Dividend Increase | Altria (MO)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Altria 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 July 28th the Board of Directors at Altria (MO) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.84 up to $0.86.  That's a rather pedestrian 2.4% raise, but that's better than what many companies have been able to deliver the past few months.  Altria is a Dividend Champion with 50 consecutive years of dividend growth.  Shares currently yield 8.26% based on the new annualized payout.

The new dividend will be payable October 9th to shareholders of record as of September 15.  

Since I own 120.975 shares of Altria in my FI Portfolio, this raise increased my forward 12-month dividends by $9.68.  This is the 4th dividend increase I've received from Altria since initiating a position in March 2018.  The total organic dividend growth over that time comes to 30%.

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

Altria's dividend growth has been fantastic although there are a few "cuts" due to spin-offs of Kraft and Phillip Morris.

What's really amazing is that despite the two cuts from the spinoffs the worst 10-year annualized dividend growth rate came in at -3.6%.  The last 2 years are actually showing greater than 9% annualized dividend growth over the previous 10 years.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1989 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.

Altria's 5-year average forward dividend yield is 5.04% which corresponds to a share price of $68 based on the new annualized payout.  

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 $62 - $76 and suggests that Altira's is significantly undervalued at least compared to historic yield levels.  

Wrap Up

This raise increased my forward dividends by $9.68 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.90% this raise is like I invested an extra $334 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 27 raises from 24 of the 54 companies in my FI Portfolio increasing my forward-12 month dividends by $213.55.

My FI Portfolio's forward-12 month dividends are $7,458.61.  Including my FolioFirst portfolio's forward dividends of $103.20 brings my total taxable accounts dividends to $7,561.81.  My Roth IRA's forward 12-month dividends are $650.76.  My Rollover IRA's forward dividends are $2,977.02.  Across all accounts I can expect to receive $11,189.59in 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.  Altria'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 Altria?  Do you think shares are cheap here?

Please share your thoughts below.


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