Dividend Increase | EOG Resources

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks EOG Resources for yet 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 May 2nd the Board of Directors at EOG Resources (EOG) approved of an increase to their quarterly dividend payment.  The dividend was increased from $0.22 up to $0.2875.  That works out to a huge 30.7% raise from the prior dividend payment.  EOG has only increased their dividend for 2 years, including 2019; however, the dividend has not been decreased since at least 1993.  Shares currently yield 1.26% on a forward basis.

Since I own 8.098 shares of EOG in my FI Portfolio this raise increased my forward 12-month dividends by $2.19.  This is the 7th dividend increase I've received from IBM since initiating a position in 2013.  Cumulatively, the organic dividend growth has totaled a whopping 259% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 13%.  

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

As I mentioned earlier EOG doesn't have the lengthiest or cleanest dividend growth streak out there.  Although as a midstream commodity producer I'm willing to grant them some leeway.  Especially since the dividend has been growing extremely fast with just a few brief pauses when the price of oil declines.  EOG has grown the dividend in all but 6 years since 1993 with every 10-year dividend growth rate over 10% per year.

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.

*2019's dividend growth assumes the new quarterly payout of $0.2875 per share is maintained for the rest of 2019.

Based on dividend yield theory EOG appears to be significantly undervalued, although they just announced a massive dividend increase which is probably skewing the forward yield too high at the moment.  I would expect the average dividend yield for EOG to creep higher over time negating some of the undervaluation.  That being said I would consider EOG a name to look at if you're bullish on the oil sector or are looking to add a mid sized E&P company that has a relatively clean dividend history.

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

Wrap Up

This raise increased my forward dividends by $2.19 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.91% this raise is like I invested an extra $75 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 21 total increases from 20 of the 54 companies in my FI Portfolio.  Combined those increases have raised my forward 12-month dividends by $137.94.

My FI Portfolio's forward-12 month dividends increased to $6,939.26.  Including my FolioFirst portfolio's forward dividends of $98.14 brings my total taxable accounts dividends to $7,037.40.  My Roth IRA's forward 12-month dividends remain at $463.51.

Do you own shares of EOG?  Are you willing to tolerate temporary pauses in dividend growth due to business conditions or do you take the pause and sell approach?

Please share your thoughts below.