Dividend Increase | Phillips 66

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Phillps 66 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 May 8th the Board of Directors at Phillips 66 (PSX) approved an increase to their quarterly dividend payment.  The dividend was increased from $0.80 up to $0.90.  That works out to a huge 12.5% raise from the prior dividend payment.  Phillips 66 has increased their dividend every year since the spinoff in 2012.  That means they've grown the dividend for 7 consecutive years and gives them the title of Dividend Challenger.  Shares currently yield 4.20% on a forward basis.

Since I own 8.289 shares of Phillips 66 in my FI Portfolio this raise increased my forward 12-month dividends by $3.32.  This is the 9th dividend increase I've received from Phillips 66 since initiating a position in 2011.  Cumulatively, the organic dividend growth has totaled a whopping 350% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 13.6%.  

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

Phillips 66 has increased their dividend for 7 consecutive years and is on track to easily make that 8 at the end of 2019.  Thus far the dividend growth has been fantastic with the year over year increase coming in above 10% every year with a 5 year dividend growth rate at 13%.  

The 1-, 3- and 5-year rolling dividend growth rates since 2012 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 $0.90 per share is maintained for the rest of 2019.

Based on dividend yield theory Phillips 66 appears to be on the lower end of its "normal" valuation in the markets which could make Phillips 66 worth a further look as a potential investment.  For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10%, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are to be greater than a 20% deviation from the average.

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

Wrap Up

This raise increased my forward dividends by $3.32 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.99% this raise is like I invested an extra $110 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 22 total increases from 21 of the 54 companies in my FI Portfolio.  Combined those increases have raised my forward 12-month dividends by $141.26.

My FI Portfolio's forward-12 month dividends increased to $6,942.13.  Including my FolioFirst portfolio's forward dividends of $99.48 brings my total taxable accounts dividends to $7,041.61.  My Roth IRA's forward 12-month dividends remain at $463.51.

Do you own shares of Phillips 66?  What about other downstream companies in the oil and gas industry?

Please share your thoughts below.


  1. Gotta love dividend increases. seems like a great increase. just started looking at this company


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