One month down in 2015! Hopefully everyone started out 2015 with a strong dividend month to really set the tone for the rest of the year. As most of you know by now, each month, we project which Dividend Aristocrats are expected to announce a dividend increase during the upcoming month. Why? Because as dividend growth investors, we love seeing our dividend income streams increase! With that being said, let’s see which Aristocrats are expected to announce dividend increases in February.
Dividend Increases in January
As always, I have to check and see how my projections from the prior month unfolded. In our January installment of the series, we identified three potential Aristocrats that were slated to increase their dividend this month. Did they deliver?
- Consolidated Edison (ED)– As Lanny discussed in his ED stock analysis, the company has a 3 year average dividend growth rate of 1.64%. So the company is a high yield, low dividend growth stock. This year, ED announced a $.02/share, or 3.2%, increase in their quarterly dividend, which is above their recent average. Even though the increase is in line with expectations, it still provides shareholders more value than they had in the prior year and most importantly, ED kept their dividend increase streak alive. For this reason, among others, we believe ED makes great foundation stock in any new dividend investors portfolio.
- HCP Inc. (HCP)– Sadly, as I write this article, HCP still has not announced a dividend increase. I have been waiting on the edge of my seat for this increase, as HCP is one of the larger holdings in my portfolio. The company typically announces their increase towards the end of the last week in January, so we should expect an announcement any day. Their 3 year average dividend increase is 4.3%, so let’s hope that management decides to surprise us all an announce an increase greater than the recent average!
- McGraw-Hill Financial Inc (MHFI)– Wow. Similar to HCP, MHFI has not announced a dividend increase at the time of the article. In the last couple of years, MHFI has also waited until the last couple of days of the month to announce an increase. So shareholders, don’t worry, your announcement should come by the end of the week. Over the last 3 years, the company has average a dividend growth rate of 6.32%, so you should be rewarded with a nice increase when the company does decide the news!
Expected Dividend Increases in February
A very anti-climactic January, as two of the three companies have not announced their increase by yet. I wouldn’t worry though. Even though dividends aren’t guaranteed, these companies have earned a place on the exclusive Dividend Aristocrat list for a reason. While January was a relatively quiet month in terms of dividend increase announcements, this month should be a much more active month as many more companies are expected to announce dividend increases in February. Will you benefit from an increase this month from one of the following companies?
- Archer-Daniels-Midland Co (ADM) – ADM, one of the main players in the farm product industry, has a current dividend yield of 1.99% and payout ratio of 31%. The company has increased their dividend 14.75% on average over the last three years and really rewarded shareholders by announcing a 26.3% dividend increase last year. With a low payout ratio and over $7 of cash/share, the company has plenty of room to continue growing their dividend by at least 10% if they choose. With the excess cash on hand and the low payout ratio in mind, perhaps a combination of dividends and share buybacks may be in the company’s future (See why a buyback program would also be great news for dividend investors)?
- Bemis Co Inc (BMS)– BMS has a current dividend yield of 2.41% and a payout ratio of 45.3%. Over the last five years, BMS has increased its quarterly dividend by $.01/share annually. For anyone that holds T like me, we are used to seeing this dividend increase pattern. Even though the company has the room to increase its dividend by a greater amount this year, I would not expect an increase outside of the norm.
- Chubb Corp (CB)– It has been a while since I have researched CB. Back in August, when I was deciding on which financial company to purchase, I considered buying CB due to its low PE Ratio, low payout ratio, and the company’s status as a Dividend Aristocrat. However, as I discussed several times last year, even though the two companies passed our dividend stock screener, AFL appeared to be the better value at the time and therefore, so I passed on CB in favor of the duck! Back to business. CB currently has a dividend yield of 1.95% and a low payout ratio of 22%. Over the last three years , CB has averaged a dividend increase of 8.7%. It’ll be interesting to see if CB will surprise investors with a large dividend increase this year considering fellow Aristocrat AFL shockingly announced a lower than average dividend increase this year.
- Coca-Cola Co (KO) – Even though I prefer competitor PEP to KO due to PEP’s diversified product offering, KO is still a great company to own. The American icon is a worldwide brand that has been paying dividend since the 1800s. Currently, KO has a current yield of 2.88% and a payout ratio of 65.30%. The last three dividend increases have averaged 9%, a very solid amount. Even though the company’s payout ratio is higher than we would typically like to see (We filter for stocks with a payout ratio below 60%), there is no reason to believe the company cannot maintain the average dividend increase rate going forward.
- Genuine Parts (GPC)- This major player in the auto parts industry has a current dividend yield of 2.36% and a payout ratio of 49.8%. The company has average an annual dividend increase of 9% over the last three years. Recently, GPC appeared on a filter I was running and since then, the company has been on my radar. However, with a PE ratio greater than the current S&P 500 (~21), I am not quite ready to purchase shares. If the stock continues to slide, as it is down 8.49% YTD, I may be forced to initiate a position in the company. Regardless, you should see this company on my watch list for the next several months.
- Kimberly-Clark (KMB)– As many of the regular followers know, I love stocks that are staples in every household. If you scroll through KMB’s product listing, you would be shocked with how many of their products can be found throughout your house. KMB has a current dividend yield of ~3%, a payout ratio of 58.5%, and a three-year average dividend increase of 6.3%. My February watch list is filling up fast, as KMB’s stock is also down ~4% YTD. If the stock continues to slide I will have to give purchasing the company strong consideration, especially considering the fact that their PE ratio is lower than their major competitors (PG, UL, and CL).
- T. Rowe Price Group (TROW)- This financial services company has averaged a double-digit dividend increase of 12.4% over the last three years. Currently, the company’s dividend yield is 2.15% and their payout ratio is 37.2%. With a relatively low payout ratio, there is plenty of room to continue the streak of double-digit increases this month. Let’s see if management can deliver once again.
- Wal-Mart Stores (WMT)- The final Dividend Aristocrat on our list happens is one of the most recognizable names in the US. WMT has a current dividend yield of 2.19% and a payout ratio of 39%. Over the last three years, the company has increased their dividend by an average of 10%. However, the 10% average is a little deceiving as the increases ranged from 2% last year to 18% in 2013. So who really knows what to expect with the expected announcement this month. With their current payout ratio, management has the capability to increase their dividend by their average if they choose.
As I mentioned at the beginning of this section, there are a lot of companies expected to announce a dividend increase this month. This list contains many great companies that would look great in any dividend investors portfolio. Do you own any of the companies on this list? Are you expecting to receive an increase from a company not on this list? Are you also getting tired of waiting for HCP to announce their dividend increase?
-Bert