Friday, July 13, 2018

One Raise At a Time - Four Decades In The Making

Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  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.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?  Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.

On Thursday the Board of Directors at Walgreens Boots Alliance (WBA) gave shareholders a pay raise.  The dividend was increased from $0.40 up to $0.44 per share per quarter.  That's a solid 10.0% increase.  Walgreens has grown their payout to shareholders for 42 consecutive years which gives them the title of Dividend Champion.  Shares currently yield 2.95% based on the new annualized payout.

The new dividend will be paid out on September 12, 2018 to shareholders of record as of August 20th.  

Since I own 46.069 shares of Walgreens in my FI Portfolio this raise increased my forward 12-month dividends by $7.37.  This is the 6th dividend increase I've received from Walgreens since initiating a position in late 2012.  Over that time the dividend payout has increased by a total of 60%.  According to US Inflation Calculatorthe total inflation over that same period has come in at just 9.6%




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

*The spikes in the dividend payout were in 1983 and 1985 when a $1 special dividend was paid out.

Walgreens' dividend growth history has been pretty phenomenal.  Not many companies can grow their dividend payout for 42 consecutive years let alone be able to grow it above 10% per year over most 10 year periods.  

Looking at the following chart it you can see that the late 1990's/early 2000's was a bit of a rough patch for Walgreens much like the last few years.  However, with the big 10% increase that was just announced I hope that we can see a run on dividend growth similar to how dividend growth accelerated starting in 2002.  Time will tell but I'd content if they can continue on with at least high single digit raises more often than not.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1993 can be found in the following chart.  



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

*2018's dividend assumes the new quarterly payout of $0.44 per share is maintained for the rest of the year.

Wrap Up

This raise increased my forward dividends by $7.37 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 3.02% this raise is like I invested an extra $244 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.

Thus far in 2018 I've received 33 dividend increases from 31 of the companies in my FI Portfolio combining to increase my forward 12-month dividends by $304.04.  

My FI Portfolio's forward-12 month dividends increased to $6,328.29.  Including myFolioFirst portfolio's forward dividends of $82.62 brings my total taxable accounts dividends to $6,410.91.  My Roth IRA's forward 12-month dividends are at $343.51.

Do you own Walgreens in your own portfolio?

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