Dividend Increase | Johnson & Johnson $JNJ #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks Johnson & Johnson 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 April 18th the Board of Directors at Johnson & Johnson (JNJ) announced an increase to their quarterly dividend payment.  The dividend was increased from $1.13 to $1.19 which is a steady as she goes 5.3% bump.  Shares currently yield 2.93% based on the new annualized payout.

The new dividend rate will be payable June 6th to shareholders of record as of May 23rd.

Since I own 92.589 shares of Johnson & Johnson in my FI Portfolio, this raise increased my forward 12-month dividends by $22.22.  This is the 10th raise I've received from Johnson & Johnson since initiating a position in late 2013 with the total organic dividend growth over that time coming to 80%.  

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

Johnson & Johnson is likely one of the most widely held and well-known dividend growth companies around and for very good reason.  They are a Dividend King with 50+ years of rewarding shareholders with higher payouts.    

Since 1972, Johnson & Johnson's year over year dividend growth has ranged from 5.3% to 42.4% with an average of 13.4% and a median of 13.3%.

There's been 47 rolling 5-year periods over that time with annualized dividend growth spanning from 5.8% to 29.2% with an average of 13.2% and a median of 13.8%.

Over that time there's also been 42 rolling 10-year periods with Johnson & Johnson's annualized dividend growth landing between 6.1% to 21.8% with an average of 12.9% and median of 13.8%.

Johnson & Johnson is definitely a case of the law of large numbers and how growth will slow over time.  While I wouldn't expect a return to consistent 10%+ annual raises, I do think 5-7% raises over time should be achievable.

The 1-, 3-, 5- and 10-year rolling dividend growth rates for Johnson & Johnson since 1972 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.

Johnson & Johnson's 3-year average forward dividend yield is 2.62% which corresponds to a share price of $182 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 $165 - $202 and suggests that shares are currently trading below the fair value range.

Wrap Up

This raise increased my forward dividends by $22.22 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 2.65% this raise is like I invested an extra $838 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 28th dividend increase I've received from the companies in my FI Portfolio which have boosted my forward 12-month dividends by $347.93 combined.

My FI Portfolio's forward-12 month dividends are $11,609.94  Including my FolioFirst portfolio's forward dividends of $239.69 brings my total taxable accounts dividends to $11,849.63  My Roth IRA's forward 12-month dividends are $1,139.04.  My Rollover IRA's forward dividends are $4,677.24.  Across all accounts I can expect to receive $17,665.91 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.  Johnson & Johnson'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 Johnson & Johnson?  

Please share your thoughts below.