One Raise at a Time | 2 Champions With Monster Increases

Getting a pay raise while sitting on the couch?  Sign me up!  Thanks 3M and Air Products for yet another dividend increase!

Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?  Dividend growth investing is far from a get rich quick investment strategy, rather you need to remain focused on the long term goal to be successful.

Last week was a really great week for dividend growth with 3 monster raises.  I'll highlight 2 of them today and the last 1 later this week.  

3M Company

On Thursday of last week the Board of Directors at 3M Company (MMM) announced another increase to their quarterly dividend payout.  The dividend was increased from $1.175 per share all the way up to $1.36 per share.  That's a huge 15.7% raise.  3M Company is a Dividend Champion with 59 consecutive years of dividend increases.  Shares currently yield 2.10% based on the new annualized payout.

Since I own 18 shares of 3M in my FI Portfolio this raise increased my forward 12-month dividends by $13.32.  This is the 4th dividend increase I've received from 3M since initiating a position in August 2014.  Combined the organic dividend growth alone has boosted my 3M dividends by 59% over that time.  According to US Inflation Calculator the cumulative rate of inflation over that same time is just 4.1%.  That's dividend growth investing in a nutshell.  

A full screen version of this chart can be found here.

For many companies, dividend growth comes in waves with high dividend growth for a few years followed by lower dividend growth for a few years as the business cycle fluctuates.  As such I like to look at rolling dividend growth rates to get a better idea of the dividend growth over longer periods of time.  This helps to smooth out the dividend growth and gives a better idea of what investors could potentially expect going forward.

A quick glance at the following table shows a thing of beauty.  The table goes back to 1977 that's 41 years with the first 10 year dividend growth rate coming in 1987 some 31 years ago.  Over that time the worst 10 year dividend growth rate has been 4.40%.  

3M Company (MMM) Annual Dividend and Rolling Dividend Growth Rates

*2018's dividend assumes the current quarterly payout of $1.36 per share is maintained for the rest of the year.

A full screen interactive version can be found here.

Air Products & Chemicals (APD)

Also on Thursday of last week the Board of Directors at Air Products & Chemicals granted shareholders a solid dividend increase of their own.  The dividend payment was increase from $0.95 up to $1.10 per share per quarter.  That's a huge 15.8% increase from the prior payout.  Air Products & Chemicals is a Dividend Champion with 35 consecutive years of dividend increases.  Shares currently yield 2.59% based on the new annualized payout.

Since I own 18.481 shares of APD in my FI Portfolio my forward 12-month dividends increased by $11.09.  This is the 5th dividend increase I've received from Air Products & Chemicals since initiating a position back in April 2013.  The organic dividend growth rate on those shares has been a massive 55%.  Considering that inflation, according to US Inflation Calculator, has been 5.8% over that same time I've been more than pleased with Air Products' ability to increase my purchasing power.

A full screen version of this chart can be found here.

Air Products' dividend growth streak dates back to 1983, although they've been paying the same or higher dividends to shareholders since 1981.  Similar to 3M's dividend growth above, Air Products' dividend growth from any given year to the next might not be too consistent; however, as we look at longer time periods we see a much more steady and consistent dividend growth rate.  Over the 28 rolling 10 year periods the worst growth rate has been 7.06% with an average 10 year growth rate of 10.35%.  

Air Products & Chemicals (APD) Annual Dividend and Rolling Dividend Growth Rates

*2018's dividend assumes 2 additional payments at the current $1.10 per share rate.

A full screen version of the above chart can be found here.

Wrap Up

These 2 raises increased my forward dividends by $24.41 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my portfolio's current yield of 2.56% this raise is like I invested an extra $953 in capital.  Except that I didn't!  Two of the companies I own just decided to send more cash my way.  

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

Thus far in 2018 I've received 4 dividend increases combining to increase my forward 12-month dividends by $35.28.  

My FI Portfolio's forward-12 month dividends increased to $5,896.27.  Including my FolioFirst portfolio's forward dividends of $77.16 brings my total taxable accounts dividends to $5,973.43.  My Roth IRA's forward 12-month dividends are at $336.21.

Do you own shares of 3M or Air Products & Chemicals?  Were you as surprised as I was to see two 15%+ dividend increases from these two Champions?

Please share your thoughts below.