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| Getting a raise while sitting on the couch? Sign me up! Thank you Coca-Cola for another dividend increase! |
There is 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 thrive and to begin seedingits benefits. Dividend growth investing is about the same way. It takes consistent saving and investing, as well as time and patience to allow the power of dividend growth.
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 raise just for owning a small piece of a company? I don’t go and do R&D on new products or technology. It does not sell any products. It does not manage employees or inventory. Not making sales calls. All I had to do was have the foresight to invest some of my savings great companies.
On February 15, the Board of Directors of Coca-Cola (KO) announced an increase in the quarterly dividend payment. The dividend increased from $0.46 to $0.485 which is a solid increase of 5.4%. Shares currently yield 3.17% based on the new annual payout.
The new dividend rate will be payable on April 1 to stockholders of record around March 15.
Since I hold 163,541 shares of Coca-Cola in my FI Portfolio, this increase increased my future 12 month dividends by $16.35. This is the 13th increase I have received from Coca-Cola since I started a position in 2011 with total organic dividend growth over that period of 106%.
A full screen version of this chart can be found here.
Coca-Cola has now increased its dividend every year for 55 consecutive years consistently earning it the title of Dividend Champion. Few companies can even survive for more than 50 years. However, Coca-Cola has been thriving for what seems like forever.
Since 1970, Coca-Cola’s annual dividend growth has ranged from 2.4% to 61.6% with a mean of 11.2% and a median of 8.7%.
There have been 50 rolling five-year periods during this period with annual dividend growth ranging from 3.4% to 30.3% with a mean of 10.9% and a median of 9.2%.
During that time, there have also been 45 rolling decades with Coca-Cola’s annual dividend growth ranging between 4.7% and 19.7% with a mean of 10.5% and a median of 9.8%.
The 1-, 3-, 5-, and 10-year rolling dividend growth rates for Coca-Cola since 1970 can be found in the chart below.
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/overvalue range is between 10%-20% deviation from the mean and The significant over/under is greater than a 20% deviation from the mean.
You can find a full screen version of this chart here.
Coca-Cola’s 5-year average forward dividend yield is 3.09% corresponding to a share price of $63 based on the new annual payout.
I find the fair value range based on dividend yield theory to be the 5 year moving average yield +/- 10%. This gives a fair value range of $57 – $69 and suggests that the stock is currently trading within the fair value range.
Wrap up
This increase increased my forward dividends by $16.35 with zero effort on my part. That’s right, absolutely nothing to contribute to their functions. Based on my FI Portfolio’s current yield of 2.66%, this increase is like I invested an additional $615 in capital. Except I didn’t! One of the companies I own just decided to send more cash my way.
So you can eventually reach the intersection point where your dividends received exceed your expenses. This is INVESTMENT IN DIVIDEND GROWTH BUSINESS! The beauty of the dividend growth investing strategy is that you create your dividends through new capital investments as well as dividend increases from the companies you own.
This is the 16th dividend increase I have received from my FI portfolio companies. Combined these increases increased my future 12 month dividends by $169.12.
My FI Portfolio12 month forward dividends are $12,313.92 Including my FolioFirst The forward portfolio dividends of $249.33 bring my accounts total taxable dividends to $12,563.25. My Roth IRA’s 12-month forward dividends are $1,246.88. My Rollover IRA’s term dividends are $5,112.57. On all accounts, I expect to receive $18,922.70 in dividends next year.
I also started compiling dividend data on many of the companies I own or would like to own. Coca-Cola’s can be found here which includes dividend history (as much as I can find without spending hours hunting it down), rolling dividend growth rates, and dividend yield theory. To see other companies I’ve already collected the data for, you can check out Dividend Companies page. Check it out and let me know what you think.
Do you own shares of Coca-Cola?
Please share your thoughts below.
