Dividend Increase | Kroger (KR)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Kroger for another 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 June 24th the Board of Directors at Kroger (KR) announced an increase in their quarterly dividend payout.  The dividend was increased from $0.18 to $0.21 which is a huge 16.7% increase.  Kroger is a Dividend Contender with 15 consecutive years of dividend growth.  Shares currently yield 2.15% based on the new annualized payout.

The new dividend will be payable September 1st to shareholders of record as of August 31st.

Since I own 150 shares of Kroger in my Rollover IRA, this raise increased my forward 12-month dividends by $18.00.  I first purchased shares in 2019 and I've now received 2 dividend raises with total organic dividend growth coming in at 31.3%.

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

Kroger's dividend growth streak began in 2006 and is now up to 15 years long.  Over that time the year over year growth rate has ranged from 5.8% to 48.7% with an average of 15.3% and a median of 13.3%.

Over that same period there's been 11 rolling 5-year periods with annualized dividend growth ranging from 11.3% to 17.1% with an average of 13.3% and a median of 12.3%.

There's been 6 rolling 10-year periods with Kroger's annualized dividend growth ranging from 11.9% to 16.5% with an average of 13.5% and a median of 13.1.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 2006 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.

Kroger's 5-year average forward dividend yield is 2.01% which corresponds to a share price of $42 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 $38 - $46 and suggests that Kroger is trading on the low end of fair value.

Wrap Up

This raise increased my forward dividends by $18.00
 with zero effort on my part.  That's right, absolutely nothing to contribute to their operations.  Based on my Rollover IRA's current yield of 1.92% this raise is like I invested an extra $938 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 12 raises from the companies in my Rollover IRA increasing my forward-12 month dividends by $153.84.

My FI Portfolio's forward-12 month dividends are $8,329.88  Including my FolioFirst portfolio's forward dividends of $175.11 brings my total taxable accounts dividends to $8,504.83.  My Roth IRA's forward 12-month dividends are $793.5.  My Rollover IRA's forward dividends are $3,790.67.  Across all accounts I can expect to receive $13,089.00 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.  Target Corporation'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 Kroger?  

Please share your thoughts below.