Dividend Increase | Johnson & Johnson

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Realty Income 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 April 25th the Board of Directors at Johnson & Johnson (JNJ) approved of an increase to their quarterly dividend payment.  The dividend was increased from $0.90 up to $0.95.  That works out to a 5.6% raise from the prior dividend payment.  Johnson & Johnson is a Dividend Champion with 56 consecutive years of dividend increases.  Shares currently yield 2.71% on a forward basis.

Since I own 78.982 shares of Johnson & Johnson in my FI Portfolio this raise increased my forward 12-month dividends by $15.80.  This is the 6th dividend increase I've received from Johnson & Johnson since initiating a position in 2013.  Cumulatively, the organic dividend growth has totaled a whopping 43.9% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 9.1%.  

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

Johnson & Johnson is often one of the first dividend growth comapnies that new investors look to and for good reason.  The consistency in their dividend growth is fantastic.  And when you add in the fact that they've been doing it for over 50 years and through all sorts of economic and geopolitical calamities there's a lot to like.  Johnson & Johnson's 10 year dividend growth rate has been trending down, as should be expected due to the massive increase is the business' size; however, the lowest it's come in at is 6.9% which is still excellent.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1973 can be found in the following chart.  

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

*2019's dividend assumes the new quarterly payout of $0.95 per share is maintained for the rest of 2019.

Based on dividend yield theory Johnson & Johnson appears to be on the upper end of fair value currently.  So despite the high quality of the business I'm in no hurry to add more shares at these price levels.  

Wrap Up

This raise increased my forward dividends by $15.80 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.92% this raise is like I invested an extra $542 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 19 total increases from 18 of the 54 companies in my FI Portfolio.  Combined those increases have raised my forward 12-month dividends by $129.71.

My FI Portfolio's forward-12 month dividends increased to $6,927.69.  Including my FolioFirst portfolio's forward dividends of $97.69 brings my total taxable accounts dividends to $7,025.38.  My Roth IRA's forward 12-month dividends remain at $462.84.

Do you own shares of Johnson & Johnson?  Were you happy with the 5.6% increase?

Please share your thoughts below.