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| Getting a raise while sitting on the couch? Sign me up! Thanks Fastenal 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 January 17th Fastenal’s (FAST) Board of Directors announced an increase in its quarterly dividend payment. The dividend increased from $0.35 to $0.39 which is an excellent increase of 11.4%. Shares currently yield 2.24% based on the new annual payout.
The new dividend rate will be payable on February 29 to shareholders since February 1.
Since I own 62.42 shares of Fastenal in my Roth IRA, this increase increased my future 12 month dividends by $8.39. This is the 3rd increase I have received from Fastenal since I started a position in 2021 with the total organic dividend increase in that time being 39%.
A full screen version of this chart can be found here.
Fastenal is a Dividend Champion with 26 consecutive years of dividend growth. While dividend growth has slowed over time, it’s still typically in the 7%-12% range, which is more than adequate. Also, it may appear that there was a dividend cut in 2011. However, this was simply a switch from semi-annual to quarterly payments.
Since 1999, Fastenal’s annual dividend growth has ranged from 6.7% to 320.0% with an average of 37.0% and a median of 13.8%.
There have been 21 rolling 5-year periods during that period with annual dividend growth ranging from 11.6% to 77.8% with a mean of 29.3% and a median of 22.3%.
During that time there have also been 16 rolling ten-year periods with Fastenal’s annual dividend growth ranging between 12.1% and 53.4% with a mean of 26.4% and a median of 19.5%.
The 1, 3, 5 and 10 year rolling dividend growth rates for Fastenal since 1999 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.
Fastenal’s 3-year average forward dividend yield is 2.33% corresponding to a share price of $67 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 $61 – $74 and suggests that the shares are currently trading at the upper end of fair value.
Wrap up
This increase increased my forward dividends by $8.39 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 2.22%, this increase is like investing an additional $378 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 1st dividend increase I have received from the companies in my Roth IRA.
My FI Portfolio12 month forward dividends are $12,198.16 Including my FolioFirst The forward portfolio dividends of $248.12 bring my accounts total taxable dividends to $12,446.28. My Roth IRA’s trailing 12-month dividends are $1,292.54. My Rollover IRA’s term dividends are $5,072.89. On all accounts I can expect to receive $18,811.71 in dividends next year.
I also started compiling dividend data on many of the companies I own or would like to own. Fastenal’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.
We’re over 3 weeks into the year, how did the dividend increases you received go?
Please share your thoughts below.
