Sunday, January 29, 2017

Dividend Growth Investing at Work - Unexpected Raises are the Best!

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Air Products & Chemicals for the dividend increase!
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.

Seriously, who doesn't love scrolling through news on the market and your portfolio to see that one of the companies you own decided to raise up their dividend payment?  Even better is when you weren't expecting a raise from them at that time so it was completely unexpected.  Even better than that is finding out it's a 10.5% increase.

On Friday the Board of Directors at Air Products & Chemicals (APD) did just that by raising the quarterly payout to $0.95 from $0.86.  Assuming the dividend is maintained at this higher rate 2017 will mark 35 consecutive years of dividend growth for Air Products placing them firmly as a Dividend Champion.  Shares currently yield 2.68%.

Since I own 18.481 shares of Air Products & Chemicals in my FI Portfolio this raise increased my forward 12-month dividends by $6.65.  This is the 4th consecutive year of dividend increases that I've received from Air Products since initiating a position in 2013.  Cumulatively my Air Products & Chemicals dividends have risen by 33.8% from dividend growth alone!  According to USInflationCalculator the total rate of inflation over the same period is just 3.0%.  




A larger version of the chart can be found here.

As I mentioned earlier Realty Income typically gives investors multiple raises throughout any given year.  So looking at any one raise in particular could paint a much different picture than examining things over a longer time frame.  I prefer to look at dividend growth rates across various time periods to encapsulate the various fluctuations and the multiple raises over time.

dividend growth investing, dividend increase, financial independence
Air Products & Chemicals (APD) Annual Dividend and Rolling Dividend Growth Rates
*2017's annual dividend assumes 2 additional payments at the $0.95 per share per quarter rate.  

An interactive graphical version of the previous chart can be found here.

Wrap Up

My forward dividends increased by $6.65 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.91% this raise is like I invested an extra $228 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.

Thus far in 2017 I've received 3 dividend raises from the companies that I own increasing my forward dividends by $18.57.

My FI Portfolio's forward-12 month dividends increased to $5,575.57.  Including my Loyal3 portfolio's forward dividends of $67.12 brings my total taxable accounts dividends to $5,642.69.  My Roth IRA's forward 12-month dividends remain at $243.18.

Previous Raises This Month

Omega Healthcare Investors (OHI)

Realty Income Corporation (O)

Do you own shares of Air Products & Chemicals?  Do you enjoy surprise dividend increases as much as I do?

Please share your thoughts below.

Image source

6 comments:

  1. We don't own APD but can't agree with you more on dividend raises and dividend stocks. Stable dividends are what we look for as we plan to eventually rely on the dividends to help supplement our retirement. Those raises will become important down the road when we no longer get raises at work. Raises will need to come from somewhere is our passive income is going to keep up with rising cost of living.

    Thanks for sharing. AFFJ

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    1. AFFJ,

      That's the plan exactly. So far things are going well but I have to say I'm looking forward to the next bear market a bit to be able to see how things go then. That will be the real test.

      All the best.

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  2. Congrats on the healthy raise!
    I recall looking at APD back in 2012 but did not buy it. Oh well, you win some, you lose some...

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    1. DoD,

      There's been plenty of times where I've been close to purchasing shares or decided against it for some reason or another only to see the companies just blow things out of the water and do spectacular. In hindsight it's a shame but that's the cost of doing business when you have a limited amount of capital to work with.

      Thanks for stopping by!

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  3. I have never looked into APD but I feel the need to do some research now. It is great when we receieve these increases, it lets us know that our plan is slowly coming together. Every little bit helps. Thanks for sharing.

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    1. MD,

      I love seeing dividend raises and especially when they come at an unexpected time. APD has been a great investment for me and with 30+ years of dividend growth behind them I'm sure there's more to come.

      Thanks for stopping by!

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