Dividend Increase | TD Bank $TD #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks TD Bank 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 December 1st the Board of Directors at Toronto Dominion Bank (TD) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.89 CAD to $0.96 CAD which is an excellent 7.9%  increase.  Toronto Dominion is a Dividend Contender with 12 consecutive years of dividend growth.  Shares currently yield 4.17% based on the new annualized payout.

The new dividend will be payable January 31st to shareholders of record as of January 6th.

Since I own 36 shares of TD Bank in my FI Portfolio, this raise increased my forward 12-month dividends by $7.51.  This is the 7th raise that I've received from TD since initiating a position in mid-2015 with total organic dividend growth coming to 88%.

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

Toronto Dominion's dividend history is quite impressive despite it being just 12 years old.  Dating back to 1970 TD has paid the same or higher annual dividend, in Canadian dollar terms, each and every year.  That's 53 straight years and out of those there's only 4 years which didn't show year over year dividend growth: 1991, 1992, 1993, and 2010.

Since 1970, Toronto Dominion's year over year dividend growth 0.0% to 39.6% with an average of 11.5% and a median of 10.9%.

There's been 48 rolling 5-year periods over that time with annualized dividend growth spanning from 2.1% to 20.9% with an average of 11.3% and a median of 11.4%.

Additionally, there's been 43 rolling 10-year periods with Toronto Dominion's annualized dividend growth coming in between 7.3% to 16.0% with an average of 11.3% and a median of 10.8%.

The 1-, 3-, 5-, and 10-year rolling dividend growth rates for Toronto Dominion since 1970, in Canadian dollars, 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.

Toronto Dominion's 5-year average forward dividend yield is 4.00% which corresponds to a share price of $71.50 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 $65 - $79 and suggests that shares are currently trading on the low end of fair value.

Wrap Up

This raise increased my forward dividends by $7.51 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 2.51% this raise is like I invested an extra $299 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 55th dividend increase I've received from the companies in my FI Portfolio increasing my forward 12-month dividends by $589.08 combined.

My FI Portfolio's forward-12 month dividends are $11,118.95  Including my FolioFirst portfolio's forward dividends of $233.87 brings my total taxable accounts dividends to $11,352.82.  My Roth IRA's forward 12-month dividends are $1,065.29.  My Rollover IRA's forward dividends are $4,690.82.  Across all accounts I can expect to receive $17,108.93 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.  Toronto Dominion'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 Roper?  Do you think they will maintain their impressive dividend growth rates?

Please share your thoughts below.