Expected Dividend Increases in May

All, I am very proud to say this, but this article series has come around full circle.  One of the very first articles we wrote on this blog was about Dividend Aristocrats that were expected to announce a dividend increase during June, 2014. This article will represent our 12th summary and you know what that means, our website is getting ready to celebrate its one year anniversary!  As a refresher, this monthly article series stemmed out of a love that me, Lanny, and many other dividend growth investors share….increasing dividends!   So much so that it turned into a game as we would try our best to predict the increase that would be announced.  While the game was fun, it was centered around the central idea that dividend growth is crucial for any DGI portfolio so that we can build a steady, growing income stream.  Without the growth, our income stream would begin to lose its purchasing power annually as the growth in inflation would slowly erode the value of the income stream.  With that being said, lets take a look at the first article in Year 2 and see which dividend Aristocrats are expected to announce a dividend  increase in May.

Dividend Increases in April

For those of you who are not familiar, before we begin looking forward to dividend increases in May, I like to take some time to review our projections from April’s article.   Did the four Aristocrats listed below follow on their historical trend?

    1. Exxon Mobil Corp. (XOM–  Last month, I mentioned that the Exxon dividend increase would be telling for the rest of the oil industry.  Exxon has one of the strongest balance sheets for major oil companies, so if XOM didn’t deliver a dividend increase, then I doubt the others would have either.  For me, selfishly, I was hoping XOM would announce a large dividend increase to signal that the oil market is healthier than most expected.  Why?  Because then I would have been much more optimistic about Chevron’s looming dividend increase announcement that was expected a few days after.  I have much more skin in Chevron’s game, as I purchased Chevron earlier in the year.  In the final week of the year, XOM finally released their earnings and reported better than expected results for the company, touting how the company’s diversification has helped XOM remain strong in the current oil environment.  More importantly, at least for a dividend growth investor, XOM increased their quarterly dividend  $.04/share from $.69/share to $.73, or a  5.8% increase.  While this has been below their recent increases, this is greater than XOM’s competitors Shell, BP, and unfortunately, CVX, who decided to maintain their current dividend level as opposed to increasing it.
    2. Johnson & Johnson (JNJ)-  Hey Lanny, what are your thoughts about JNJ?  I am asking this rhetorical question because he has been pretty active over the last month and invested in JNJ not once, but twice!   So clearly Lanny likes what he is seeing with JNJ and I can’t blame him. After all, we consider JNJ one of our  foundation stocks for a reason since management has a long history of rewarding shareholders and the company possesses an impressive brand portfolio.  Lanny timed his first purchase well, as he wanted to make a move prior to the company’s dividend announcement.  After his purchase that morning, JNJ announced a quarterly dividend increase of $.05/share from $.70/share to $.75/share, or a 7.14% increase.  Great move here and a solid increase that is in line with the 5 year dividend growth rate of 7.4%.
    3. PPG Industries (PPG)– As discussed last month, PPG is a great company with a low dividend yield.  But what was startling to me was the company’s low dividend growth rate (3 year average of 5.6%), as I would expect a company with a low dividend yield to have a much higher dividend rate.  This low growth rate was the reason why PPG was not considered one of our Top 5 low dividend yield, high dividend growth stocks, as PPG met all the other metrics Lanny was using when he compiled the list.   Management must have heard our calls (joking) and took notice, as PPG announced a quarterly dividend increase of $.05/share, or 7.5%.  While this is below the double-digit growth rate we typically see with low yielding stocks, the increase was greater than the average and was in line with JNJ’s increase.  Definitely a positive for shareholders.
    4. Procter & Gamble (PG)– Where do I even begin with this foundation dividend stock.  I think the dividend growth investor community shouted a collective “WHAT” when PG announced their uncharacteristic dividend increase this month.  We have been spoiled recently with PG’s clockwork 7% annual dividend increase, which is why we were so surprised when the quarterly dividend only increased $.0193/share, or 3%.  This was a bit of a wake up call for me, as I was reminded of the lesson that dividends are never guaranteed, let alone dividend increases.  While we work our tails off trying to put us in the best situation to build a growing dividend income stream, we still assume risk with our investments.  I don’t want to sound dramatic or act like some tragic event occurred in my life, because trust me, the world is still moving and my day-to-day  life was not impacted one bit.  But I had grown so accustomed to PG’s increase that I began to take it for granted.  This was just more of an eye-opening announcement and a great reminder of one of the most important lessons in dividend investing.

Expected Dividend Increases in May

Now that we have taken a look at the past, let’s look forward and see which Dividend Aristocrats are expected to announce a dividend increase in May.

  1. Clorox (CLX)– A consumer staple stock, right up my alley.  Clorox is a stable stock that seems to chug along each year that has a moderate dividend yield and a higher payout ratio that exceeds the 60% level we use in our stock screener.  Last year, CLX announced a quarterly dividend increase of $.03/share, or 4.2%, which was  below their 5-year dividend growth rate of ~8%.  Let’s see if CLX can reverse the script this month and provide shareholders with an increase more in line with their average.
  2. W W Grainger (GWW)– Unlike PPG, GWW is considered one of our Top 5 low dividend yield, high dividend growth stocks.  I won’t go into too much detail as Lanny summarized it very well last week, but GWW sports a dividend yield of 1.90% and a 5-year dividend growth rate of 18.64%.  Very strong figures for this Dividend Aristocrat and based on their balance sheet and current payout ratio, I don’t see any reason why the high growth rate cannot continue.
  3. Lowe’s (LOW)– Wow, another one of our Top 5 low yielding, high dividend growth rate stocks to make the list.   Kinda funny that two of the five stocks on Lanny’s list are expected to announce their dividend in May.  As Lanny mentioned, LOW has a current dividend yield of 1.3% and a 5-year dividend growth rate of 20.8%.   Similarly, LOW has a low payout ratio that provides them the room to continue to grow their dividend at a high rate.
  4. PEP (PEP)–  I love this company and quite frankly, I am very jealous of Lanny for owning a position in the beverage giant.  My love affair began last year when I performed a stock analysis.  Owning PEP would fill a major hole in my portfolio, has a diversified product offering which provides a unique edge over competitor Coke, and PEP has a strong track record of dividend increases.  Whats not to love?  So I may just have to initiate a position regardless of the current valuation levels, but this will be debated a lot internally (and with Lanny) over the next couple of months.  Over the last five years, PEP has an average dividend growth rate of 7.87%, which is above my portfolio’s current weighted average dividend growth rate (fulfilling one of the arbitrary rules I set for myself at the end of last year).  Let’s see if PEP can deliver this month. *Editor’s Note*  At the time this article was released, PEP already has announced a quarterly dividend increase of $.0455/share, or 7.3%.  Bingo, right on target with their five-year average!

There we have it, the final installment in the first year of the “Expected Dividend Increases” article series.  I am really looking forward to continuing this monthly article going forward as it has introduced me to many new dividend stocks that were never on our radar.  Hopefully you all have found the articles as beneficial as I have over the last year and have used the information in an investment decision at one point in time.  If there is any information you would like to see in year 2, please let me know!



6 thoughts on “Expected Dividend Increases in May

    • M,

      No problem, anything we can do to help. I love writing this article as it has helped me uncover a lot of dividend gems over the last year. Many of the stocks were never even on my radar over the last year, so discovering all these new companies has been a nice side benefit!


    • Mike,

      It has been a crazy couple of weeks for me, that’s for sure. It does seem like it has been forever since we have had a conversation. I have had a crazy few weeks of traveling for both work and pleasure, so I haven’t had too many opportunities to open the laptop. But those days will hopefully be coming to an end soon and I will be back and better than ever! I don’t blame you if you are sick and tired of hearing from Lanny haha

      I still owe you an email, so I am going to write back as soon as I can. As always, thanks for stopping by!


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