Even a Small Dividend Increase is Good News




BAE Systems announced their year end results on Thursday, which showed an increase in orders received and order backlog, plus an increase in Operating Profit (on a constant currency basis). The important bit from my point of view is that they also increased their dividend, which although this was only by 2%, it is still an increase.

As a result of this dividend increase I have effectively received this pay rise without having to expend any effort, or having to turn up in one place each workday, so as a result I have received £470 in dividends in the last twelve months, and if they match the 2% rise next year I will receive nearly £480 in dividends.

Although this increase is not a huge increase, there are companies who are raising their dividends significantly (see post on BHP Billiton’s increase), so overall I should receive total increases that beat inflation.

In addition to the dividend increase, the share price of BAE Systems has increased by around 25% in the last 12 months, which as I am approaching the time when I will be taking cash out of my FIRE Engine will increase either the amount I can withdraw each year, or the length of time before I will have used up all of the value of my FIRE Engine.




5 thoughts on “Even a Small Dividend Increase is Good News

  1. Retirement Investing Today

    “…which although this was only by 2%, it is still an increase.” When I look at my dividends I’m more ruthless than your good self. I’m intending to use my dividends to eat in the very near future (will FIRE in the summer) and so I need my portfolio (which includes a HYP) to generate cash that increases at least with inflation over the longer term. With inflation (RPI) at 2.6% I look at BAE as a dividend cutter.

    Reply
    1. Financial Independence UK Post author

      HI RIT

      Thanks for reading and commenting on my blog.

      I am not in quite as good position as yourself, as I will need to actually spend some of my capital to live, but based on 6% growth per year I have a pretty good margin of safety before I get anywhere near zero (and if I do run out of cash at say 80, I will have benefitted from retiring 87 years before my state retirement age. I do agree that BAE are an effective cutter, but as part of a portfolio I am prepared to live with a below inflation increase for a period of time. If I can achieve dividends at arate that is more than inflation over the whole portfolio then I will be comfortable as long as I don’t get a multi year poor performer. I will also include share price increase as an offset against dividend growth.

      I am looking to finish work this summer also, and am looking forward to having the choice of how I live my life 7 days every week.

      Best Wishes
      FIUK

      Reply
  2. DividendMonkey

    A small dividend increase is better than no dividend increase, or even a dividend cut. I know I would like huge dividend increases from all of my stocks, but I know that is not possible. Congrats on the raise.

    Reply
    1. Financial Independence UK Post author

      Hi DM

      Thanks for your comments.

      I also do not believe I can always get significant increases on all the shares I own (I do have two or three that are more growth orientated), but a consistent increase across the whole portfolio is what I am looking to achieve.

      I have just reported on my dividends for January, and that has shown an overall increase above inflation – even with a cut from one of the companies.

      Mest Wishes
      FIUK

      Reply

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