Dividend Increase | Medtronic & A Milestone

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Medtronic 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 June 21 the Board of Directors at Medtronic plc (MDT) approved an increase to their quarterly dividend payment.  The dividend was increased from $0.50 up to $0.54.  That works out to a 8.0% raise from the prior dividend payment.  Medtronic has increased their dividend for 41 consecutive years giving them the title of Dividend Champion.  Shares currently yield 2.18% on a forward basis.

Since I own 92.126 shares of Medtronic in my FI Portfolio this raise increased my forward 12-month dividends by $14.74.  This is the 7th dividend increase I've received from Medtronic since initiating a position in December 2012.  Cumulatively Medtronic's dividend growth has totaled 107.7% since I purchased shares.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 11.5%.  

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

Historically, Medtronic has rewarded owners with very healthy dividend increases.  From 2003 through 2019, every rolling 10-year dividend growth rate has been greater than 10%.  That's how long term wealth is created.

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 $0.66 per share is maintained for the rest of 2019.

Based on dividend yield theory Medtronic appears to be in the fair value to undervalued range and a possible candidate for further research.  

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 5 year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are 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 $14.74 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.84% this raise is like I invested an extra $518 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 25 total increases from 23 of the 54 companies in my FI Portfolio.  Combined those increases have raised my forward 12-month dividends by $166.88.

My FI Portfolio's forward-12 month dividends increased to $7,012.68.  Including my FolioFirst portfolio's forward dividends of $100.08 brings my total taxable accounts dividends to $7,112.76.  My Roth IRA's forward 12-month dividends remain at $465.30.

For those that didn't catch it, this raise pushed me up over $7,000 in forward dividends for my FI Portfolio.  With more capital likely to be coming later this year the $7,000 mark is just another step on the way to financial independence and hopefully the $8,000 mark comes along much quicker!

Do you own shares of Medtronic?  Do you think they can keep the high single digit dividend growth going?

Please share your thoughts below.