Friday, April 28, 2017

Dividend Growth Investing at Work - Big Oil For Big Dividends

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks ExxonMobil 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 been a good month for dividend increases with 4 of my holdings already announcing raises and this announcement makes 5.

On Wednesday, the Board of Directors at Exxon Mobil (XOM) announced an increase to their dividend.  The quarterly dividend was raised from $0.75 to $0.77.  That works out to a 2.67% increase which is right what I expected considering the ongoing issues in the energy space.  This raise pushes ExxonMobil's streak to 35 consecutive years of increases giving them the title of Dividend Champion.  Shares currently yield 3.69% based on the new annualized dividend.

Since I own 68.633 shares of Exxon Mobil in my FI Portfolio this raise increased my forward 12-month dividends by $5.49.  This is the 4th dividend increase that I've received since becoming an owner in 2013.  Through organic dividend growth alone Exxon Mobil 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.

For a commodity based business, ExxonMobil has truly been a model of consistency when it comes to their dividend.  Sure there's periods where the dividend is raised every 5 quarters, but that's the nature of the business.  Commodity based businesses have to thrive on operation excellence through the lean times in order to still be around for the fat times.  



*2017's dividend assumes 2 more payouts at the new $0.77 per share per quarter rate.

Wrap Up

My forward dividends increased by $5.49 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.92% this raise is like I invested an extra $188 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 18 dividend increases from 16 companies held in my FI Portfolio increasing my forward 12-month dividends by $98.42.

My FI Portfolio's forward-12 month dividends increased to $5,653.62.  Including my Loyal3 portfolio's forward dividends of $70.29 brings my total taxable accounts dividends to $5,723.91.  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)
IBM (IBM)

Do you own shares of Exxon Mobil?  Were you content with another lackluster dividend increase considering the headwinds in the oil patch?

Please share your thoughts below.

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2 comments:

  1. This is why many of us are dedicated dividend growth investors. Getting these raises is always a nice gesture especially, as you put it, you didn't have to do anything to earn this extra income. I own no XOM but still was happy to receive dividend boosts from my other holdings.

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  2. XOM also released earnings today which didn't look too bad considering where oil is trading these days.

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