Monday, October 30, 2017

One Raise at a Time | The Duck Quacks Again

Concept of how dividend growth investing works, health care, real estate
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Aflac 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.
On Tuesday of last week the Board of Directors at Aflac (AFL) announced an increase to their quarterly payout.  Previously the company had been paying $0.43 per share and now they'll be paying $0.45.  That's a solid 4.7% pay raise.  Aflac is a Dividend Champion with 34 consecutive years of dividend growth.  Shares currently yield 2.14% based on the new annualized payout.

Since I own 73.411 shares of Aflac in my FI Portfolio this raise increased my forward 12-month dividends by $5.87.  This is the 5th dividend increase I've received from Aflac since initiating a position in 2013.  Through organic dividend growth alone Aflac has increased my annual dividend payments over 28% cumulatively.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 6%.  That's dividend growth investing in a nutshell.  



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


I like to examine the dividend growth rates that a company has doled out over time in order to see whether dividend growth is holding steady, increasing or decreasing.  Looking at this gives you an idea as to possible future direction of dividend growth.

Looking at Aflac's history dividend growth has slowed significantly coming out of the financial crisis.  Prior to that annual double digit dividend growth was the norm, but since then they haven't hit that level once.  Some of that has to do with FX concerns as well as Aflac's business being primarily in Japan where they've struggled maintain the high growth in policies which in turn leads to lower growth in premiums they receive.  My best guess would be that dividend growth continues it's current trend around 5.0% per year unless/until management can expand into other insurance products or into new markets.
dividend growth investing, dividend, passive income, financial independence
Aflac (AFL) Annual Dividend and Rolling Dividend Growth Rates
A full screen interactive version can be found here.

Wrap Up

My forward dividends increased by $5.87 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.86% this raise is like I invested an extra $205 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 41 dividend increases from 34 companies held in my FI Portfolio increasing my forward 12-month dividends by a combined $250.43.

My FI Portfolio's forward-12 month dividends increased to $5,853.91.  Including my FolioFirst portfolio's forward dividends of $74.63 brings my total taxable accounts dividends to $5,928.54.  My Roth IRA's forward 12-month dividends are at $317.44.

Do you own shares of Aflac?  What other insurance companies look attractive for purchase current valuations?

Please share your thoughts below.

Image source

1 comment:

  1. Nice research on Aflac, Looks like a winner. PassiveIncomeWiz

    ReplyDelete