Dividend Increase | Air Products & Chemicals (APD)

Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Air Products for the 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 January 23rd the Board of Directors at Air Products & Chemicals approved an increase to the quarterly dividend payment.  The dividend was increased from $1.16 up to $1.34.  That's a huge 15.5% increase.  Shares currently yield 2.26% based on the new annualized payout.  Air Products & Chemicals is a Dividend Champion with 37 consecutive years of dividend increases.

The newly increased dividend will be payable on May 11th to shareholders of record as of April 1st.

Since I own 18.481 shares of Air Products in my FI Portfolio, this raise increased my forward 12-month dividends by $13.31.  This is the 7th dividend increase I've received from Air Products since initiating a position in April 2013.  The total organic dividend growth since my purchase is 88.7%.

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

Air Product's 1-year dividend growth rates have ranged from 2.3% to 22.2% with an average of 11.2% and a median of 9.6%.

Air Product's rolling 5-year annualized dividend growth rates have ranged from 6.4% to 19.3% with an average of 10.7% and a median of 10.0%.

The rolling 10-year annualized dividend growth rates are equally impressive.  They've ranged from 7.1% to 15.4% with an average of 10.3% and a median of 9.8%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1982 can be found in the following chart.  

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

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.

Air Products' 5-year average forward dividend yield is 2.50% which corresponds to a share price of $214 based on the newly raised dividend.

I consider the fair value range based on dividend yield theory to be the 5-year moving average yield +/- 10%.  That gives a fair value range of $195 - $238.  At a current price of $237.29 shares are trading on the above the upper range of fair value.

Air Products is trading at 25.1x FY 2020's estimates of $9.44 and 22.5x FY 20201's estimates of $10.53.  Those both seem on the high side, but not exorbitantly so given the 5-year estimate earnings growth rate of 11.8%.  

Currently, Air Products is valued at a 16.5x EV/EBITDA multiple which suggests that shares are likely on the higher side of fair value.


  




Wrap Up

This raise increased my forward dividends by $13.31 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.82% this raise is like I invested an extra $472 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.

I've now received 1 raise from 2 of the 54 companies in my FI Portfolio increasing my forward-12 month dividends by $19.47.

My FI Portfolio's forward-12 month dividends are $7,903.29.  Including my FolioFirst portfolio's forward dividends of $101.11 brings my total taxable accounts dividends to $8,004.40.  My Roth IRA's forward 12-month dividends are $650.79.  My Rollover IRA's forward dividends are $2,371.37.  Across all accounts I can expect to receive $11,026.56 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Air Products & Chemical'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 Air Products & Chemicals?  Have you received any dividend increases yet in 2020?

Please share your thoughts below.