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| Getting a raise while sitting on the couch? Sign me up! Thanks to CME Group 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 8, the Board of Directors of CME Group (CME) announced an increase in its quarterly dividend payment. The dividend was increased from $1.10 to $1.15 which is an okay increase of 4.6%. Shares currently yield 2.17% based on the new annual payout.
The new dividend rate will be payable on March 26 to shareholders of record from March 8.
Since I hold 29,725 shares of CME Group in my FI portfolio, this increase increased my future 12 month dividends by $5.94. This is the 2nd increase I have received from CME Group since I started a position in 2022 with total organic dividend growth over that period amounting to 15%.
A full screen version of this chart can be found here.
CME Group is a dividend candidate with 14 consecutive years of dividend growth. CME Group typically increases its dividend at a steady pace, while rewarding owners with huge special dividends along the way. it was able to increase its dividend payout rapidly during that period.
Since 2012, CME Group has paid $33.71 in quarterly dividends, while also paying $35.90 in special dividends.
Since 2011, CME Group’s annual dividend growth has ranged from 0.4% to 60.0% with a mean of 12.9% and a median of 8.6%.
There have been 12 rolling three-year periods during this time with annual dividend growth ranging from 3.7% to 25.1% with an average of 11.2% and a median of 9.5%.
During this time there have also been 10 rolling five-year periods with CME Group’s annual dividend growth ranging between 8.1% and 16.8% with an average of 10.7% and a median of 9.3%.
The 1-, 3-, 5-, and 10-year rolling dividend growth rates for CME Group since 2003 are shown 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.
CME Group’s 3-year average forward dividend yield is 2.0% corresponding to a share price of $230 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 $209 – $256 and suggests that the shares are currently trading at the lower end of fair value.
Wrap up
This increase increased my forward dividends by $5.94 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 $224 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 11th dividend increase I have received from my FI portfolio companies. Combined these increases increased my future 12 month dividends by $101.79.
My FI Portfolio12 month forward dividends are $12,245.59 Including my FolioFirst The forward portfolio dividends of $248.02 bring my accounts total taxable dividends to $12,493.61. My Roth IRA’s 12-month forward dividends are $1,246.88. My Rollover IRA’s term dividends are $5,106.23. On all accounts I can expect to receive $18,846.72 in dividends next year.
I also started compiling dividend data on many of the companies I own or would like to own. You can find CME Group 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 CME Group stock? Do you like exchange companies as an investment?
Please share your thoughts below.
