Dividend Increase Rollover IRA | Lockheed Martin (LMT)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Lockheed Martin 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 25th the Board of Directors at Lockheed Martin (LMT) approved an increase in the quarterly dividend payment.  The dividend was increased from $2.40 up to $2.60.  That's an excellent 8.3% raise.  Lockheed is a Dividend Contender with 18 consecutive years of dividend growth. Shares currently yield 2.69% based on the new annualized payout.

The new dividend will be payable December 24th to shareholders of record as of December 1st.  

Since I own 10.463 shares of Lockheed in my Rollover IRA, this raise increased my forward 12-month dividends by $8.37.  This is the 2nd dividend increase I've received from Lockheed since initiating a position in September 2019.  Total organic dividend growth over that time is a solid 18%.  

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

Lockheed doesn't have the cleanest dividend growth streak having a dividend cut back in 2000.  However, since then Lockheed Martin has given owners a pay raise every year starting in 2003.

Of the 18 periods dating back to 2002, year over year dividend growth has ranged from 8.9% to 56.9% with an average of 19.3% and a median of 15.3%.

Of the 14 rolling 5-year periods over that time, annualized dividend growth has range from 9.8% to 27.3% with an average of 18.3% and a median of 19.4%.

Of the 9 rolling 10-year periods annualized dividend growth has ranged from 14.0% to 25.2% with an average of 18.7% and a median of 18.4%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 2002 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.

Lockheed's 5-year average forward dividend yield is 2.66% which corresponds to a share price of $391 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 $355 to $433 and suggests that Lockheed is trading within the fair value range.

Wrap Up

This raise increased my forward dividends by $8.37 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my Rollover IRA's current yield of 2.16% this raise is like I invested an extra $387 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 11 raises from the companies in my Rollover IRA this year.

My FI Portfolio's forward-12 month dividends are $7,428.84  Including my FolioFirst portfolio's forward dividends of $104.53 brings my total taxable accounts dividends to $7,533.37.  My Roth IRA's forward 12-month dividends are $662.20.  My Rollover IRA's forward dividends are $3,021.29.  Across all accounts I can expect to receive $11,216.86 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.  Lockheed Martin'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 Lockheed Martin?  Do you think high single to low double digit growth will continue?

Please share your thoughts below.