April was an interesting month in the market. Trillions of dollars were pumped into the economy and the Fed was pulling all of the levers possible to offset the fact that economic activity came to a screeching halt.  Stock prices rebounded from the crash in March and the market posted its best month in 30+ years (from a percentage gained perspective).

Unfortunately, from a dividend perspective, the story in April was similar to the story in March.  Once again, dividend cuts stole the show. The end of the month, was particularly brutal, as Royal Dutch Shell (RDS.A) dropped a “66% dividend cut” bomb on their investors.  The other major companies announced drastic reductions in CAPEX to hold on to maintain their dividend this quarter.  So yes, it was very shocking when Shell announced their cut out of the blue and ahead of their peer.

See – Our Dividend Stock Portfolios – We Disclose our Full Portfolios on our Website

Oil has not been the only sector slashing their dividend. Retail continues to see the dividend cuts fly in.  Bed Bath & Beyond (BBBY), for example, cut their dividend amidst the store closures. It’ll be interesting to see how quickly some of these retail companies restore their dividend once the economy returns to normal (whenever that may be).

The dividend cuts have been brutal.  But is that going to stop us from investing? HECK NO! It caused the two of us to stop in our tracks and refocus our investing strategy to focus on companies that are:

1. Dividend Aristocrats (or close to it) to focus on companies that have increased their dividend through various economic cycles.
2. In Industries built to perform well during the pandemic.
3. Perform well in our Dividend Stock Screener

Further, for me personally, I’m also paying closer attention to the balance sheet than ever. I’m going to continue considering a company’s debt position in future investments by focusing on Dividend Aristocrats with Low Debt. Quality of the balance sheet and management’s capital allocation strategies are more important than ever.  That’s going to be the recurring theme over the next few months. Focusing on QUALITY companies that have LONG track records of dividend growth.  The remainder of this article will discuss just that!

Actual Dividend Increases in April 2020

Despite the negative news and the dividend cuts. There were still a lot of dividend increases announced in April.  It was exciting to receive the dividend increases.  You bet Lanny and I were texted each other once we received each increase.  Lets recap some of the dividend increases received in April:

Company #1: Procter & Gamble (PG) –  Lets start this party off with one of our favorite dividend paying stocks. They are one of our Top 5 Foundation Stocks for a reason after all. They are a diversified, consumer staple giant that is providing the necessary products to consumers during this pandemic.  And quite frankly, their stock price over the last few months reflects that fact. That is why I was not really concerned about PG skipping a dividend increase or announcing a dividend cut. I was expecting the company to stay the course on the dividend front.  But this year, I was shocked by the actual dividend increase and how it compared to their recent dividend increases!

Actual Increase?  6%

Greater than Last Year?  Yes! Last year, their increase was closer to 4%

Company #2: Johnson & Johnson (JNJ)  – If P&G is my 1A of favorite dividend stocks, JNJ is 1B.  JNJ is also one of our Top 5 Foundation Stocks and within Dividend Aristocrats with Low Debt.  Similar to P&G, I was expecting JNJ to stay the course with their dividend increase due to the industry they operate in, their strong portfolio, and position to perform well during the pandemic.  Their dividend increase fell right in line with their recent average dividend increases.  If you’re looking for consistency, look no further than JNJ!

Actual Increase?  6.3%

Greater than Last Year?  Yes! Last year, their dividend increase was 5.5%

Company #3: International Business Machines (IBM)  –  First, and foremost, it is time to welcome IBM to the Dividend Aristocrat family! This title is well deserved by all the companies that have earned it. Now, IBM, it is time to work towards becoming a Dividend King! This was an exciting month for Big Blue, as the company has a new leader at the helm. Unfortunately, for the new Aristocrat, the companies dividend increase was less than underwhelming.  And by less than underwhelming, I mean terrible.  IBM announced a tiny $.01 per share increase in their quarterly dividend.  It wasn’t even 1%.  This was definitely below my expectations and I hope this is not the new normal for them. 

Actual Increase?  .6%

Greater than Last Year?  NOT A CHANCE! And last year’s increase was only 3.2%.  Yikes.

Company #4:  Southern Company (SO) – The utility company is as consistent as you would expect a utlity company to be. Souther Company continued their streak of increasing their quarterly dividend $.02 per quarter.

Actual Increase?  3.2%

Greater than Last Year?  No…barely though

Company #5: W.W.Grainger (GWW) – The first four companies on this list followed through and increased their dividend as expected. Unfortunately though, the streak ends here as Grainger did not announce a dividend increase. Fortunately, they did not announce a dividend cut.  Rather, the company will maintain their current dividend for at least the current quarter. Hopefully this increase will be revisited in April as the economy starts to slowly open up.

Company #6:  Apple Inc. (AAPL) – Apple was a wild card for me (As I wrote about last month). With the economies of two major markets coming to a screeching halt (China and US) and supply chains potentially impacted, I would not have been surprised at all if the company decided to forgo a dividend increase this quarter. Luckily, I was wrong and Apple announced a dividend increase at the very end of April!

Actual Increase?  6.5%

Greater than Last Year?  Yes! Last year, their increase was 5.5%.  That extra percentage point is HUGE

Company #7: Kinder Morgan (KMI) – Rarely will I get excited about a company announcing a dividend increase that is less than anticipated. In the case of Kinder Morgan, I was ecstatic that the company ditched their plan to increase their dividend 25% in 2020 for a more prudent dividend increase.  Their initial dividend project was announced before the price of oil collapsed. After seeing a drastic change in their revenue stream, management decided to revise this increase downward significantly in order to preserve capital.  To me, this is a signal that management gets it and has learned from their previous mistakes. The mistakes that saw a company aggressively increase their dividend, at the risk of their balance sheet, to only have to cut the dividend when the price of oil collapsed.  That occurred in 2016.  Can you think of another major oil company that also fell for the same trap in 2020 (Occidental Petroleum)

Actual Increase?  5.2%

Greater than Last Year?  No. This was significantly lower than their dividend increase last year

Company #8: Peoples Bancorp (PBCT) –  I did not include Peoples Bancorp in my April article despite the fact the company is a Dividend Aristocrat.  PBCT earned a spot on Lanny’s May Dividend Stock Watch List for good reason. Their current metrics are looking great. In fact, the metrics looked so strong that I started building a position in the company myself.  Thanks for bringing PBCT to my attention Lanny!  The fun part is that PBCT still announced a dividend increase in April. So the bank has now increased their dividend through the Great Recession and the pandemic.  Those are two strong notches on the bank’s belt, that’s for sure.

Actual Increase?  1.1%

Greater than Last Year?  No. Last year, the bank increased their dividend 1.7%

Company #9: Travelers Insurance (TRV) – Last, but definitely not least, we have Travelers Insurance. Like Peoples United, Travelers was not included in our article last year.  The insurance giant has a strong balance sheet and is working their way towards becoming a Dividend Aristocrat. While I have been adding to Cincinnati Financial over the last few days, I could easily see myself investing in Travelers.

Actual Increase?  3.7%

Greater than Last Year?  No. Last year, Travelers increased their dividend 6.5%.

Expected Dividend Increases in May 2020

Wow. What a list of companies that announced a dividend increase in April. It is encouraging to see so many companies continue to increase their dividend despite the negative economic environment.  The increases were typically smaller than last year, as expected, and I am expecting that trend to continue in May. Let’s look head now to the expected dividend increases in May 2020.

Company #1: Caterpillar (CAT) – Oh man, this is a very interesting company to start off the list for May. Caterpillar is a cyclical company that has paid a quarterly dividend since the 1930s.  CAT did not cut their dividend during the financial crisis. Instead, they froze their dividend as economic activity slowed down.  With both our economy and China’s slowing down due to the pandemic, could we see CAT delay their dividend announcement until later in the year? That scenario would not surprise me at all.

Last year’s dividend increase –  19.8%

Five-year average DGR –  8.3%

Expected timing of Dividend Increase Announcement –  Beginning of the month

Company #2:  Chubb Limited (CB) – Travelers Insurance announced last month. Chubb, take your seat up on the stage during May! Chubb’s dividend increase history is about as consistent as you are going to get. They have increased their quarterly dividend $.02 per share over the last several years.  Despite the slowdown, I am expecting the company to once again announce a $.02 per share increase this month.

Last year’s dividend increase –  2.7%

Five-year average DGR –  2.9%

Expected timing of Dividend Increase Announcement –  Middle of the month

Company #3:  Leggett & Platt, Incorporated (LEG) –  This dividend increase is iffy. Like Caterpillar, I would not be surprised if LEG postponed their dividend increase until the third or fourth quarter.  The only difference here is that LEG is a Dividend Aristocrat.  The slowdown has hit LEG hard and the company doesn’t have the lowest of dividend payout ratios.  But there is still a chance that LEG could announce an IBM style, <1% increase in their dividend!

Last year’s dividend increase –  5.3%

Five-year average DGR –  5.4%

Expected timing of Dividend Increase Announcement –  Beginning of the month

Company #4: Cardinal Health (CAH) – Another Dividend Aristocrat is set to announce a dividend increase in May.  CAH has announced very small dividend increases over the last few years (despite a strong 5-year average dividend growth rate).  I’m not expecting anything different here this month. However, CAH will play a critical role in this pandemic based on their medical supply network.  Hospitals need supplies and medications now more than ever. So CAH should be in a position to perform well during these troubling times. Maybe their dividend increase will reflect this and we will all be surprised.

Last year’s dividend increase –  1%

Five-year average DGR –  7.2%

Expected timing of Dividend Increase Announcement –  Beginning of the month

Company #5: Lowes Corporation (LOW) – Last year, Lowe’s announced a dividend increase on the final day of May.  The company announces their dividend either the last week of May or the first week of June. So there is a chance that the company may not announce anything at all!  The company’s dividend growth has been incredible over the last few years. But I am not expecting the company’s increase to match last year’s due to the slowdown in construction, non-essential projects, and the stay at home order. Sure, people have more time to complete DIY projects.  But that cannot offset the major purchases made by contractors.

Last year’s dividend increase –  14.6%

Five-year average DGR –  19.1%

Expected timing of Dividend Increase Announcement –  End of the month

Company #6: The Clorox Co (CLX) – Clorox is the definition of a company that will benefit from the coronavirus pandemic. The company’s products are in very high demand, for obvious reason. Thus, I am expecting the company to announce a strong dividend increase during the month. Similar to PG and JNJ, it should be par the course for CLX and their dividend announcement.  Man, this is just a great Dividend Aristocrat!

Last year’s dividend increase –  10.4%

Five-year average DGR – 7.5%

Expected timing of Dividend Increase Announcement –  End of the month

Summary

May is slower compared to April. but not by much.  6 great companies historically announce their dividend increase in May.  Hopefully, the dividend cuts subside and we can start building some economic momentum towards the end of the month. Let’s continue to stay positive, stay healthy, and focus on building positions in high quality dividend growth stocks.  Despite the dividend cuts and negative news, there are still plenty of great companies out there that are trading at a discount and/or offering solid dividend growth.  If you don’t believe me, look back at the April dividend increases section. There are still plenty of great companies increasing their payout to shareholders.

What dividend increases are you expecting in May? How many increases did you receive in April? What dividend cuts did you receive in April?

Bert