12.3% Dividend Increase for 2015

"Image courtesy of Master isolated images / FreeDigitalPhotos.net".

“Image courtesy of Master isolated images / FreeDigitalPhotos.net”.

As well as companies like Glaxo, Royal Dutch Shell and National Grid, who pay a high current dividend yield, I also have two or three companies who have a track record of significantly increasing their dividend each year.

One of these is FW Thorpe, who are a family run company that manufacture light fittings mainly for use in commercial applications (e.g fluorescent office light fittings, emergency and fire exit lighting and road lighting).

They have recently announced a final dividend for the year ending in June 2015 which is 15.9% higher than last year’s final dividend, this was possible because of an increase in earnings per share of 13.5% for the year. When added to the interim dividend (which increased by 4.8%) the full year dividend is 12.3% more than 2014 (which was itself an 8.33% increase on 2013).

The current dividend yield doesn’t look too impressive at 1.78% (this is based on the total dividend of 2.65 pence per share and a current share price of £2.05) however my shares were actually bought in 2006 at a price of 58.475 pence per share which means that my yield on cost is a much more impressive 6.24%. In this time the actual dividend per share has increased from 1.325 pence per share in 2007 to 3.65 pence per share in 2015, which means my income is now 2.75 times the amount it was just 8 years ago. If this growth is repeated over the next 8 years I will be receiving just over 10 pence per share which would be a dividend on cost of just over 17%.

This performance illustrates how a company increasing its earnings and dividend per share by around 10% per year can soon turn a low percentage pay out into a high percentage pay out.

If I can build up a portfolio of shares which contain a mixture of companies who pay a lower current dividend yield that increases quickly and companies who pay a high current dividend yield (but don’t increase it by much more than inflation each year) I should be in the fantastic position of receiving a decent income when I start to take it (as compared to re-investing it as I do at present), but which will also grow by more than inflation thereby increasing my standard of living each year.

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