Thursday, April 13, 2017

Dividend Growth Investing at Work - 61 Years and Counting

Concept of how dividend growth investing works, health care, real estate
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 typically been a big month for dividend increase announcements among my FI Portfolio holdings.  Last year saw 7 total increases, although I'm only expecting 6 this year.  

On Tuesday of this week the Board of Directors at Procter & Gamble (PG) announced yet another dividend increase to keep their lengthy streak going.  The prior dividend was $0.6695 and has been increased to $0.6896.  That's a decent, but unspectacular, 3.0% increase.  This year will mark 61 consecutive years of dividend growth for Procter & Gamble giving them the title of Dividend Champion.  Shares currently yield 3.05% based on the new annualized dividend.  

Since I own 68.412 shares of Procter & Gamble in my FI Portfolio this raise increased my forward 12-month dividends by $5.50.  This is the 6th consecutive year with a dividend increases that I've received since becoming an owner in late 2011 growing over 31% cumulatively.  According to US Inflation Calculator the rate of inflation over that same time is 8.3%.



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

The consistency and length of Procter & Gamble's dividend history is only bested by a few companies.  That steady climb in dividend payments is a dividend growth investor's dream.  However, recently dividend growth has been slowing with rather the last 3 increases being rather meager.  Most of that is due to Procter & Gamble growing their dividend faster than earnings which led to an expansion in the payout ratio.  Until Procter & Gamble can have meaningful top and bottom line growth dividend increases are likely to remain muted.
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Procter & Gamble (PG) 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 $0.6896 per share per quarter rate.

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

Wrap Up

My forward dividends increased by $5.50 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 $187 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 14 dividend increases from 13 companies held in my FI Portfolio increasing my forward 12-month dividends by $72.67.

My FI Portfolio's forward-12 month dividends increased to $5,627.37.  Including my Loyal3 portfolio's forward dividends of $69.25 brings my total taxable accounts dividends to $5,696.62.  My Roth IRA's forward 12-month dividends remain at $286.41.

Do you own shares of Procter & Gamble?  If so are you considering closing your position due to the weak dividend growth or will you ride this period out?  

Please share your thoughts below.

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1 comment:

  1. Got to love PG (Consumer staples). I am planning to initiate a position in VDC (Vanguard Consumer Staples ETF). It has a yield of 2.43%. PG is 10.8% of the overall portfolio. Cannot go wrong with staples.

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