Dividend Increase | The Hershey Company
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| Getting a pay raise while sitting on the couch? Sign me up! Thanks Hershey for another dividend increase! |
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 25th the Board of Directors at The Hershey Company (HSY) approved an increase to the quarterly dividend payment. The dividend was increased from $0.722 up to $0.733 per share. That's a modest 7.1% increase. The end of 2019 will put The Hershey Company back up into Dividend Contender status with 10 consecutive years of dividend growth. Shares currently yield 2.07% based on the new annualized payout.
The new dividend will be payable on September 16th to shareholders of record as of August 23rd.
Since I own just 11 shares of Hershey in my FI Portfolio this raise increased my forward 12-month dividends by $2.24. This is the 5th dividend increase I've received from Hershey since initiating a position in July 2015. Cumulatively, the organic dividend growth has been 44.5% over that time. According to US Inflation Calculator, the cumulative rate of inflation over that same time is just 8.1% so Hershey is handily growing the dividend faster than inflation.
A full screen version of this chart can be found here.
Hershey's dividend growth streak sits at just 10 years; however, that's due to the freeze in the payout from September 2007 to December 2009. Considering that the "world was ending" I'm willing to excuse the freeze, especially since there was no cut involved.
Hershey's dividend growth has been very consistent over the years and right in line with what I would expect from a consumer staple with massive brand power. From 1994 through 2019 the 1-year dividend growth rate, excluding 2009, has ranged from 4.9% to 16.0% with an average of 9.9%. Expanding out to the 17 rolling 10-year periods the annualized growth has ranged from 8.4% to 10.5% with an average of 9.5%.
The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1994 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 $0.773 per share is maintained for the rest of 2019.
Based on dividend yield theory shares of Hershey appear to be overvalued. Since 1993 Hershey's dividend yield has fluctuated from around 1.2% up to around 3.8%. The current 5 year average yield sits at 2.45%. Even after the 7% dividend increase shares of Hershey still only offer a 2.07% yield. If shares of Hershey were to now trade at a 2.45% yield that would put the share price at $126.20 per share or roughly 15.5% lower than current prices.
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.
Wrap Up
This raise increased my forward dividends by $2.24 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my portfolio's current yield of 2.89% this raise is like I invested an extra $78 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 31 total increases from 28 of the 54 companies in my FI Portfolio. Combined those increases have raised my forward 12-month dividends by $211.50.
My FI Portfolio's forward-12 month dividends increased to $7,159.75. Including my FolioFirst portfolio's forward dividends of $99.94 brings my total taxable accounts dividends to $7,259.69. My Roth IRA's forward 12-month dividends increased to $543.97.
I've also started compiling dividend data on many of the companies that I own or would like to own. Hershey'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 Hershey? Do you think they can maintain their high single digit dividend growth over the long haul?
Please share your thoughts below.
I don't own any shares of Hershey JC but it's always good to get a dividend increase without having to do anything other than owning shares. Of course, the reverse is true because sometimes companies decide to cut their dividends. I read an article recently that PFE might very well do so, but we will see. Congrats on the increase, however small it may be. It's the power of compounding working in your favor!
ReplyDeleteDP,
DeleteHSY is one of those great companies to own for the long haul. They won't be going anywhere. But right now shares look ridiculously expensive so it's not time to pick up any shares. Dividend cuts happen. Luckily I've avoided them for the most part off the top of my head I can think of 3 that have happened to the companies that I own/owned.