Dividend Increase | BlackRock (BLK)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks BlackRock 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 January 14th the Board of Directors at BlackRock (BLK) approved an increase in the quarterly dividend payment.  The dividend was increased from $4.13 to $4.88 which is an incredible  18.2% increase.  BlackRock is a Dividend Challenger with 12 consecutive years of dividend growth.  Shares currently yield 2.30% based on the new annualized payout.

The new dividend will be payable March 23rd to shareholders of record as of March 4th.

This raise from BlackRock was also my first dividend increase for the year which is exciting.

Since I own 2.414 shares of BlackRock in my FI Portfolio, this raise increased my forward 12-month dividends by $7.24.  This is the 2nd raise that I've received from BlackRock since initiating a position in 2020.  Total organic dividend growth over that time is a stellar 34.4%.

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

BlackRock initiated a dividend in 2003, but during the financial crisis they froze the dividend in 2009.  However, dividend growth returned in 2010 and it's been off to the races since.  Their active streak is now up to 12 years and 2022 will make it 13.

Dating back to 2003 BlackRock's year over year dividend growth has ranged from 0.0% to 59.5% with an average of 19.0% and a median of 14.9%.

There's been 15 rolling 5-year periods over that time with annualized dividend growth ranging from 10.7% to 31.3% with an average of 17.6% and a median of 16.6%.

There's also been 10 rolling 10-year periods with annualized dividend growth ranging from 11.6% to 23.7% with an average of 16.9% and a median of 15.0%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates for BlackRock since 2003 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.

BlackRock's 3-year average forward dividend yield is 2.50% which corresponds to a share price of $781 based on the new annualized payout.  

I consider the fair value range based on dividend yield theory to be the 3-year moving average yield +/- 10%.  That gives a fair value range of $710 - $868 and suggests that shares are trading on the upper end of 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 BlackRock can maintain 7.5% annual dividend growth shares are worth around $840 per share.

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

Reducing the estimated growth rate to 6.5% lowers the fair value to $594.  

Wrap Up

This raise increased my forward dividends by $7.24 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 2.30% this raise is like I invested an extra $315 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.

This is the first, of many, dividend increase that I've received from the companies in my FI Portfolio increasing my forward 12-month dividends by $7.24.

My FI Portfolio's forward-12 month dividends are $9,459.47  Including my FolioFirst portfolio's forward dividends of $178.84 brings my total taxable accounts dividends to $9,638.31.  My Roth IRA's forward 12-month dividends are $896.10.  My Rollover IRA's forward dividends are $4,085.84.  Across all accounts I can expect to receive $14,620.25 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.  BlackRock'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.

Have you received any dividend raises in 2022 so far?  Do you own shares of BlackRock or any other asset managers? 

Please share your thoughts below.