Thursday, February 9, 2017

Dividend Growth Investing at Work - An Early Valentine's Gift

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Getting a pay raise while sitting on the couch?  Sign me up!  Thanks 3M Company 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.

On Tuesday afternoon the Board of Directors at 3M Company (MMM) announced yet another dividend increase in their long and storied history.  The new dividend payout will be $1.175 which is a solid 5.9% increase from the previous payment of $1.11.  Through the end of 2016 3M Company had grown dividends for 58 consecutive years giving them the title of Dividend Champion.  Shares currently yield 2.67%.

Since I own 18 shares of 3M in my FI Portfolio this raise increased my forward 12-month dividends by $4.68.  This is the 3rd dividend increase that I've received from 3M Company since initiating a position in 2014.  Cumulatively my 3M Company dividends have risen by 37.4% from dividend growth alone!  According to USInflationCalculator the total rate of inflation over the same period is just 1.4%.  



A larger version of the chart can be found here.

The length of 3M Company's dividend streak is truly impressive.  In fact out of all the companies listed on the US stock market there's only 7 companies that boast longer streaks than 3M.  As a huge industrial conglomerate 3M's business waxes and wanes with the overall economy, although their size and diversification does provide a buffer such that it's rare for all business segments to do poorly at the same time.  As such the dividend growth rate varies with the performance of the company.


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3M Company (MMM) Annual Dividend and Rolling Dividend Growth Rates

*2017's annual dividend assumes 3 additional payments at the $1.175 per share per quarter rate.  

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

Despite the dividend increase shares of 3M don't appear to be offering up any kind of value at this time.  I personally wouldn't feel comfortable adding more shares to my portfolio until the share price retreats back to the low $160's.  You can check out my recent analysis of 3M over at Seeking Alpha.

Wrap Up

My forward dividends increased by $4.68 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 $161 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 4 dividend raises from the companies that I own increasing my forward dividends by $23.25.

February should be a busy month for dividend increases with 6 expected raises in total.

My FI Portfolio's forward-12 month dividends increased to $5,582.78.  Including my Loyal3 portfolio's forward dividends of $67.45 brings my total taxable accounts dividends to $5,650.24.  My Roth IRA's forward 12-month dividends are at $243.42.

Do you own shares of 3M Company?  

Please share your thoughts below.

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2 comments:

  1. Wow. 4 dividend increases already. That is awesome. That is a great way to start the year.

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    Replies
    1. DividendMonkey,

      It sure is. And February should bring about 5 more the rest of the month. I can't wait to see what these companies have in store.

      Thanks for stopping by!

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