Dividend Increase | Phillip Morris (PM)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Phillip Morris 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 September 9th the Board of Directors at Phillip Morris (PM) approved an increase in the quarterly dividend payment.  The dividend was increased from $1.17 up to $1.20.  That's a decent 2.6% increase in the dividend payout.  Phillip Morris is a Dividend Contender with 13 consecutive years of dividend growth. Shares currently yield 5.86% based on the new annualized payout.

The new dividend will be payable October 13th to shareholders of record as of September 24th.  

Since I own 62.61 shares of Phillip Morris in my FI Portfolio, this raise increased my forward 12-month dividends by $7.51.  This is the 8th dividend increase I've received from Phillip Morris since initiating a position in December 2012.  Total organic dividend growth over that time is 41.2%.  

I also own 16.443 shares in my Roth IRA and this raise increased my forward dividends for that account by $1.97.

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

Phillip Morris has a 13 year streak of rising dividends that dates back to the spin-off from the parent Phillip Morris International which then became Altria (MO).  Phillip Morris, and its various entities, have a rich dividend growth history. 

During Phillip Morris' 13 year streak, year over year dividend growth has ranged from 2.0% to 17.5% with an average raise of 7.9% and a median increase of 6.8%.

Looking at the rolling 5-year periods, Phillip Morris' annualized dividend growth has ranged from 3.2% to 12.7% with an average of 7.7% and a median of 7.3%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 2008 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.

Phillip Morris' 5-year average forward dividend yield is 5.86% which corresponds to a share price of $97.50 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 $89 - $108 and suggests that Phillip Morris is trading below its fair value range.

Wrap Up

This raise increased my forward dividends by $7.51 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.71% this raise is like I invested an extra $277 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 30 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $224.26.

My FI Portfolio's forward-12 month dividends are $7,387.35.  Including my FolioFirst portfolio's forward dividends of $104.60 brings my total taxable accounts dividends to $7,491.95.  My Roth IRA's forward 12-month dividends are $661.60.  My Rollover IRA's forward dividends are $2,946.45.  Across all accounts I can expect to receive $11,100.00 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.  Phillip Morris' 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 Phillip Morris?  Do you think they can return to at least mid single digit annual dividend growth?

Please share your thoughts below.