Dividend Increase | Air Products & Chemicals (APD)

Getting a pay raise while sitting on the couch?  Sign me up!  Thanks APD 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 28th the Board of Directors at Air Products & Chemicals approved an increase in the quarterly dividend payment from $1.34 up to $1.50.  That's a very strong 11.9% dividend increase.  Air Products is a Dividend Champion with 38 consecutive years of dividend growth.  Shares currently yield 2.18% based on the new annualized payout.

The new dividend will be payable May 10th to shareholders of record as of April 1st.  

Since I own just 18.481 shares of Air Products & Chemicals in my FI Portfolio, this raise increased my forward 12-month dividends by $11.83.  This is the 8th dividend increase I've received from Air Products & Chemicals after initiating a position in 2013.    

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

Air Products initiated a dividend back in 1981 and promptly failed to raise it the following year.  However, there's been no looking back since then with dividend growth coming each year since.  Dividend growth in any given year is quite erratic, but over time the jumpiness has smoothed out.

From 1982 through the estimated 2021 payout, year over year dividend growth has ranged from 5.1% to 22.2% with an average of 11.1% and a median of 9.4% across the 39 observations.

Over that same period there's been 36 rolling 5-year time periods with Air Products & Chemicals' annualized dividend growth ranging from 6.6% to 19.6% with an average of 10.8% and a median of 10.2%.

There's also been 31 rolling 10-year periods with annualized dividend growth ranging from 7.1% to 15.2% with an average of 10.3% and a median of 9.9%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1981 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 & Chemicals' 5-year average forward dividend yield is 2.42% which corresponds to a share price of $248 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 $225 - $275 and suggests that Air Products shares are trading on the upper end of the fair value range.
  




Wrap Up

This raise increased my forward dividends by $11.83 with zero effort on my part.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.47% this raise is like I invested an extra $479 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 5 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $19.72.

My FI Portfolio's forward-12 month dividends are $7,723.58  Including my FolioFirst portfolio's forward dividends of $106.89 brings my total taxable accounts dividends to $7,817.55.  My Roth IRA's forward 12-month dividends are $687.38.  My Rollover IRA's forward dividends are $3,368.43.  Across all accounts I can expect to receive $11,873.36 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 & Chemicals' 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 Air Products & Chemicals shares?  Do you think they can continue on with annual dividend growth around 10% over the long term?

Please share your thoughts below.