Hello!  This weighted dividend growth post is arriving a bit later in the year than I’d prefer, but better late than never.

I feel like I had some good dividend growth within my Portfolio in 2019, but I always want to quantify it.  In my Monthly Dividend Income (Dec. 2019) report, I showed that my Portfolio’s 2019 dividend raises netted me nearly $684 in additional forward dividend income.  That sounds great, but how does that translate to weighted dividend growth, and how does this year’s weighted dividend growth compare to previous years?  And which raises from which stocks resulted in the biggest contribution to the Portfolio’s weighted dividend growth?  We’ll get the answers to these questions right here, in my annual look at my Portfolio’s weighted dividend growth.

This is only the 3rd year I’ve done this.  I started in 2017 after reading a Dividend Growth Checkup post from JC over at Passive Income Pursuit.  I was inspired to go back and calculate my weighted dividend growth for 2015, 2016 and 2017 and share the results.  I then following that up by reviewing my 2018 results the following year.

This time I’ll be calculating the weighted dividend growth in my Portfolio for 2019.  When done, I’ll compare it to my results from previous years.  I’ll also share my thoughts on any interesting tidbits of information as we go along.

Let’s kick this off…

 

Weighted Dividend Growth Calculation

To determine the weighted growth percentage contributed by an individual stock, its dividend growth percentage for the year is multiplied by the dividend amount that company paid me for the year, divided by the total dividends for the portfolio for the year, or…

Div Growth % for Stock * (Div Paid by Stock / Div Paid by Portfolio)

Each of these individual dividend growth percentages is then added up to obtain the weighted dividend growth percentage for the entire portfolio of stocks.

Note – I did not include special dividends in the weighted dividend growth calculations, as these are usually a one-time occurrence, and they skew the percentages up and then down from year-to-year.  Main Street Capital (MAIN) was my only stock in 2019 to pay special dividends.

 

Weighted Dividend Growth for my Portfolio

First, here’s some info to help understand what you see in the first table below.  Tickers in blue are for stocks that exited my Portfolio in 2019.  Tickers in red are for stocks added to my Portfolio in 2019.  Tickers in purple are for stocks that both joined and left my Portfolio all within 2019.  Due to these stocks not having a full year of participation in my Portfolio, their contributions tend to be muted.

The stocks are listed in order of weighted dividend growth, best to worst, so that you can quickly compare their contributions to my total.

In the ‘Div Growth’ column, I show the Dividend Growth for each stock.  This growth percentage is for the change in 2018 total dividends paid to 2019 total dividends paid, as opposed to the percentage of the dividend raise the company provided in 2019.  The size of 2018 and 2019 dividend raises, and the timing of the 2019 dividend raise, results in the difference between these two numbers.

This year, I added the ‘Div Rank’ column, which shows the dividends paid ranking for a particular stock within my Portfolio in 2019.  A high ‘Div Rank’ coupled with a large ‘Div Growth’ percentage leads to a more significant ‘Weighted Div Growth’.

 

 

Review of 2019 Results

My Portfolio’s weighted dividend growth for 2019 came in at 9.97%.  Oh so close to 10%.  This 2019 growth came up shy compared to last year, but turned out much better than I expected.  In addition, this is well above the 7% dividend growth I target for my Portfolio as a whole.

For the 2nd straight year, Abbvie (ABBV) provided the biggest contribution to my weighted dividend growth, delivering 0.91% in 2019.  No stocks crossed the 1% threshold for me this year.  This year’s hefty dividend raise from ABBV, plus the fact that ABBV delivered the 2nd largest amount of my Portfolio’s annual dividend income, led to this result.

High percentage raises from JPMorgan Chase & Co. (JPM), Air Lease (AL), Nexstar Media Group (NXST) and Texas Instruments (TXN) allowed them to finish in the top 10, despite them all having a mid-range ‘Div Rank’.

A couple of my stocks with better ‘Div Ranks’ are Union Pacific (UNP) and Fastenal (FAST).  They both delivered a couple of dividend raises in 2019, leading to strong weighted dividend growth.

As for some disappointments, Qualcomm (QCOM) and Procter & Gamble come to mind.  These were my #1 and #4 dividend payers in 2019, but they ended up way down the weighted dividend growth list due to their subpar dividend growth during the year.  Any rebound from these stocks in 2020 can potentially mean double-digit weighted dividend growth for my Portfolio next year.

Poor dividend growth from Cardinal Health (CAH) and Cognizant Technology Solutions (CTSH) were part of the reason for their departures from my Portfolio.

In general, I try to have any new additions (red tickers) arrive with a history of strong dividend growth.  Other than Iron Mountain (IRM), I’d say the dividend growth for my new holdings look good.  Finding stocks that provide good dividend growth is always a factor in my Portfolio adjustments, and it should help my Portfolio’s weighted dividend growth stay elevated in future years.

You’ll see that I had 7 stocks showing 0% weighted dividend growth.  General Dynamics (GD), UnitedHealth Group (UNH) and Caterpillar (CAT) all had strong dividend growth in 2019, but their 2019 raises occurred before I purchased the stocks, so I didn’t count their potential contributions (a total of 0.06%).

VF Corp (VFC) spinoff Kontoor Brands (KTB) shows 0% weighted dividend growth since it is a newly formed entity and didn’t have a previous year’s dividend to compare to.

Portfolio addition Cisco Systems (CSCO) had nice dividend growth in 2019, but shows 0% weighted dividend growth since I purchased the stock late in the year and a dividend was not paid to me in 2019.

CVS Health (CVS) and CTSH did not provide dividend increases in 2019, and thus their weighted dividend growth is correctly calculated as 0%.

As expected, nearly all of my REITs delivered small dividend growth relative to my other holdings.  This is part of the reason I’ve been reducing my REIT holdings recently.  My REITs include Realty Income (O), Omega Healthcare Investors (OHI), W.P. Carey (WPC), Crown Castle International (CCI) and IRM.  CCI managed to avoid the poor dividend growth trend with nearly 7.02% dividend growth in 2019, leading to the best weighted dividend growth (0.18%) for my REITs.

Stocks that I’d like to see better dividend growth from include the aforementioned QCOM and PG, but also Aflac (AFL), Gentex (GNTX), and of course CVS.

 

Comparison of 2019 Results to Previous Years

In the next table below, I show the weighted dividend growth from 2019 against those calculated from previous years.  Tickers are now in alphabetical order.  Tickers in blue are for stocks that I no longer own.  These stocks have weighted dividend growth cells that are empty and shaded blue once they no longer contributed to my results.  Cells that are empty and shaded gray are for stocks that I didn’t own yet, and thus did not contribute to the weighted dividend growth calculation in that year.

Let’s see the weighted dividend growth for my Portfolio in each of the past 5 years…

 

 

Comparing years, the weighted dividend growth for my Portfolio came in at 10.24% in 2015, 6.94% in 2016, 8.62% in 2017, 11.60% in 2018 and 9.97% in 2019.

These are all outstanding numbers, with 2019 showing up in the middle of the pack.  Continued growth like this will make me very happy and should keep Dividend Raises as the #1 contributor to my annual forward dividend income every year.

Given that it appears I can consistently achieve a weighted dividend growth of better than my target 7%, I think I’ll move my target up to 8% for 2020 and beyond.

 

Summary

It was definitely another strong year of dividend growth for my Portfolio stocks.  That dividend growth led to a 9.97% weighted dividend growth for my Portfolio in 2019.

However, there’s still room for improvement.  Some better raises from a few of my larger dividend payers, in addition to contributions from many of those stocks that showed 0% weighted dividend growth in 2019, can lead to an even better percentage next year.

My Portfolio continues to lean more toward growth than yield, and thus the companies in my Portfolio tend to offer more aggressive dividend growth increases than a slower-growing company offering a high yield in exchange.  I believe this continues to be a factor in my excellent weighted dividend growth percentages.

Along those lines, the recent paring of my REITs (usually showing weaker dividend growth), and some strong dividend growth for my new holdings, may lead to even better weighted dividend growth results in 2020.

Thanks to some good growth results over the past few years, I’ll be bumping up my weighted dividend growth target from 7% to 8% starting in 2020.

 

What’s stopping you from calculating the weighted dividend growth for your portfolio?  The math is pretty straightforward, so give it a try.  Then share your results in the comments!