Dividend Increase | Wells Fargo

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Wells Fargo for another dividend increase!
There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  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.  

On January 22nd the Board of Directors at Wells Fargo (WFC) approved an increase to their quarterly dividend.  The dividend payout was increased from $0.43 to $0.45.  That's a 4.65% increase from the prior payout.  Wells Fargo is a Dividend Challenger with 9 consecutive years of dividend increases.  Shares currently yield 3.45% based on the new annualized payout.

The $0.45 dividend payment will be payable on March 1st to shareholders of record as of February 1st.

The 4.65% increase might not seem that strong; however, that's just compared to the previous quarters payment.  Compared to the year ago payment it's a whopping 15.38% raise.  That's what I'm talking about!  Wells Fargo, and most other financial institutions, have been limited in their capital return, dividends and buybacks, plans pending approval from the Federal Reserve.  I wouldn't expect any further increases to be announced until sometime in the middle of 2019 when the next round of CCAR tests are done.

Since I own 55.024 shares of Wells Fargo in my FI Portfolio this raise increased my forward 12-month dividends by $4.40.  This is the 10th dividend increase I've received from Wells Fargo since initiating a position in August 2011.  Cumulatively, the organic dividend growth from WFC has totaled a whopping 275% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is 11.6%.  

I also own 30.412 shares of Wells Fargo in my Roth IRA and this increase raised my forward 12-month dividends for that portfolio by $2.43.

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

It should come as no surprise that Wells Fargo's dividend history isn't exactly the cleanest, you know...that little financial crisis a decade or so ago.  However, since we didn't go back to the "Dark Ages" and things have since normalized Wells Fargo has been back to their dividend growing ways.  In 2014 the annual dividend from Wells Fargo had eclipsed the pre-chaos high in 2008.  Annual dividend growth has been all over the place; however, it resumed increasing every year starting in 2011.  From 2012 through 2018 the rolling 10-year dividend growth rate has ranged from 2.35% to 4.81% and 2019, assuming no further increases, is set to be at 13.9%.  

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1995 can be found in the following chart.  

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

*2019's dividend assumes the new payout of $0.45 per share is maintained for the rest of 2019.

Wrap Up

This raise increased my forward dividends by $4.40 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.07% this raise is like I invested an extra $143 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 2019 I've received 2 total increases from 2 of the 51 companies held in my FI Portfolio.  In total my forward 12-month dividends have increased by $9.81.

My FI Portfolio's forward-12 month dividends increased to $6,579.25.  Including my FolioFirst portfolio's forward dividends of $92.11 brings my total taxable accounts dividends to $6,671.36.  My Roth IRA's forward 12-month dividends increased to $413.64.

Do you own shares of Wells Fargo?  Why or why not?

Please share your thoughts below.