Dividend Increase | Deere & Company (DE)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Deere 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 August 25th the Board of Directors at Deere & Company (DE) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.90 to $1.05 which is an excellent 16.7% increase.  Shares currently yield 1.12% based on the new annualized payout.

While this raise is exciting enough, what's truly special is that back in March Deere had already announced an increase.  The previous raise was a hefty 18.4% and with this second raise announced the November payout will be 38.2% higher than last year!

The new dividend will be payable November 8th to shareholders of record as of September 30th.

Since I own 60.257 shares of Deere in my FI Portfolio, this raise increased my forward 12-month dividends by $36.15.  I first purchased shares in 2014 and I've now received 4 dividend raises with total organic dividend growth coming in at 75%.

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

While Deere's dividend growth streak is only just resuming they have a pretty remarkable record even if growth has been very spotty.  Since 1992 they've given raises in 8 of the 29 years.  Despite the pauses in growth Deere's longer term dividend growth rates are still quite impressive.

Dating back to 1992 there's been 29 years with year over year dividend growth ranging from 0.0% to 300.0% with an average of 19.6% and a median 9.5%.

There's been 25 rolling 5-year periods with annualized dividend growth ranging from 0.0% to 37.5% with an average of 10.3% and a median of 8.7%.

There's also been 20 rolling 10-year periods with annualized dividend growth ranging from 2.8% to 18.1% with an average 10.6% with an average of 9.8%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1992 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.

Deere's 5-year average forward dividend yield is 1.79% which corresponds to a share price of $235 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 $213 - $261 and suggests that shares are trading well above fair value.

Wrap Up

This raise increased my forward dividends by $36.15 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 2.21% this raise is like I invested an extra $1,634 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 33 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $469.84.

My FI Portfolio's forward-12 month dividends are $8,499.24  Including my FolioFirst portfolio's forward dividends of $174.78 brings my total taxable accounts dividends to $8,674.02.  My Roth IRA's forward 12-month dividends are $863.13.  My Rollover IRA's forward dividends are $3,861.94.  Across all accounts I can expect to receive $13,399.09 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.  Deere & Company'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 Deere & Company?  How do you handle freezes?  Immediate sell or take it case by case?

Please share your thoughts below.