Dividend Increase | Altria (MO)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Altria 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 26th the Board of Directors at Altria (MO) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.86 to $0.90 which is a solid 4.7% increase.  Altria is a Dividend Champion with 52 consecutive years of dividend growth.  Shares currently yield 7.38% based on the new annualized payout.

The new dividend will be payable October 12th to shareholders of record as of September 15th.

Since I own 163.418 shares of Altria in my FI Portfolio, this raise increased my forward 12-month dividends by $26.15.  I first purchased shares in 2017 and I've now received 4 dividend raises with total organic dividend growth coming in at 36%.

I also own 100 shares of Altria in my Rollover IRA so this raise boosted that portfolio's dividends by $16.00.  Additionally I own 23.93 shares in my Interactive Brokers account, formerly FolioFirst formerly Loyal3.

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

Altria's dividend streak looks like it ended in 2007; however, there's a big caveat to that.  In March 2007 Kraft was spun out of the business and then in March 2008 Phillip Morris, the international arm of the original company, was spun out leaving Altria with the domestic operations.  As such, Altria's dividend growth streak is 52 years long giving them the title of Dividend King.

Dating back to 1989 and excluding the 3 years of "dividend cut" Altria has 29 years of dividend growth with year over year growth ranging from 2.5% to 23.8% with an average of 11.7% and a median of 9.3%.

Over that same period and excluding the periods effected by the spinoffs has Altria with 22 5-year periods with annualized dividend growth ranging from 5.8% to 19.1% with an average of 11.1% and a median of 9.7%.

There's also been 14 rolling 10-year periods over that time, 9 were removed as they were effected by the spinoffs, with annualized dividend growth ranging from 2.6% to 16.3% with an average and median of 10.0%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1989 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.

Altria's 5-year average forward dividend yield is 5.90% which corresponds to a share price of $61 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 $56 - $68 and suggests that shares are trading well below fair value.

Wrap Up

This raise increased my forward dividends by $26.15 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 2.23% this raise is like I invested an extra $1,171 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 34 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $495.99.

My FI Portfolio's forward-12 month dividends are $8,542.99  Including my FolioFirst portfolio's forward dividends of $178.60 brings my total taxable accounts dividends to $8,721.59.  My Roth IRA's forward 12-month dividends are $863.13.  My Rollover IRA's forward dividends are $3,877.94.  Across all accounts I can expect to receive $13,462.66 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.  Altria'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 Altria?  What about some of the other "sin" stocks?

Please share your thoughts below.