Dividend increases – one major reason why we are in the dividend investing community, right? The month of April is always a fun month for the Dividend Diplomat Portfolio, as there are a few DOW companies that increase their dividend through this wonderful month. We wanted to write an article to bring forth those notable dividend increases this month of April and to see the impact on my portfolio and then to see how you and other investors benefited. Don’t worry – I’ll keep it to 3 stocks! Now… let’s dive on in!
Notable Dividend Increases
The three large companies that increased their dividend, in order, are Procter & Gamble (PG), International Business Machines (IBM) and Johnson & Johnson (JNJ). I’ll go into each by each and talk about what dividend occurred, new yield and new payout ratios (as of 4/28 close date). Let’s begin:
1.) Procter & Gamble (PG) – well.. the big 1% dividend increase occurred. Talk about big companies increasing their dividend by a small amount! Only 1%. I could have sworn to myself with the business activities they had undergone, that this would have propelled them to new heights. I was wrong and damn, this one stung! The new dividend is $0.6695 from $0.6629 and the current yield is 3.36% with a payout of roughly 73%… ooph. They maintained their aristocrat status – but… when will earnings “pop” again? Are consumers still consuming? Looking forward to 2017 over here.
2.) International Business Machines (IBM) – A few of my co-workers were wondering about this increase. I remember last year when they announced a whopper at 18%. I stated I had a guess of $1.40 and luckily and wild enough – that is the new quarterly payout. Not the double digit growth we’ve seen in the past, which we would expect them to decrease it, given the earnings pressure and the constant figuring out of who/what/how they went to serve their client base. A 7.69% growth rate is still VERY strong and is above my weighted average growth rate no doubt. Current yield is at 3.81% and payout has popped up over 41%. Still room to grow in big blue! Ah, the dividend growth rate is vastly important for us investors, and IBM has come through again.
3.) Johnson & Johnson (JNJ) – similarly, there was 4 of us in the office that own shares. Bert and I know we had a great discussion over this and he guessed $0.82 per quarter, with mine coming in at $0.80. Well, JNJ announced a nice solid 5 cent increase from $0.75 to $0.80 and somehow we got a correct amount here as well. JNJ has to be the most reliable and consistent dividend aristocrat out there, period. It’s hilarious, bottom-line. This was a 6.67% increase and is very closely related to their historical dividend growth rate over I don’t know how many years. Maybe that’s why I have them as a top 5 foundation stock for dividend portfolios? Recommend them all day! The new yield is 2.84%, with a payout ratio at roughly 48.5%. Still showing room to go from here.
Next I want to talk about the impact this had on my portfolio, and then followed by overall conclusions and thoughts on the 3 increases above.
Dividend Increase Impact
I’ll describe this further in my April dividend income post, but the overall impact here was $17.81 additional/forward income. This is massive to me, especially since I felt like I was lagging behind in my dividend income goal that I recently posted about. This is an extra $1.50 almost a month from increases alone and it’ll keep getting better going forward. This covers 9 gallons of gas, or a month of electricity for me, and that’s an easy way to look at things. This covers expenses that I did not have to, or at least can. We will feel the benefit of PG’s come mid-May with IBM’s and JNJ’s being in June. Ah.. nice to see a few positive points here in the month and seeing one of the reasons why we invest into these types of companies come to life.
Though this was a good month, I’m still expecting 16 companies to finish the year off. Pepsi (PEP) will be the big one in May that I am expecting, excited to see what they decide to do!
Notable dividend increase conclusions
So what do we see here? 1 big blue company who increased their dividend last year by 18%+ and this year was 7.70% or less than half. One dividend aristocrat increased their dividend by such a small amount that it barely buys a stick or two of gum. And of course – the old reliable comes through as expected. What I am seeing in this industry is no more big dividend increases, as EPS hasn’t increased at a steady pace. Only bottom lines have been increasing if your major cost was fuel/oil and you were able to take advantage of the low $ per barrel prices (such as Norfolk Southern (NSC)). I do still feel that dividend increases in our “boring” companies will continue but at a 3-8% pace and not a 6-12% pace. At least for now. Pepsi could surprise us right? I wouldn’t complain, one bit!
What about you? How do you feel? Do you own any of the big 3 above? Are you happy, sad or satisfied with the events above? Positive or negative outlook on div increases for you? Surprised or no? Please let us know below, as we would love to hear your stance and insight! And of course – as always – thank YOU for coming by and making this blog what it is today. Excited to talk about these items! Talk soon.
-Lanny