First off, Happy Holidays everyone.  Regardless of which holiday you celebrate, take these few weeks to spend as much time with your family, share as many stories as possible, and create life long memories!  Once again, the calendar is turning and a new set of Dividend Aristocrats are getting ready to announced dividend increases.  So let’s take a look at which Aristocrats announced dividend increases in December and which Aristocrats are expected to announce dividend increases in January.

Dividend Increases in December

Before looking ahead to dividend increases in January, we are going to take a look at Decembers results.  Last month, my article highlighted six Dividend Aristocrats that were set to announce a dividend increase in December.  Did the company follow through on their historical trend?

1. 3m Co (MMM)- First on our list is MMM, the industrials giant that has been paying an uninterrupted dividend for almost a century.  On December 16th, MMM announced a very large quarterly dividend increase, raising the quarterly payout from $.8550/share to $1.025/share.  This only represents a 19.8% increase and increases the forward dividend yield to 2.45%.   As I mentioned last month, I cannot wait for the next pullback in the stock so I can add this Aristocrat to my portfolio since MMM is always on my watch list.   Congratulations to all the current shareholders!
2. Abbott Laboratories (ABT)- ABT  announced a quarterly dividend increase of $.02/share, increasing the payout from $.22/share to $.24/share.  A very solid increase in the dividend (9%) that is in line with the five-year dividend growth rate (Outside of last year’s increase from $.14/share to $.22/share).   After the increase, ABT now has a current yield of 1.9%.
3. AT&T (T)- I must admit, Lanny and I were watching this dividend increase like a hawk since we both have large holdings in the telecom giant.   Funny story about this dividend increase.  Lanny was trying to project the date the increase was announced and initially projected the news to be released on Monday December 15th.  However, as 7 PM rolled around, T still did not announce a dividend increase.  For the next four days, one of us was checking for an announcement at least once an hour until the news was finally announced on a Friday December 19th (It made for a very exciting week, that’s for sure).   I don’t know why we were so eager for this announcement, especially considering that AT&T has recently only increased its quarterly dividend by $.01/share.  We somehow just convinced ourselves that T had a larger than usual dividend increase in store and were hopeful our dreams would become reality.  At the end of the day, T continued their trend of and increased its quarterly dividend from $.46/share to $.47/share.  Overall, this accouncement increased my projected annual income by $2.53 and the company’s current dividend yield to 5.5%!
4. Ecolab (ECL)-  Similar to MMM and ABT, ECL announced a strong dividend increase in its quarterly dividend.  The company announced a $.055/share, or 20%, increase in its quarterly dividend and now has a current dividend yield of 1.2%.  The great news is that the company still sports a sub 30% payout ratio after the announcement, so there is plenty of room to continue to grow the dividend at a double-digit growth rate going forward. 
5. Franklin Resources (BEN)-  Last month, I mentioned that BEN had a very low payout ratio (12%), which would allow the company to announce a large increase if they desired.   Well, the company surprised its shareholders this holiday season and not only announced a 25% increase in its quarterly dividend, but also announced a special dividend of $.50/share!  To put that in perspective, the special dividend represents 83.3% of the company’s forward annual dividend, that is $.60/share ($.15.share quarterly).   While this is exciting for me, it turns out receiving a special dividend is the normal course of business for long-term shareholders.  BEN has a unique dividend strategy: low dividend yield, high annual dividend growth, and a large special dividend every few years.  Currently, BEN has a PE ratio of ~ 15 (middle of the pack in the industry), a dividend yield of 1.05%, and has the fourth largest market cap.  Is it time to consider adding this unique dividend payer to my portfolio?
6. Nucor (NUE)- NUE is the final company on our list from last month and as I mentioned in the prior article, the company has a dismal historical dividend growth rate and a high payout ratio…not a great combination.  This month, NUE announced once again announced a quarterly dividend increase of only $.0025/share, which is less than 1%.  Another small dividend increase that is below inflation for this stock that currently yields 3%.  

Expected Dividend Increases in January

Now, it is time to put December (and 2014 for that matter) in the past and begin looking forward to 2015!  I cannot believe that 2014 is over! Holy smokes.  I hope everyone has taken the time to review their portfolios, assess their 2014 goals, and take the time to set challenging goals for 2015 (I know we did).  Back to business.  Let’s take a look at which Dividend Aristocrats we expect to announce dividend increases in January.

1. Consolidated Edison (ED)– Ah, Consolidated Edison, a favorite of the Dividend Diplomats as we believe ED makes a great foundation stock in any new dividend investors portfolio.  We have been following the stock closely since mid-2014 waiting for a sell-off to provide a lower-entry position; however, with other discounts available in the market, the timing to initiate a position in the utility giant has just not been right.  Earlier in the year, Lanny prepared a stock analysis of the company  and showed that ED has a 3 year dividend growth rate of 1.64%, which is below inflation but in line with industry standards (As utility companies tend to have higher dividend yields with lower growth rates).  This year, with the company’s payout ratio of ~60% in mind, I do not expect any surprisingly large dividend increases.
2. HCP Inc. (HCP)– I love when I see company’s that I hold in my portfolio on this list! The large healthcare REIT currently yields 5% and has a 3-year average dividend increase of 4.33%.  Looking back, the reason I purchased HCP over the other large healthcare REITs was due to its inclusion on this list.  At the time, I wanted additional exposure to REITs, but in a less risky manner than the other REIT in my portfolio, ARCP.  HCP’s steady earnings, dividend growth, and diversification in the healthcare industry filled this role perfectly and I couldn’t be happier with my investment.  Now, I get to look forward to receiving my first dividend increase as a shareholder.
3. McGraw-Hill Financial Inc (MHFI)– When I read McGraw-Hill, flashbacks raced through my mind of all the expensive textbooks we were forced to purchase in college.  The memories of scouring every online textbook website to find the location that would provide the cheapest textbook price and the highest sale-back rate so I could minimize the net impact of each textbook purchase.  Looks like I have always had the same mindset, even as a young college student!  However, once I started investigating this Dividend Aristocrat further, I realized that was considering the wrong McGraw-Hill.  In 2012, McGraw-Hill Financial and McGraw-Hill Education were spun-off into two separate entities.  The entity that has increased and paid a dividend since 1993 is McGraw-Hill Financial, which has the Standard & Poors rating services, S&P Dow Jones Indices, and other services under the business umbrella. It was an easy mistake to make, right??  Currently, MHFI has a PE ratio of ~27.75, a current dividend yield of 1.32%, and a payout ratio of 35%. Over the last 3 years, the company has average a dividend growth rate of 6.32%, which is a little lower than I would like in my portfolio for a company yielding below the S&P 500 average.  Overall, the company has a strong balance sheet and that will allow them to sustain a high-single digit, low double-digit dividend growth rate for many years if they choose.

Summary

The number of companies that are set to announce dividend increases in January is down significantly from November and December.  What makes this month different from the other months I have been reviewing is that none of the stocks have sported a double-digit growth rate recently.   This fact jumped off the page to me since Lanny and I have been discussing the impact of your portfolio’s weight average dividend growth rate a lot recently (Trust me, Lanny has only discussed this in one article with you.  Imagine the many behind the scenes conversations we have had on the topic!).   This analysis has shined the spotlight even further on the my portfolio’s average dividend yield and weighted-average dividend growth rate, and going forward I am going to look for stocks that have one of the following combinations when compared to my portfolios average: 1. higher dividend yield, lower average dividend growth rate; 2. lower dividend yield, higher average dividend growth rate; or 3. both a higher dividend yield and a higher dividend growth rate.  Two of the three stocks on this list, ED and HCP, would pass this new test of mine while MHFI falls short.   Reviewing my portfolio’s weighted average growth rate has added an exciting new wrinkle to my monthly review articles.

Do you own any of the stocks that are expected to increase their dividend in January?  If so, how do the stocks growth rates compare to your portfolio’s growth rate?  How did your dividend income increase from announcements in December?  Did I leave any off of the list?

-Bert, one of the Dividend Diplomats

 DISCLOSURE: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING.