Notable Dividend Increases – April 2016

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:

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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

 

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14 thoughts on “Notable Dividend Increases – April 2016

  1. Hey Lanny, thanks for sharing this.

    I think the P & G situation is disappointing. They increased the dividend for the sake of increasing it. They have had difficulty increasing earnings (in an almost deflationary world, I suppose the rising US $ has impacted this), the increasing dividends have been funded by an increase in payout ratio, which is just meaning they have less money to re-invest back into the business, making future earnings growth more difficult.

    IBM is interesting, to see what they will do to create substantial revenue, similar to Microsoft. So much is moving towards cheaper subscription based income..

    JNJ has been great and should continue to be good for a very long time to come (as health in general will).

    Tristan

    • Tristan,

      Couldn’t agree more with all of the above. Increase is better than no increase but PG has to figure their earnings growth out and cash flow. They will be constantly monitored. Thanks for stopping by!

      -Lanny

  2. Hey Lanny,
    Thanks for the post. Interesting to see how 3 of your Big 5 are still growing their dividends (If we want to consider P&G growing their dividend). I agree with Tristan above, I think they just raised it for raising sake to stay on the list. I was surprised by IBMs move but not so much JNJ. I have yet to add them to my portfolio as I am still on college income but hopefully I can soon!
    PS. I predicted 81 cents for JNJ, so close yet so far.

    • Stefan,

      I remember those college income days. I would scrape every cent I could to make a purchase, always recommend JNJ even at these levels. Hustle and grind, you and I know it pays off. Keep building those assets over there!

      -Lanny

  3. Like Stefan, I’m also a bit surprised with the IBM raise given the decline of their bottom line and eps in the past couple of years. JNJ on the other hand has been a dividend machine I continue to add to on any dips.

    • Captain,

      I am sure the dividend increase fromy IBM coincided with the share repurchase and I’m praying they did an analysis on the appropriate cash flow measures for their business with that increase. I expected an increase and I’ll be sure to grab the 7.7% with open arms, as long as future dividends are stable. Thanks Captain talk soon.

      -Lanny

  4. A bit disappointed about PG’s dividend increase but it’s better than none right? Hopefully they can get the boat straightened out and have a higher increase next year.

    • Tawcan,

      I hear you. PG is under my watch as well, curious to see next quarters earnings without a doubt. Cash flow is critical and hope they are making smart decisions. We will stay tuned.

      -Lanny

    • IH,

      Haha loving it. If only my day job gave me raises by the month or multiple times per year I probably wouldn’t be writing as much haha too funny. Love more money, thanks big 3 players!

      -Lanny

  5. Always nice to read about dividend increases no matter the size. I’ll take any increase over flat rates or cuts. I know many are not thrilled with PG but between reinvestment and this small increase my passive income still grows which is really what matters. JNJ was a nice surprise despite some currency headwinds. Just goes to show what a real machine that name is in all market environments. Thanks for sharing.

    • Hut,

      Of course. An increase nonetheless, we’ll have to see what a full year swing brings. Dividend income continues to rage on! Apple by the way – interesting uses of cash lately, keeping an eye on them.

      -Lanny

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