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| Getting a raise while sitting on the couch? Sign me up! Thanks Walmart 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 20, Walmart’s (WMT) Board of Directors announced an increase in its quarterly dividend payment. The dividend increased from $0.19 to $0.2075 which is an excellent increase of 9.2%. Shares currently yield 1.39% based on the new annual payout.
The new dividend rate will be payable on April 1 to shareholders of record from March 15.
Since I own 193,632 shares of Walmart in my FI portfolio, this increase increased my future 12 month dividends by $13.55. This is the 11th increase I have received from Walmart since I started a position in 2013 with total organic dividend growth in that time being 32%.
A full screen version of this chart can be found here.
Walmart is a Dividend Champion with 51 consecutive years of dividend growth. Unfortunately, every increase since I bought shares has been a small token increase of just $0.01, before the split, which raised the quarterly payout from $0.47 to $0.57. This is the biggest increase in 10 years and hopefully a sign of better dividend growth to come.
Since 1993, Walmart’s annual dividend growth has ranged from 1.8% to 49.5% with a mean of 13.6% and a median of 11.0%.
There have been 27 rolling 5-year periods during this period with annual dividend growth ranging from 1.9% to 24.03% with an average of 12.8% and a median of 15.1%.
During this time there have also been 22 rolling decades with Walmart’s annual dividend growth ranging between 1.9% and 20.6% with a mean of 13.2% and a median of 15.8%.
The rolling 1, 3, 5 and 10 year dividend growth rates for Walmart since 1993 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.
Walmart’s 5-year average forward dividend yield is 1.64% corresponding to a share price of $51 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 $46 – $56 and suggests that the stock is currently trading just above the fair value range.
Wrap up
This increase increased my forward dividends by $13.55 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 2.65%, this increase is like I invested an additional $511 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 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 17th dividend increase I have received from my FI portfolio companies. Combined these increases increased my future 12 month dividends by $182.67.
My FI Portfolio12 month forward dividends are $12,329.15 Including my FolioFirst The forward portfolio dividends of $251.93 bring my accounts total taxable dividends to $12,581.08. My Roth IRA’s 12-month forward dividends are $1,290.90. My Rollover IRA’s term dividends are $5,149.93. On all accounts I can expect to receive $19,021.91 in dividends next year.
I also started compiling dividend data for many of the companies I own or would like to own. Walmart’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 for which I have already collected the data, you can see them Dividend Companies page. Check it out and let me know what you think.
Do you own Walmart stock? Do you think improved dividend growth is a sign of things to come?
Please share your thoughts below.
