The Beauty of a Double Digit Dividend Hike

In the world of dividend growth investing, few things can create satisfaction as the prospect of receiving double-digit dividend hikes.

Just imagine waking up to the news that a company you have invested in reported solid earnings. On top of that, they also decided to share their success with you in the form of a significant dividend increase.

To me, that’s a true testament to the power of compounding!

This is where the beauty of dividend growth investing truly shines; it’s not solely about the double-digit dividend increase.

You also have the opportunity to reinvest those dividends back into the stock of your choice. This further fuels your projected annual dividend income.

Hence, while I don’t know about you, I find it challenging to secure double-digit salary hikes at my job. This is precisely why investing for passive income might offer us higher income growth than our current day jobs.

So, do you agree that there’s nothing quite like a double-digit dividend hike?

Well, if you do, then I’ve got good news for you: NN Group (NN.AS) has just announced a 12% increase in their interim dividend compared to last year. 💪

NN Group Share Price Chart – 5 Years

This is awesome news for me because currently I own 140 shares in the company:

NN Group – Purchase History.

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This single dividend hike also increased my projected annual dividend income (PADI) by €16.80.

This may not sound as much, but if my entire portfolio would hike their dividends by 10% on average, then this would equate to more than a year of monthly purchases at a 3.25% starting yield.

This is another beautiful thing about dividend growth investing, especially when you’re already a bit further on in the journey!

My perspectives on NN Group

NN Group didn’t have an easy ride this year from a share price perspective. Early on in the year, it got hammered down due to underwhelming numbers when they released their annual report.

The reason for that was a sharp decline in investment income and revaluation results on non-trading derivatives. These have nothing directly to do with their core business, although you can argue that it’s an important additional aspect of their ability to grow profits.

Gross Premium income wise they also showed some decline, but it was, in my opinion, not something to worry about.

Having said that, we’re now 6 months further and again NN Group has published some well-received H1 numbers (share price +10%).

This time, their gross premium income showed some year-over-year decline again (-3.6%), but it looks like it has been stabilizing. Furthermore, their Operating Capital Generation increased by nearly 11% year-over-year (their description of free cash flow), which is a very strong number.

No wonder the stock market responded positively to this because it felt that the share price had a lot of bearish sentiments priced in. Actually, this seems to apply to most insurance companies right now. At least, in my opinion.

But hey, we’re dividend growth investors and this 12% dividend hike shows a lot of conviction from management. The forward dividend is now €2.91 per share and they generated already €2.01 EPS per share in the first 6 months.

NN Group dividend policy and dividend history chart
NN Group Dividend History – Note that 2020 included a delayed dividend payment due to the requirement to postpone the dividend at the outbreak of Covid in 2029

At this pace, they only need to work another 2.3 months for us to fully cover the 2023 dividend. The rest can go directly back to our equity on the balance sheet and their 250 million share buybacks (2.5% buyback yield).

Having said that, the dividend yield continues to be attractive, even after today’s 10% jump in share price. NN Group still yields 7.7% and their shareholder yield is ~10.2% if we include those buybacks.

Besides that, the stock is still trading below a 10 price-to-earnings multiple. If you expect that the insurance industry, and in particular NN Group, will become a bit more in favor again, then a potential for multiple expansion might just be the cherry on the cake.

Hence, to me, the current value and dividend yield that NN Group still offers seems to be a pretty good deal.

What do you think? Are you long NN Group?

Yours Truly,

European Dividend Growth Investor

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European DGI

I am European DGI and it's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog because I truly believe we can learn a lot from each other by sharing our journeys!

Disclaimer

I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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