Cincinnati Financial Rewarding Shareholders with a 4% Raise

One of the easiest ways to grow your income from the stock market is from company dividend increases.

I like to call these dividend increases – raises. Because really that is what they are.

Long term investors who buy and hold stock from the top dividend paying stocks are usually rewarded with a raise each year. Some companies may raise their dividend by a penny or two … while others are growing their dividend by 10% or more each year.

Overtime, these annual dividend increases start to compound and really take off.

For example, we bought shares of Consolidated Edison (ED) stock over 8 years ago. Those 25 shares we bought back then are now yielding over 10% in income each year!

As we grow our dividend growth portfolio (aka – Money Sprout Index) – we celebrate these increases.

Recently, another company that we have owned for over 6 years announced a dividend increase – Cincinnati Financial (CINF).

We Got another 4% Raise

Cincinnati Financial just announced another annual dividend increase. The company has consistently been raising dividends for over 50 years! How cool is that.

Starting this April (2017), we will receive $0.50 in dividends for each share that we own … instead of $0.48 last quarter. It is not the growth that we like to see year to year, but the company still managed to give us a raise.

This latest increase bumps the annual dividend for CINF up to $2.00 per share compared to $1.92 last year.

Overall, that is a 4.17% increase in dividend income.

How Much Extra Income?

This latest dividend increase has pushed our 12 month forward dividend income for CINF up to $155.92, compared to $149.68 last quarter.

That is an annual dividend income increase of $6.24

This is another reminder that our dividend income stream is constantly growing without any extra work from us.

For example, last month we discussed how we got several other raises – Realty Income Corp (O) – 4%, and Consolidated Edison (ED) – 3%.

Whether they are large or small, all of these increases can really add up over the months and years.

With this latest increase by Cincinnati Financial, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,267.02.

Dividend Growth for CINF

Getting a raise from Cincinnati Financial every single year since 2011 has been great. These constant raises and dividend reinvestment is one of the reasons why our yield on cost is 5.94% for the stock!

Take a look at the annual dividend payments since 2011 (when we purchased our shares) –

  • 2011 – $1.603
  • 2012 – $1.615
  • 2013 – $1.643
  • 2014 – $1.740
  • 2015 – $1.820
  • 2016 – $1.900
  • 2017 – $1.980 (projected)

Note – The 2017 dividend has been adjusted to reflect the dividend increase paid after the 1st quarter (April 2017).

As you can tell from the numbers above, CINF dividends have been raised consistently. However, the dividend growth has been a little slower than we would like to see.

Typically, we look for stocks with a 5-year or 10-year dividend growth rate of 6% or higher.

Here are a few average growth rates for shares of Cincinnati Financial

  • 1 Year DGR – 4.21% (2016 to 2017)
  • 3 Year DGR – 4.40% (2014 to 2017)
  • 5 Year DGR – 4.17% (2012 to 2017)
  • 6 Year DGR – 3.60% (2011 to 2017)

Note – Since we have owned shares of CINF for the past 6 years … I calculated the 6 year DGR instead of using the 10 year.

Overall, the dividend growth of the company has been hovering around 4% since we purchased over 6 years ago.

It does appear that CINF has been increasing their dividend at a higher rate the past few years … but we are still averaging less than 6% growth.

Cincinnati Financial – Buy, Sell, or Hold?

We started buying shares of Cincinnati Financial back in 2011 through a direct stock purchase plan.

For 2.5 years straight, we purchased partial shares of CINF stock every month.

Here are a few stats from over the years of buying stock in Cincinnati Financial

  • Total Investment – $2,575.00
  • Shares Purchased – 66.06
  • Dividends Earned – $595.83
  • DRiP Shares – 11.18

Back in early 2014, we stopped our monthly automated investments in the company. At the time, our position in the company was growing and we wanted to diversify our new investments.

Fast forward 3 years and we have decided to start back up our monthly investments in the company.

At the time of this writing, Cincinnati Financial met our stock screen criteria based on the following metrics –

  • Current Yield – 2.83%
  • Payout Ratio – 51.4%
  • P/E Ratio – 18.1

The one area that didn’t meet our stock screen requirements is the 5-year and 10-year dividend growth rates.

Starting last month (January), we are now investing $50 per month into new shares of CINF through their direct stock purchase plan.

We will continue to slowly grow our position in the company one month at a time.

I love these types of monthly investment plans as it allows us to dollar cost average. We also don’t need to remember to make our monthly investments.

For now, we will plan to invest $50 each month in partial shares of CINF.

Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – CINF, ED, and O. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.

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