Dividend Increase | BP (BP)
Getting a pay raise while sitting on the couch? Sign me up! Thanks BP for the 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 February 4th the Board of Directors at BP plc (BP) approved an increase to the quarterly dividend payment. The dividend was increased from $0.615 up to $0.63. That's a decent 2.4% increase. Shares currently yield 6.89% based on the new annualized payout. BP now has 3 consecutive years of dividend growth with a 10 year streak of paying the same or higher dividend.
The newly increased dividend will be payable on March 27th to shareholders of record as of February 14th.
Since I own 105.799 shares of BP in my FI Portfolio, this raise increased my forward 12-month dividends by $6.35. This is the 5th dividend increase I've received from Aflac since initiating a position in May 2013. The total organic dividend growth since my purchase is 16.7%.
A full screen version of this chart can be found here.
BP's dividend history won't be confused as one of consistency. They had periods of extremely fast growth, followed by sub-par growth, followed by a massive cut due to the oil spill, a couple years with no raises and minuscule growth for the last 3 years.
The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1992 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.
BP's 5-year average forward dividend yield is 6.45% which corresponds to a share price of $39.07 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 $35.50 - $43.50.
Wrap Up
This raise increased my forward dividends by $6.35 with me doing nothing. That's right, absolutely nothing to contribute to their operations. Based on my FI Portfolio's current yield of 2.84% this raise is like I invested an extra $223 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 6 raises from 6 of the 54 companies in my FI Portfolio increasing my forward-12 month dividends by $61.00.
My FI Portfolio's forward-12 month dividends are $7,983.33. Including my FolioFirst portfolio's forward dividends of $101.01 brings my total taxable accounts dividends to $8,084.34. My Roth IRA's forward 12-month dividends are $651.38. My Rollover IRA's forward dividends are $2,377.37. Across all accounts I can expect to receive $11,113.09 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. BP'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 BP? What about any other "Big Oil" companies?
Please share your thoughts below.
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