Dividend Growth Investing at Work - Addictions and Dividends
|Getting a pay raise while sitting on the couch? Sign me up! Thanks Starbucks Corporation for another raise!|
Emerson Electric (EMR) kicked off November with a dividend increase, although it was meager at just 1.1%. Well, Starbucks Corporation (SBUX) announced earnings as well as a huge dividend increase yesterday to help pick up the slack. The new dividend payout is $0.25 which is an excellent 25% bump higher from the previous payout of $0.20. Starbucks Corporation is a Dividend Challenger with 6 consecutive years of dividend growth. Shares currently yield 1.93%.
Since I own 56.208 shares of Starbucks in my FI Portfolio this raise increased my forward 12-month dividends by $11.24. This is the 3rd dividend increase I've received from Starbucks since initiating a position in 2014. Cumulatively my income from Starbucks has increased by 92%!!! According to USInflationCalculator the total rate of inflation over the same time period is 2.0%. So Starbucks is growing my income ONLY 46x faster than inflation thus far. Oh darn!
A larger version of the chart can be found here.
Starbucks' dividend history isn't exactly the longest, but they make up for it with excellent growth. Just for some perspective on how fast the dividend has grown the very first payment in 2010 was $0.05 and the new payout is 5x that. Obviously growth like this can't last forever, but I do think they are one of the best consumer discretionary brands out there and have the potential to build up a very lengthy dividend streak.
|Starbucks Corporation (SBUX) Annual Dividend and Rolling Dividend Growth Rates Since 2010|
As usual the dividends and dividend growth rates are based off calendar year payouts and don't necessarily sync up with the fiscal years.
That's impressive dividend growth and just what investors love to see from the low yield-high growth holdings in their portfolio. What really stands out to me is the consistency with the dividend growth with the "worst" (Can you really say that?) 1 year growth rate coming in at 23.60%.
I haven't read through the full earnings release, but just skimmed the highlights and they were solid. Comp store sales showed 5% growth in the Americas, 4% in the US, 6% in China and 4% globally. GAAP EPS for the quarter came in at $0.54 which is a 26% increase and a record for Starbucks. Management also guided to 10-11% earnings growth for fiscal year 2017.
So everything seems to be running smoothly and I hope to get a chance to add more shares to my portfolio. If I had more cash I would have already added shares or at least been selling some puts. Starbucks' share price had actually declined nearly 14% YTD despite excellent results like these. Much of that was likely due to the valuation being stretched towards the end of 2015 and is still a little bit high than I'd like, but reasonable at around 24.7x the midpoint of 2017 guidance.
My forward dividends increased by $11.24 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 3.11% this raise is like I invested an extra $361 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 better than hearing news of a dividend increase. So far this year I've received 48 increases from 39 companies increasing my forward 12-month dividends by $273.48.
My FI Portfolio's forward-12 month dividends increased to $5,462.17 and including my Loyal3 portfolio's forward dividends of $66.13 brings my total taxable account forward dividends to $5,5528.30. My Roth IRA's forward 12-month dividends remain at $241.75.
Expected Raises in November:
Becton, Dickinson & Company (BDX)
Preivous Raises in November:
Emerson Electric (EMR)
Do you own shares of Starbucks Corporation? How long do you think they can maintain 10%+ annual dividend growth?
Please share your thoughts below.
Image courtesy of digitalart on FreeDigitalPhotos.net.