Monday, May 1, 2017

Dividend Growth Investing at Work - Just 55 Consecutive Years of Increases

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Johnson & Johnson 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 is now in the books and it was a truly stellar month.  Six different companies owned in my FI Portfolio announced dividend increases during the month.

On Thursday of last week, the Board of Directors at Johnson & Johnson (JNJ) announced an increase to their dividend.  The quarterly dividend was raised from $0.80 to $0.84.  That works out to a 5.0% increase which is a bit smaller than I expected with my guess being a dividend rate of $0.85.  Johnson & Johnson has now given owners a pay raise for 55 consecutive years giving them the title of Dividend Champion.  Shares currently yield 2.72% based on the new annualized dividend.

Since I own 75.616 shares of Johnson & Johnson in my FI Portfolio this raise increased my forward 12-month dividends by $12.10.  This is the 4th dividend increase that I've received since becoming an owner in late 2013.  Through organic dividend growth alone Johnson & Johnson has increased my annual dividend payments by 27% 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.



Johnson & Johnson has long been the quintessential dividend growth stock and for good reason.  For starters the dividend increases have been coming like clockwork for 55 years now.  While companies can amass a lengthy streak with just token increases each year, Johnson & Johnson has been sharing the wealth with dividend growth far outpacing inflation over time.




*2017's dividend assumes 2 more payouts at the new $0.84 per share per quarter rate.

Recently though dividend growth has slowed down to around the mid single digits annually.  That's primarily due to Johnson & Johnson's dividend previously growing faster than earnings which led to a higher payout ratio over time.  Nevertheless, if mid-single digit annual growth continues I'll be more than happy as a shareholder.

Wrap Up

My forward dividends increased by $12.10 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 $411 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 19 dividend increases from 17 companies held in my FI Portfolio increasing my forward 12-month dividends by $110.52.

My FI Portfolio's forward-12 month dividends increased to $5,664.72.  Including my Loyal3 portfolio's forward dividends of $70.26 brings my total taxable accounts dividends to $5,734.98.  My Roth IRA's forward 12-month dividends are at $286.85.

Previous Increases This Month:

Procter & Gamble (PG)
Omega Healthcare Investors (OHI)
Unilever plc (UL)
IBM (IBM)
ExxonMobil (XOM) 

Do you own shares of Johnson & Johnson?  Do you think dividend growth will rebound back to the high single digits or stay in the mid single digit range?

Please share your thoughts below.

Image source

10 comments:

  1. JNJ is awesome. Diversified & profitable. I own it through an ETF.

    ReplyDelete
    Replies
    1. DG,

      As far as stability and consistency in the equity space JNJ is one of the top notch companies out there. No they aren't likely to return to 10%+ annual growth but if purchased at good valuations, i.e. a 3%+ yield, 5-7% annual dividend growth will work out just fine.

      Thanks for stopping by!

      Delete
  2. I love JNJ and actually just wrote an article about them on my site! JNJ is a steady and consistent dividend payer in the healthcare industry and increasing dividend payments is important. Some people will chase yield (and invest in a stock which hasn't raised its dividend in years) which I think is a mistake.
    For more, visit us at TheDividendLife.com

    ReplyDelete
    Replies
    1. TDL,

      JNJ is definitely one of the companies that I'm most confident in for the long term. They are diversified and are in the right industry that should continue to grow over the long term.

      Thanks for stopping by!

      Delete
  3. Fantastic. These are the companies that you just can't go wrong with. All the best.

    ReplyDelete
    Replies
    1. BHL,

      Exactly. JNJ would definitely be near the top of the list of companies that I would recommend for someone that's just starting down the DGI path.

      Thanks for stopping by!

      Delete
  4. JNJ is one of my favorite companies. I just added them to my portfolio. I use computershare to drip them directly and will be increasing my position in the stock with my next purchase in May. You can't argue with 55 consecutive years of increases.

    ReplyDelete
    Replies
    1. DP,

      JNJ is definitely one of the favorites among DG investors and for good reason. I hope to get a chance to add to my position but since it's already fairly sizable I want to get a much better value than where it's currently sitting. But long term DCA should work out great for JNJ.

      Thanks for stopping by!

      Delete
  5. I think there's good reason you see JNJ in almost every DGI portfolio. It just delivers.

    ReplyDelete
    Replies
    1. Keith,

      Exactly. You know that dividend increase will be there every April.

      All the best.

      Delete