Dividend Growth Investing at Work - Healthy Customers, Healthy Dividends
|Getting a pay raise while sitting on the couch? Sign me up! Thanks Medtronic for another raise!|
This morning the Board of Directors at Medtronic plc (MDT) were at it again giving investors yet another dividend increase. The quarterly payout was increased from $0.38 to $0.43. That's an excellent 13.2% increase! This raise is also the 39th consecutive year of increases from Medtronic and marks the company with the title of Dividend Champion. Shares currently yield 2.01.
Since I own 92.126 shares of Medtronic in my FI Portfolio this raise increased my forward 12-month dividends by $18.43. This is the 4th dividend increase I've received from Medtronic since initiating a position in 2012. The cumulative dividend increases over that time have amounted to 65.4%! According to USInflationCalculator the total rate of inflation over the same time period is just 4.6% so Medtronic is increasing my income much faster than the negative drag of inflation.
|Medtronic plc Dividend Growth and Annualized Growth Rates Since 2001|
|Medtronic plc Quarterly Dividend Payment History Since 2001|
Medtronic has done very well for me since I became an owner. Over 60% income increase and a 100%+ price appreciation return is great to see. However, we invest for the future so I like to use the Gordon Growth Model as a quick reference to determine whether the company could be attractively valued and therefore need more research. The following table shows the required dividend growth rates in order to provide varying annual returns.
|Medtronic Gordon Growth Model Valuations|
Based on the Gordon Growth Model, Medtronic appears to be a candidate for the further analysis. The required dividend growth is very attainable considering the historical growth rates, low payout ratio, expected earnings growth over 7% per for the next 5 years and the wonderful healthcare industry and its huge global tailwinds.
My forward dividends increased by $18.43 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 2.98% this raise is like I invested an extra $618 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.
For a dividend growth investor there's not much that's better than hearing news of a dividend increase. So far this year I've received 26 increases from 23 companies increasing my forward 12-month dividends by $151.44.
My FI Portfolio's forward-12 month dividends increased to at $5,592.37 and including my Loyal3 portfolio's forward dividends of $63.68 brings my total taxable account forward dividends to $5,656.05.
Do you own shares of Medtronic plc in your own portfolio? Health care is one of my favorite industries for the long term, where's it fall on your list?
Image courtesy of digitalart on FreeDigitalPhotos.net.