Dividend Increase | Phillip Morris $PM #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Phillip Morris 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 September 14th the Board of Directors at Phillip Morris (PM) approved an increase in the quarterly dividend payment.  The dividend was increased from $1.25 to $1.27 which is a modest 4.3% increase.  Phillip Morris is a Dividend Contender with 15 consecutive years of dividend growth.  Shares currently yield 5.44% based on the new annualized payout.

The new dividend will be payable October 12th to shareholders of record as of September 28th.

Since I own 66.938 shares of Phillip Morris in my FI Portfolio, this raise increased my forward 12-month dividends by $5.36.  This is now the 10th raise I've received from Phillip Morris since initiating a position in 2012 with total dividend growth coming in at 49%.  

I also own 20.322 shares of Phillip Morris in my Roth IRA and this increased raised my forward dividends for that portfolio by $1.63.

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

Phillip Morris had shown really strong dividend growth after being spun-off from Altria as the international operations.  Unfortunately since around 2016 dividend growth has been quite disappointing countered somewhat by the still strong dividend yield.

This was actually the smallest increase that Phillip Morris has given to investors since becoming it's own entity in 2008.

Part of that is due to how the business is structured.  It's the international tobacco business; however, it's domiciled in the United States.  So all the revenues/earnings/cash flow is generated in foreign currencies, but reported and paid as dividends via US dollars so their financial reporting is hurt with a strong dollar.

Since 2008 Phillip Morris has shown year over year dividend growth ranging from 2.0% to 17.5% with an average of 7.2% and median of 5.4%.

There's been 12 rolling 3-year periods with annualized dividend growth coming in between 3.2% and 13.6% with an average of 7.1% and a median of 4.7%.

Likewise, there's been 10 rolling 5-year periods with annualized dividend growth spanning 3.2% to 12.7% with an average of 6.9% and a median of 5.3%.

The 1-, 3-, 5-, and 10-year rolling dividend growth rates for Phillip Morris since 2008 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.

Phillip Morris' 3-year average forward dividend yield is 5.53% which corresponds to a share price of $92 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 $84 - $102 and suggests that shares are currently trading around fair value.

Wrap Up

This raise increased my forward dividends by $5.36 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 2.66% this raise is like I invested an extra $201 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 43rd dividend increase I've received from the companies in my FI Portfolio increasing my forward 12-month dividends by $450.70 combined.

My FI Portfolio's forward-12 month dividends are $10,726.10  Including my FolioFirst portfolio's forward dividends of $233.34 brings my total taxable accounts dividends to $10,959.44.  My Roth IRA's forward 12-month dividends are $1,050.67.  My Rollover IRA's forward dividends are $4,556.41.  Across all accounts I can expect to receive $16,566.52 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.  Phillip Morris' 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 Phillip Morris?  Do you think we'll see a return to at least mid-single digit annual increases?

Please share your thoughts below.