Dividend Increase | Analog Devices $ADI #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Analog Device for the 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 February 15th the Board of Directors at Analog Devices (ADI) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.69 to $0.76 which is an excellent 10.1%.  Analog Devices is a Dividend Contender with 19 consecutive years of dividend growth.  Shares currently yield 1.90% based on the new annualized payout.

The new dividend will be payable March 8th to shareholders of record as of February 25th.

Since I own 21.528 shares of Analog Devices in my FI Portfolio, this raise increased my forward 12-month dividends by $6.03.  This is the 1st raise that I've received from ADI since initiating a position in late 2021.

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

Analog Devices is one of those stealth dividend growers that just isn't as well-known as companies like Coca-Cola (KO), Procter & Gamble (PG), Johnson & Johnson (JNJ) and many others.  However, they've built their dividend growth streak up to 19 years and I fully expect many more to come in the future.

During ADI's dividend growth streak, year over year dividend growth has ranged from 5.0% to 75.0% with an average of 17.4% and a median of 10.8%.

There's been 14 rolling 5-year periods during their streak with annualized dividend growth ranging from 7.4% to 32.0% with an average of 12.7% and a median of 10.9%.

There's also been 9 rolling 10-year periods with ADI's annualized dividend growth ranging from 9.5% to 21.9% with an average of 12.5% and a median of 11.1%.

The 1-, 3-, 5-, and 10-year rolling dividend growth rates for Analog Devices since 2004 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.

Analog Devices' 3-year average forward dividend yield is 1.90% which corresponds to a share price of $160 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 $145 - $178 and suggests that shares are trading within the fair value range.

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 ADI can maintain 8.0% annual dividend growth shares are worth around $164 per share.

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

At a 7.0% estimated dividend growth rate ADI shares are worth around $70 per share.  With a 8.5% dividend growth rate shares are worth around $220 per share.

Wrap Up

This raise increased my forward dividends by $6.03 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 2.42% this raise is like I invested an extra $249 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 9th dividend increase I've received from the companies in my FI Portfolio increasing by forward 12-month dividends by $87.67 combined.

My FI Portfolio's forward-12 month dividends are $9,748.58  Including my FolioFirst portfolio's forward dividends of $179.34 brings my total taxable accounts dividends to $9,927.92.  My Roth IRA's forward 12-month dividends are $934.06.  My Rollover IRA's forward dividends are $4,047.59.  Across all accounts I can expect to receive $14,909.57 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.  Analog Devices' 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 Analog Devices?  

Please share your thoughts below.