Friday, March 24, 2017

Dividend Growth Investing at Work - Getting In On The Ground Floor

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Versum Materials 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 of this week the Board of Directors at Versum Materials (VSM) announced their first ever dividend.  As a dividend growth investor I primarily invest in companies with dividend growth streaks that span decades, but sometimes you get the opportunity to get in on the ground floor of what can hopefully turn into a lengthy streak.  

If Air Products, Versum's parent company before being spun off, is any guide with their 35 year dividend growth streak then Versum could prove to be at the beginning of a long and profitable streak of their own. approved yet another increase in their storied dividend history.  Shares currently yield 0.67% based on the newly initiated dividend. 

Since I own 9 shares of Versum Materials in my FI Portfolio this raise increased my forward 12-month dividends by $1.80.  

The $0.20 annualized dividend would only be a payout ratio of 11% based on the average analyst estimate of $1.77 of earnings for the current fiscal year.  Going forward there appears to be plenty of room for Versum's dividend payout to grow through organic growth of the company as well as a rising payout ratio.  

Wrap Up

My forward dividends increased by $1.80 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.93% this raise is like I invested an extra $61 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 13 dividend increases from 12 companies held in my FI Portfolio increasing my forward 12-month dividends by $67.17.

My FI Portfolio's forward-12 month dividends increased to $5,618.02.  Including my Loyal3 portfolio's forward dividends of $69.24 brings my total taxable accounts dividends to $5,687.26.  My Roth IRA's forward 12-month dividends remain at $285.78.

Previous Raises This Month

Toronto Dominion Bank (TD)
Realty Income Corporation (O)
JP Morgan Chase (JPM) (Roth IRA)

Do you own shares of Versum Materials?  Are there any other spinoff companies that you're waiting on dividend announcements from?

Please share your thoughts below.

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1 comment:

  1. Congrats -- I don't know anything about VSM, but every stock with a long streak of dividend increases started with none. Take care and happy investing!

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