Dividend Increase | Walmart (WMT)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Walmart 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 February 19th the Board of Directors at Walmart (WMT) approved another increase to their dividend payment.  The dividend payout was increased from $0.52 to $0.53.  That's a 1.9% increase from the prior payout.  Walmart is a Dividend Champion with 46 consecutive years of dividend increases.  Shares currently yield 2.14% based on the new annualized payout.  

The new $0.53 dividend will be payable on April 1st to shareholders of record as of March 15th.

Since I own 63.415 shares of Walmart in my FI Portfolio this raise increased my forward 12-month dividends by $2.54.  This is the 6th dividend increase I've received from Walmart since initiating a position in June 2013.  The total organic dividend growth since I initiated a position has been 12.8%.  According to US Inflation Calculator the cumulative rate of inflation over that same time is 8.1%.  

I won't go into too much detail here about Walmart the business or the valuation, you can check out my full analysis over on Seeking Alpha.  The TL;DR version is that I think Walmart is a terrific company and while they're are making progress on ecommerce the problem is that it just doesn't move the needle much when the core store front business is doing $500,000 M in annual sales.  

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

Walmart's years of rapid growth are behind it and that can clearly be seen by it's subpar dividend growth starting in 2014.  I expect dividend growth to pick up over the next few years; however, I would expect the long term average to come closer to the mid to upper single digits rather than the >10% annual growth of years past.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1993 can be found in the following chart.  

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

Wrap Up

This raise increased my forward dividends by $2.54 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.97% this raise is like I invested an extra $86 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 10 total increases from 10 of the 52 companies held in my FI Portfolio.  In total my forward 12-month dividends have increased by $65.08.

My FI Portfolio's forward-12 month dividends increased to $6,784.86.  Including my FolioFirst portfolio's forward dividends of $92.55 brings my total taxable accounts dividends to $6,877.41.  My Roth IRA's forward 12-month dividends remain at $414.23.

Do you own shares of Walmart?  Did you expect a bigger dividend increase than just another ~2%?  Do you think dividend growth will perk up in the coming years?

Please share your thoughts below.