Hello everyone, welcome back to another episode of Dividend Growth Investing (DGI). Today is DCA (Dollar-Cost Averaging) day. As always, I have diligently invested, and I want to share with you my focus for today.
The Importance of Regular Investing
Regular investing is a cornerstone of my financial strategy. By consistently investing a fixed amount each week, I mitigate the risks of market volatility and take advantage of the power of compounding. This approach ensures that I am steadily building my portfolio over time, regardless of short-term market fluctuations. This week, my focus was on purchasing more shares of KPN.
The Rationale Behind Buying More KPN
KPN is a Dutch telecommunications company that has consistently demonstrated stable performance and reliable cash flows. One of the primary triggers for purchasing KPN today is the recent dividend I received from them, amounting to €275. Reinvesting dividends is a crucial aspect of my investment strategy, as it allows me to compound my returns over time. This week, I combined my recent dividend with my regular weekly investment amount of €250, and a small amount saved from the previous week, to purchase more KPN shares.
Despite KPN currently being priced slightly above my target price of €3.40 per share, I remain convinced of the attractiveness of their future cash flows and growing dividends. The risk-reward profile of KPN still makes it an appealing investment. KPN has performed well this year, with the stock price up by 10% year-to-date and offering a nearly 5% dividend yield. This combination provides a robust total return, making KPN a compelling choice.
Investing Strategy and Dividend Reinvestment
Each week, I evaluate which stocks are attractively priced based on my target prices. Ideally, I aim to buy KPN under €3.40 per share. Despite KPN currently being above this price, I still see it as a solid purchase. Today, I invested €313 in KPN, purchasing 911 shares at an average price of €3.44 per share. Although this is slightly above my target price, I am pleased with the acquisition. The expected dividend income from these shares is significant.
With KPN expected to pay €0.17 per share in 2024, I anticipate an additional annual dividend income of €15.47. This brings my total KPN holdings to 420 shares, resulting in an expected annual dividend income of €7.42 from KPN. This steady increase in dividend income aligns perfectly with my long-term investment goals.
The Long-Term Goal and Future Projections
My goal is to accumulate enough KPN shares to earn €100 in annual dividends. Once this milestone is reached, I will continue to increase my holdings. Based on KPN’s projections, they plan to grow their dividend by approximately 7% annually until 2027. This steady growth, combined with a nearly 5% dividend yield, makes KPN a very attractive investment for my portfolio.
KPN’s dividend policy is progressive, aiming to increase the dividend each year. The interim and final dividends together are projected to be €0.17 per share for 2024. This structure provides a predictable and growing income stream, which is ideal for dividend growth investing. The company’s commitment to returning free cash flow to shareholders through dividends and buybacks adds to its appeal.
The Strategic Value of KPN in My Portfolio
KPN may not be the most exciting stock, but its reliable cash flows and predictable dividend growth make it a valuable component of my portfolio. The company’s commitment to returning free cash flow to shareholders through dividends and buybacks ensures that investors are consistently rewarded. Their strategy includes growing free cash flow by 7% per year until 2027, supporting consistent dividend increases.
Historically, KPN has been a stable dividend payer, with interim and final dividends paid annually. For example, I recently received the final dividend for 2023, and the next interim dividend is expected in August. This regular income stream allows for predictable cash flows and aligns well with my investment strategy.
KPN is considered a defensive stock with stable and reliable cash flows. While it may not offer explosive growth, its predictable dividends and conservative financial management provide a solid foundation for dividend growth investing. The company’s commitment to a progressive dividend policy and their conservative approach to financial management make KPN a “Sleep Well At Night” (SWAN) stock for me.
Combining Dividend Yield and Growth for Optimal Returns
When evaluating investments, I focus on the combination of dividend yield and dividend growth. KPN offers a dividend yield of nearly 5% and an expected annual dividend growth of 7%, resulting in a combined growth rate of 12%. This allows my cash flows to grow steadily, outpacing inflation and providing a reliable income stream.
Some investors might suggest investing in the S&P 500, which has historically grown at an average rate of around 10% per year. However, I prioritize the predictability of cash flows from dividends. Knowing exactly what to expect from my investments in terms of dividend income aligns with my financial goals and risk tolerance.
The Strategic Advantage of KPN’s Financial Policies
KPN’s financial policies are geared towards maximizing shareholder value. The company has a strong focus on returning free cash flow to shareholders through dividends and share buybacks. This approach not only provides immediate income to shareholders but also supports long-term share price appreciation by reducing the number of shares outstanding.
KPN’s strategy of growing free cash flow by 7% per year until 2027 underpins their commitment to consistent dividend increases. This strategy ensures that KPN can continue to grow its dividend at a healthy rate, providing a reliable and growing income stream for investors. This predictability is a key factor in my investment decisions.
Analyzing KPN’s Dividend History and Future Projections
Historically, KPN has demonstrated a strong commitment to returning capital to shareholders. The company pays dividends twice a year, with an interim dividend paid in August and a final dividend paid in April. This regular payment schedule provides a predictable income stream for investors.
For 2024, KPN is projected to pay a total dividend of €0.17 per share, up from €0.15 per share in 2023. This increase represents a 13% growth rate, which is well above the company’s long-term target of 7% annual dividend growth. This higher growth rate for 2024 reflects KPN’s strong financial performance and their commitment to returning value to shareholders.
Looking ahead, KPN aims to continue growing its dividend at a rate of 7% per year until 2027. This steady growth rate, combined with the company’s nearly 5% dividend yield, provides a compelling total return proposition for investors. The combination of high current income and steady growth makes KPN an attractive investment for dividend growth investors.
The Defensive Nature of KPN and Its Future Outlook
KPN is considered a defensive stock with stable and reliable cash flows. While it may not offer explosive growth, its predictable dividends and conservative financial management provide a solid foundation for dividend growth investing. The company’s commitment to a progressive dividend policy and their conservative approach to financial management make KPN a “Sleep Well At Night” (SWAN) stock for me.
KPN’s business model is based on providing essential telecommunications services, which ensures a steady and reliable revenue stream. The company’s strong market position in the Netherlands and their focus on operational efficiency support their ability to generate consistent free cash flow. This free cash flow is the basis for KPN’s dividend payments and share buybacks.
KPN’s focus on returning capital to shareholders through dividends and share buybacks, combined with their conservative financial management, makes them a reliable choice for dividend growth investors. The company’s predictable cash flows and commitment to growing their dividend provide a solid foundation for long-term investment returns.
Conclusion
In summary, KPN remains a key component of my investment strategy due to its reliable dividends and predictable growth. The company’s commitment to returning value to shareholders through dividends and buybacks, combined with its conservative financial management, makes it a solid choice for dividend growth investing. As I continue to build my portfolio, I will maintain my focus on companies like KPN that offer a balanced combination of dividend yield and growth. Thank you for joining me today, and I look forward to providing more updates in the future.
