Friday, April 21, 2017

Dividend Growth Investing at Work - Feel Good, Look Good and Build Your Wealth

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Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Procter & Gamble 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.
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 Unilever plc (UL) announced a dividend increase.  This one was forecast a bit earlier this month with their intention to increase the dividend around 12% and yesterday's announcement didn't disappoint.  The new dividend payout is 0.3585 euros which is a 12.0% increase from the previous payment of 0.3201.  This year will mark 22 consecutive years of dividend increases giving them the title of Dividend Contender.  Shares currently yield 3.05% based on the new annualized dividend.  

*All references to the dividend streak are based on the home currency, the Euro, for Unilever.  
**The current yield is quoted for U.S. investors in the Unilever (UL) ADR shares and accounts for the current EURO:USD conversion.

Since I own 30.277 shares of Unilever in my FI Portfolio this raise increased my forward 12-month dividends by $4.99.  This is the 4th dividend increase that I've received since becoming an owner in early 2014 with my dividends growing by 33% cumulatively due to dividend growth alone.  According to US Inflation Calculator the rate of inflation over that same time is 3.0%.



A full screen version of this chart can be found here.

Unilever's dividend history is quite hard to find and a bit confusing.  There's been semi-annual dividends as well as capital restructurings to account for and unfortunately Unilever's investor relations site doesn't clear things up with lots of details.  

Thankfully "Dividends are Coming" had contacted Unilever's investor relations about this a few years ago and helped to clear things up.  

In the above chart, dividend payments from 1962 through 2006 are displayed as annual dividend payments because only annual totals were given in the aforementioned article.  Dividend payments from 2007 to current are taken from Unilever's investor relations site.
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Unilever (UL) (UN) Annual Dividend and Rolling Dividend Growth Rates
*Annual dividends are based on calendar year payments.
**2017's dividend assumes 2 more payouts at the new 0.3585 Euro per share per quarter rate.

A full screen, graphical version of this chart can be found here.

If you look through the table you'll notice that Unilever doesn't exactly employ the "slow and steady" approach.  Dividend growth from one year to the next is kind of a crapshoot.  For example look at 2002-2004 where the annual dividend growth was 8.97%, 2.35% then 8.62%.  That's why I prefer to look at things on a bit longer time horizon to smooth out the annual ups and downs.  The rolling 10-year dividend growth rates are solidly around 5-7%.  While the short term trend in 10-year growth rates is rising, the longer term trend is down.  Realistically if Unilever can continue with 5-7% 10-year growth rates I'll be more than happy.

Wrap Up

My forward dividends increased by $4.99 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.94% this raise is like I invested an extra $170 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 16 dividend increases from 14 companies held in my FI Portfolio increasing my forward 12-month dividends by $80.84.

My FI Portfolio's forward-12 month dividends increased to $5,635.63.  Including my Loyal3 portfolio's forward dividends of $70.12 brings my total taxable accounts dividends to $5,705.75.  My Roth IRA's forward 12-month dividends remain at $286.41.

Previous Increases This Month:

Procter & Gamble (PG)
Omega Healthcare Investors (OHI)

Do you own shares of this global consumer staple behemoth?    

Please share your thoughts below.

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3 comments:

  1. Increasing dividends are very important. Some people chase yield and don't care that the dividend hasn't been raised in 10 years but I think that's a mistake.
    For more, visit us at TheDividendLife.com

    ReplyDelete
  2. What you gonna do w loyal3 stocks?

    ReplyDelete
  3. PiP -

    Nice nice nice, have to love div increases, that's for sure!

    -Lanny

    ReplyDelete