Dividend Increase | Home Depot $HD #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Home Depot 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 21st the Board of Directors at Home Depot (HD) announced an increase to their quarterly dividend payment.  The dividend was increased from $1.90 to $2.09 which is an excellent 10.0% increase.  Shares currently yield 2.88% based on the new annualized payout.

The new dividend rate will be payable March 23rd to shareholders of record as of March 9th.

Since I own 34.982 shares of Home Depot in my Rollover IRA, this raise increased my forward 12-month dividends by $13.08.  This is the 4th raise I've received from Home Depot since initiating a position in 2019.  Total organic dividend growth over that time comes to 54%.  

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

Home Depot's dividend growth streak is only 14 years old and what's more impressive is that all but one year over that time has come in at 10% or greater.  Home Depot has paid the same or higher dividend since at least 1987 and they took a brief 2-year pause to dividend growth surrounding the housing bubble/crisis.

Since 1987, Home Depot's year over year dividend growth has ranged from 0.0% to 68.8% with an average of 26.8% and a median of 23.9%.

There's been 32 rolling 5-year periods over that time with annualized dividend growth spanning from 5.2% to 52.9% with an average of 25.4% and a median of 24.4%.

Over that time there's also been 27 rolling 10-year periods with Home Depot's annualized dividend growth landing between 14.7% to 40.0% with an average of 24.2% and a median of 20.7%.

The 1-, 3-, 5-, and 10-year rolling dividend growth rates for Home Depot since 1987 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.

Home Depot's 3-year average forward dividend yield is 2.33% which corresponds to a share price of $359 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 $326 - $329 and suggests that shares are currently trading well below fair value.

Wrap Up

This raise increased my forward dividends by $26.59 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 2.35% this raise is like I invested an extra $1,131 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.

My FI Portfolio's forward-12 month dividends are $11,450.37  Including my FolioFirst portfolio's forward dividends of $239.18 brings my total taxable accounts dividends to $11,689.55.  My Roth IRA's forward 12-month dividends are $1,103.46.  My Rollover IRA's forward dividends are $4,630.84.  Across all accounts I can expect to receive $17,423.85 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.  Home Depot'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 Home Depot?  

Please share your thoughts below.