Dividend Growth Investing at Work - Betting on Buffett and Big Blue
April has historically been a great month for dividend increases among the companies that I own. Last year saw 7 dividend raises in April alone and thus far this month there's been 3 announcements including this one.
Yesterday the Board of Directors at IBM (IBM) announced an increase to their dividend. The quarterly dividend was raised from $1.40 to $1.50 or a solid 7.1%. This year will mark 22 consecutive years of dividend increases for IBM giving them the title of Dividend Contender. Shares currently yield 3.74% based on the new annualized dividend.
Since I own 30.22 shares of IBM in my FI Portfolio this raise increased my forward 12-month dividends by $12.09. This is the 4th dividend increase that I've received since becoming an owner in late 2013. Through organic dividend growth alone IBM has increased my annual dividend payments by 58% cumulatively. According to US Inflation Calculator the rate of inflation over that same time is just 4.7%.
A full screen version of this chart can be found here.
IBM has done a superb job with growing their dividend throughout the years. I think you'd be hard pressed to find someone that would complain about IBM's dividend growth. From 2004 through 2017 the rolling 10 year dividend growth rate has been well above 10%. Although given IBM's recent struggles over the past few years dividend growth is likely to be a bit more muted as evidenced by this year's 7% raise.
|IBM (IBM) Annual Dividend and Rolling Dividend Growth Rates|
A full screen, graphical version of this chart can be found here.
My forward dividends increased by $12.09 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 2.90% this raise is like I invested an extra $415 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 17 dividend increases from 15 companies held in my FI Portfolio increasing my forward 12-month dividends by $92.93.
My FI Portfolio's forward-12 month dividends increased to $5,648.13. Including my Loyal3 portfolio's forward dividends of $70.29 brings my total taxable accounts dividends to $5,718.42. My Roth IRA's forward 12-month dividends remain at $286.59.
Previous Increases This Month:
Procter & Gamble (PG)
Omega Healthcare Investors (OHI)
Unilever plc (UL)
I'm expecting dividend increases to be announced by Johnson & Johnson (JNJ) and ExxonMobil (XOM) later this week. If Johnson & Johnson's increase comes in at less than $0.85 per quarter I'll be disappointed; however, for Exxon I'd be just happy with a raise to $0.77.
Will IBM return to meaningful business growth and in turn dividend growth? Or will they have to rely on share buybacks to generate the majority of their dividend growth?
Please share your thoughts below.