Dividend Increase | Walgreens Boots Alliance

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Walgreens Boots Alliance 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 July 10th the Board of Directors at Walgreens Boots Alliance (WBA) approved an increase to the quarterly dividend payment.  The dividend was increased from $0.44 up to $0.4575 per share.  That's a modest 4.0% increase, but a raise nonetheless.  Walgreens Boots Alliance is a Dividend Champion with 43 consecutive years of dividend increases.  Shares currently yield 3.27% based on the new annualized payout.

Since I own 46.456 shares of Walgreens in my FI Portfolio this raise increased my forward 12-month dividends by $3.25.  I also own 43.151 shares in my Roth IRA and this raise boosted my forward dividends for that portfolio by $3.02.  This is the 7th dividend increase I've received from Walgreens since initiating a position in August 2012.  Cumulatively, the organic dividend growth has been 66% over that time.  According to US Inflation Calculator, the cumulative rate of inflation over that same time is just 11.6% so Walgreens has far outpaced inflation with its dividend growth.

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

Walgreens dividend growth has been a little less consistent than I would have expected; however, you won't hear me complaining too much.  Despite the periods of "lower" dividend growth the longer term growth rates have been fantastic.  Since 1982 the lowest rolling 10-year dividend growth rate has still come in above 7.5% per year.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1972 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 $0.51 per share is maintained for the rest of 2019.

Based on dividend yield theory Walgreens appears to be significantly undervalued with a forward dividend yield of ~3.3%.  That's significantly higher than the 5 year moving average of 2.1% and thus a possible candidate for further research.  Since 1990 this is the best time, from a starting dividend yield standpoint, to purchase shares of Walgreens since late 2012.

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 $3.25 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.88% this raise is like I invested an extra $113 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 29 total increases from 26 of the 54 companies in my FI Portfolio.  Combined those increases have raised my forward 12-month dividends by $206.82.

My FI Portfolio's forward-12 month dividends increased to $7,140.68.  Including my FolioFirst portfolio's forward dividends of $100.03 brings my total taxable accounts dividends to $7,240.71.  My Roth IRA's forward 12-month dividends increased to $543.85.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Walgreens Boots Alliance's can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Walgreens?  Do you think the fear surrounding the pharmacy business is overdone?

Please share your thoughts below.