Monday, May 29, 2017

Dividend Growth Investing at Work - 6 Years and Counting

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Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Phillips 66 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.
May has been a busy month and somehow it's just about over with.  It was so busy in fact that I missed one of my favorite things about investing: a dividend increase announcement.  Back on May 3rd the Board of Directors at Phillips 66 (PSX) announced an increase to their dividend.  The quarterly payout was boosted from $0.63 to $0.70 or 11.1%.  Assuming the dividend is maintained at this level for the remainder of 2017 Phillips 66 will have increased their dividend for 6 consecutive years giving them the title of Dividend Challenger.  Shares currently yield 3.62% based on the new annualized dividend.

Since I own 8.289 shares of Phillips 66 in my FI Portfolio this raise increased my forward 12-month dividends by $2.32.  This is the 7th dividend increase that Phillips 66 has given owners since being spun off of ConocoPhillips (COP) in 2012.  Through organic dividend growth alone Phillips 66 has increased my annual dividend payments by 250% cumulatively.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 6.5% so yeah Phillips 66 is definitely increasing my income faster than inflation is eating away at it.



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


Phillips 66 doesn't have the longest streak although they've done as good of a job as possible.  In 2012 Phillips 66 was spun off from ConocoPhillips and Phillips 66 has paid and increased dividends every year since.  They've actually given investors 7 dividend increases out of the 20 total dividends they've paid.  Even better is that they've been growing the dividend at a healthy clip too with the lowest year over year raise being 11.4%.  I think I can live with that.
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Phillips 66 (PSX) Annual Dividend and Rolling Dividend Growth Rates
*2017's dividend assumes 2 more payouts at the new $0.70 per share per quarter rate.

A full screen interactive version can be found here.

Wrap Up

My forward dividends increased by $2.32 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 $80 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 20 dividend increases from 18 companies held in my FI Portfolio increasing my forward 12-month dividends by $112.84.

My FI Portfolio's forward-12 month dividends increased to $5,675.76.  Including my Loyal3 portfolio's forward dividends of $35.79 brings my total taxable accounts dividends to $5,711.55.  My Roth IRA's forward 12-month dividends are at $286.85.

Do you own shares of Philips 66?  Are you happy with the dividend growth?

Please share your thoughts below.

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4 comments:

  1. I like the equivalent calculation for capital invested. Puts in perspective how beneficial increasing dividends are each year.

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    1. Owen,

      I like looking at it that way because it really reinforces just how powerful dividend increases can be over time. So far this year the $112.84 of increased dividends is like I invested nearly $4k at the current yield of my portfolio. That's awesome!

      All the best.

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  2. PiP -

    Nice increase, and that's what it's about - the cross over point. Keep pushing hard to get there!

    -Lanny

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    Replies
    1. Lanny,

      Slowly but surely we'll get there. After a couple years' break from serious investing I have to say it's great seeing the light at the end of the tunnel for us to get back to investing our excess cash to build our future.

      All the best.

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