Dividend Increase | Nike (NKE)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Nike 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 November 18th the Board of Directors at Nike (NKE) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.275 to $0.305 which is an excellent 10.9% increase.  Nike is a Dividend Challenger with 20 consecutive years of dividend growth.  Shares currently yield 0.71% based on the new annualized payout.

The new dividend will be payable December 28th to shareholders of record as of December 6th.

Since I own 103.736 shares of Nike in my Rollover IRA, this raise increased my forward 12-month dividends by $12.45.  This is the 5th raise that I've received from Nike since initiating a position in 2017.  Total organic dividend growth over that time is 69%.

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

Nike has now amassed a 20 year dividend growth streak.  Year over year raises have ranged from 8.3% to 32.5% with an average of 16.1% and a median of 15.4%.

During their streak there's been 16 rolling 5-year periods with annualized dividend growth ranging from 11.3% to 26.1% with an average of 16.0% and a median or 14.7%.

There's also been 11 rolling 10-year periods with Nike's annualized dividend growth ranging from13.2% to 19.6% with an average of 15.6% and a median of 14.9%.

If the next 20 years are just half as good as the last 20 years I'll be a very happy shareholder.

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 3 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.

Nike's 3-year average forward dividend yield is 0.93% which corresponds to a share price of $131 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 $120 - $145 and suggests that shares are trading above fair value.

Another quick and dirty valuation method is the Gordon Growth or Dividend Discount model.  This valuation method is based solely off the expected future dividends as well as your required return.  Based on a 10% discount rate and assuming Nike can maintain 9.0% annual dividend growth shares are worth around $133 per share.

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

The above chart shows the DDM valuation using the 9% growth rate and 10% discount rate in comparison to the share price over time.

Wrap Up

This raise increased my forward dividends by $12.45 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 1.86% this raise is like I invested an extra $671 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 22 raises from the companies in my Rollover IRA increasing my forward-12 month dividends by $269.07.

My FI Portfolio's forward-12 month dividends are $9,102.17  Including my FolioFirst portfolio's forward dividends of $178.23 brings my total taxable accounts dividends to $9,280.40.  My Roth IRA's forward 12-month dividends are $887.42.  My Rollover IRA's forward dividends are $4,013.33.  Across all accounts I can expect to receive $14,181.15 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.  Nike'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 Nike?  What do you think of their long term dividend growth potential?  

Please share your thoughts below.


  1. PIP,

    Nice raise there! NKE has been on a heck of a run the last few years. Wish I still had my shares.



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