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| Getting a raise while sitting on the couch? Sign me up! Thanks Home Depot 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, Home Depot’s ( HD ) Board of Directors announced an increase in its quarterly dividend payment. The dividend increased from $2.09 to $2.25 which is a solid increase of 7.7%. Shares currently yield 2.47% based on the new annual payout.
The new dividend rate will be payable on March 21st to shareholders of record around March 7th.
Since I own 38,644 shares of Home Depot in my Rollover IRA, this increase increased my future 12 month dividends by $24.73. This is the 5th increase I have received from Home Depot since I started a position in 2019 with the total organic dividend increase in that time being 65%.
A full screen version of this chart can be found here.
Home Depot’s dividend growth streak now reaches 15 years, earning them the title of Dividend Challenger. Unfortunately, dividends froze dividend growth in 2008, although if I recall there was something going on with the housing market at the time. They have paid the same or higher dividend since at least 1987, which is now a 38-year streak.
Since 1987, Home Depot’s annual dividend growth has ranged from 0.0% to 68.8% with an average of 26.3% and a median of 23.8%.
There have been 33 rolling 5-year periods during that period with annual dividend growth ranging from 5.2% to 52.9% with a mean of 25.0% and a median of 23.7%.
During this time there have also been 28 rolling decades with Home Depot’s annual dividend growth ranging between 14.7% and 40.0% with a mean of 23.9% and a median of 20.5%.
The 1, 3, 5 and 10 year rolling dividend growth rates for Home Depot’s since 1987 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.
Home Depot’s 5-year average forward dividend yield is 2.42% corresponding to a share price of $372 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 value range of $338 – $413 and suggests that the shares are currently trading within the fair value range.
Wrap up
This increase increased my forward dividends by $24.73 with zero effort on my part. That’s right, absolutely nothing to contribute to their functions. Based on my current Rollover IRA yield of 2.41%, that increase is like I invested an additional $1,026 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 5th dividend increase I have received from the companies in my Rollover IRA. The combination of these increases increased my future 12-month dividends by $55.77.
My FI Portfolio12 month forward dividends are $12,313.92 Including my FolioFirst The forward portfolio dividends of $251.89 bring my accounts total taxable dividends to $12,565.81. My Roth IRA’s 12-month forward dividends are $1,246.88. My Rollover IRA’s term dividends are $5,137.30. On all accounts I can expect to receive $18,949.99 in dividends next year.
I also started compiling dividend data for many of the companies I own or would like to own. You can find Home Depot 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 refer to Dividend Companies page. Check it out and let me know what you think.
Do you own Home Depot stock? Do you think they can continue their terrific rate of dividend growth?
Please share your thoughts below.
