal years.  It might look like there's been dividend cuts; however, there really hasn't.  The "cuts" were due to the timing of payouts with management occasionally changing from a late December to early January payout and vice versa.  

I like to look at dividend growth across a variety of time periods to give a better idea of what the company can provide over time.  If you look at just the dividend growth from year to year you might have passed over Becton, Dickinson & Company from 2001-2003 when annual dividend growth was less than 3%.  However, patience has typically been rewarded for Becton, Dickinson owners with the "worst" 10 year dividend growth rate coming in at 8.1% over their history with latest sub 10% 10 year growth rate coming in 2003.

Wrap Up

My forward dividends increased by $2.24 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.00% this raise is like I invested an extra $75 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 48 increases from 39 companies increasing my forward 12-month dividends by $275.72.

My FI Portfolio's forward-12 month dividends increased to $5,463.16 and including my Loyal3 portfolio's forward dividends of $66.08 brings my total taxable account forward dividends to $5,529.24.  My Roth IRA's forward 12-month dividends remain at $241.75.

Expected Raises in December:

Ventas REIT (VTR)
Care Capital Properties (CCP) (Maybe?)

Preivous Raises in November:

Emerson Electric (EMR)
Starbucks Corporation (SBUX)

Do you own shares of Becton, Dickinson & Company?  

Please share your thoughts below.

Image courtesy of digitalart on FreeDigitalPhotos.net.

6 comments:

  1. Congrats on the raise, JC. Nice raise from BDX -- wish it was trading at a lower multiple for me to initiate :)

    cheers
    R2R

    ReplyDelete
  2. R2R,

    It was a solid raise from BDX and I don't think anyone could realistically complain about a 10% bump. I personally think BDX is offering a decent value here, not great, but not nearly as overvalued as several other companies. Today would be a great day to sell puts on BDX but I already have an open one and I don't want to risk loading up too much there.

    Thanks for stopping by!

    ReplyDelete
  3. I owned BDX years ago but sold early which was a mistake. I will put it back on my radar!

    http://TheDividendLife.com

    ReplyDelete
    Replies
    1. TDL,

      I hope to own BDX for decades because they definitely have a great track record. If the future is just half as good as the past then I'll be a happy camper.

      Thanks for stopping by!

      Delete
  4. I don't own shares of BDX but I will certainly keep an eye on that company. It has a compelling growth history in terms of profits and dividends. And also in regard to the future there should be several growth catalysts.
    Thanks for sharing your analysis.
    Cheers

    ReplyDelete
    Replies
    1. FS,

      BDX has been wonderful for investors and I've already gotten 2 pay raises from them which is great. With a low payout ratio and strong tailwinds for the health care sector I fully expect BDX to continue to improve on its track record.

      Thanks for stopping by!

      Delete