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| Getting a raise while sitting on the couch? Sign me up! Kudos to Cisco 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 14th the Cisco (CSCO) Board of Directors announced an increase in the quarterly dividend payment. The dividend increased from $0.39 to $0.40 which is another pedestrian 2.6% increase. Shares currently yield 3.31% based on the new annual payout.
The new dividend rate should be paid on April 24th to stockholders of record around April 4th.
Since I hold 74,704 shares of Cisco in my FI portfolio, this increase increased my future 12 month dividends by $30.46. This is the 5th increase I’ve received from Cisco since I started a position in 2019 with total organic dividend growth in that time being just 14%.
A full screen version of this chart can be found here.
Cisco has now collected dividends for 13 consecutive years earning it the title of Dividend Challenger. However, this increase marks the 5th consecutive $0.01 coupon increase in their payout.
Since 2011, Cisco’s annual dividend growth has ranged from 2.0% to 45.1% with an average of 10.7% and a median of 5.7%.
There have been 11 rolling three-year periods during that period with annual dividend growth ranging from 2.7% to 60.2% with a mean of 15.2% and a median of 11.7%.
During this time there have also been 9 rolling 5-year periods with Cisco’s annual dividend growth ranging between 2.9% and 40.6% with an average of 13.8% and a median of 11.8%.
The 1, 3, 5 and 10 year rolling dividend growth rates for Cisco since 2011 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 3 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.
Cisco’s 3-year average forward dividend yield is 3.03% corresponding to a share price of $53 based on the new annual payout.
I find the fair value range based on dividend yield theory to be the 3 year moving average return +/- 10%. This gives a fair value range of $48 – $59 and suggests that the shares are currently trading at the low end of fair value.
Wrap up
This increase increased my forward dividends by $2.99 with zero effort on my part. That’s right, absolutely nothing to contribute to their functions. Based on my FI Portfolio’s current return of 2.66%, this increase is like I invested an additional $112 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 15th dividend increase I have received from my FI portfolio companies. Combined these increases increased my future 12 month dividends by $152.77.
My FI Portfolio12 months future dividends are $12,296.92 Including mine FolioFirst The forward portfolio dividends of $248.73 bring my accounts total taxable dividends to $12,545.65. 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 $18,905.10 in dividends next year.
I also started compiling dividend data on many of the companies I own or would like to own. Cisco’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 Cisco stock? How quickly do you typically cut and run from a business with unimpressive dividend growth?
Please share your thoughts below.
