Recent Dividend Increases

As a dividend growth investor, one of the primary objectives I seek is passive dividend income from my investments that increases over the rate of inflation, annually. It’s always wonderful news when companies decide to reward loyal long-term shareholders with a dividend raise. Dividend raises typically mean operations are doing well and management is confident enough about cash flows to give shareholders a raise. All in all, it’s a good sign.

I try to keep my eyes peeled for dividend raises from companies I’m invested in, as well as companies on my watch list. Some recent dividend increases include:

PepsiCo, Inc. (PEP) just boosted its quarterly dividend from $0.5675 per share to $0.655. This amounts to a 15.4% raise for shareholders, which is fantastic. Pepsi now has 42 years of dividend growth under its belt, and with a healthy payout ratio of 61.5% there should be plenty of dividend raises in the future. Shares now yield 3.29%, which is rather attractive in this market from a high quality company like Pepsi. The company also announced plans to increase its share buyback program to nearly $5 billion in 2014. Overall, not much to dislike here from Pepsi. I continue to view this company as a core holding for me.

Digital Realty Trust, Inc. (DLR) recently gave shareholders a raise on the order of 6.4%, with a new quarterly dividend payout of $0.83 per share over the old rate of $0.78. This is a rather stout raise considering that DLR shares now yield 6.2% based on the new payout. I purchased shares in DLR as it continued to slide last year, reaching new low after new low. But I was confident in the REIT back then, and I remain so now. This is now 10 years of consecutive dividend growth for the trust, and I see no real reason this won’t continue for the foreseeable future. However, as a tech play on demand for cloud computing I’d like for my position in DLR to remain relatively small.

Stryker Corporation (SYK) increased its quarterly per share dividend by 15.1%, now paying out $0.3050. This represents an increase of $0.04 over the old dividend of $0.2650. Another very solid increase here, and SYK has increased its dividend for 21 consecutive years. The yield on the new payout is 1.47%. I’ve never taken a good look at Stryker because its yield is usually too low for me to consider it as a potential investment based on my income requirements, but the company continues to reward shareholders very well and I do quite like the business model of medical equipment. This is definitely a company I’d like to take a look at.

Cisco Systems, Inc. (CSCO) upped its quarterly dividend to $0.19 per share, an increase of 11.7% over the old dividend payout of $0.17 per share. This is the 4th dividend increase for Cisco since it initiated a dividend back in 2011. Although the yield on shares is now an attractive 3.4%, after getting burned by Intel’s recent lack of dividend growth and clarity after years of strong raises I’m a bit leery of tech plays like Cisco. However, Cisco does appear to be setting a precedent here with consistent dividend growth, so this is definitely one to watch. The company will have to remain on the cutting edge to make sure cash flow can continue to support a rising dividend, and tech can be quite fickle.

Occidental Petroleum Corporation (OXY) just gave shareholders a great boost in income by raising its quarterly per share dividend by $0.08, which represents a 12.5% increase. The new dividend is now $0.72 per share, over the old rate of $0.64. I remain heavily allocated to energy, so I haven’t yet taken a good look at OXY yet. I took a quick peek at the company a year ago or so and was concerned about executive compensation and haven’t revisited this idea since. The company now has 12 years of dividend growth and continues to grow the dividend at a robust rate. The yield on the new dividend payout is 3.12%, and the dividend appears to be well covered with a payout ratio of 50%.

Own a piece of any of the above companies? Happy with the dividend raises?

Full Disclosure: Long PEP, DLR

Thanks for reading.

Photo Credit: FreeDigitalPhotos.net

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56 Comments

  1. I am happy with DLR, as far as Cisco not sure on that as it was hammered today. I
    Would like to start position in PEP in near future. I updated my portfolio to reflect my recent purchases

  2. I have a tiny position in PEP and didn’t know about the increase until reading here. I like PEP a lot because it is one of the few companies I can see being around possibly forever.

    I’m looking forward to the KO and WMT increases as well.

  3. Dividend increase season is upon us!

    I’m loving the PEP increase! Woo hoo! Yeaahh!! I will probably never get that kind of increase at work =).

    As you point out, the DLR increase is very encouraging given the pounding the stock has taken these past few months.

    Thanks for writing this post, it shows the power of DG investing.

  4. Dividend Mom,

    I’ve been happy with DLR so far. This dividend increase was pretty much in line with what I was expecting. The payout remains comfortably covered and shares are still cheap. In other words, I’m a happy camper. 🙂

    PEP is solid. I only wish I would have bought more in the mid-$60s!

    Best wishes.

  5. DividendVet,

    I’m with you! Raises are wonderful, especially when they don’t require performance reports from your boss. 🙂

    Music to my ears as well. Hallelujah!

    Cheers.

  6. The Dividend Guy,

    PEP is great. Although Nooyi isn’t popular, I like her. She’s been focusing on healthier brands and I like her steadfast determination not to split the company. I’m a fan.

    I’m with you on the other increases. Looking forward. This is always a great time of year when some of the “heavy hitters” start announcing their annual raises. I guess it makes winter a little easier to deal with, right?

    Take care!

  7. Spoonman,

    You’re right. This is one of the best seasons of the year. 🙂

    DLR has been hit hard. And I agree, the raise was encouraging. You never know what management is really thinking when the price gets hit like that, so it’s good to see the priorities are correct.

    Thanks for stopping by! Always appreciate your insight.

    Best regards.

  8. FFdividend,

    I love raises as well. Who doesn’t like more money, right? 🙂

    “Show me the money!”

    Looking forward to seeing what you write about Cisco. I’ve been leery of tech after Intel. Cisco has some great numbers, however, especially with the cash on the balance sheet.

    Good luck with your new investment!

    Best wishes.

  9. Steve,

    Wow, you must have really loved that PEP increase since it’s such a large holding for you.

    At one point PEP was a much larger holding for me in terms of percentage of my portfolio. But as my portfolio grew in around PEP and I stopped adding it’s now come down quite a bit. But I still really like the company. I’m glad Nooyi has decided to remain steadfast in not spinning off the beverages business. I like it as is.

    This season of dividend raises is off to a very strong start. I hope this is a sign of things to come! 🙂

    Cheers.

  10. Holy dog poop, I didn’t notice PEP is doing a double digit increase this year! Wow that certainly makes up for 2013 and 2012 which were rather lack luster… Also Avista announced a 4.5% boost. I know you own that one. AVA isn’t sexy but seemingly performs to standard year after year.

    I’m glad to see DLR continues to raise dividends, that will surely help your freedom fund!

  11. Who doesn’t love some raises! I’ve been eyeing PEP, and ideally want it to come down a bit more, but it will be tough after announcing that sort of increase. I wasn’t expecting them to announce it this early since it doesn’t kick in until the second payment of the year, but perhaps leaves the window open for a possible buy between here and there.

    Certainly pleased with the CSCO and DLR raises as well. February is always a good month for dividend increases.

  12. Man I almost bought some PEP today. Hopefully it doesn’t jump up tomorrow morning because I’d like to add some shares below $80. Even better is that the increase came a quarter early. The DLR increase was pretty solid too. I almost bought some SYK when it was giving a 2% yield but passed at the time. That was probably a mistake, but its not the first and definitely won’t be the last. I can’t wait for the rest of the usual suspects to make their announcements.

  13. Hi DM, nice dividend list, can’t argue with that. I have another you maybe interested in, i bought some a while back. The stock is interpipeline ( IPL.TO ) and the website is interpipeline.com – solid dividend and growing (5%), decent cash flow, great management. The stock is one of those solid steady growers. It pays the dividend monthly so compounds even more quickly.
    It was a unit trust stock in canada which meant it was only available to canadian residents but recently converted to normal stock and recently was added to the alerian infrastructure etf.

    cheers
    Tales

  14. Also RCI (9 years of dividend increases) raised dividend by 5.2% (usually they raise 10% plus, so a bit dissapointing) and current yield 4.67%,
    BCE (5 years of dividend increases) raised dividend by 6% and current yield 5.77%
    SU (11 years of dividend increases) raised dividend by 15% and current yield 2.75%
    The only real Canadian dividend chapmion FTS (OTC Pink FRTSF) , 41 years of dividend increases , raised dividend by 3.2%, yield 4.2%

  15. Got a small amount of DLR, though holding it at a small loss at the moment. Liking the increase. Every bit helps. PEP on the other hand has me smiling. It’s about 9% of our portfolio. Didn’t expect that large of an increase, though I’ll gladly take it even if the ex-div isn’t until June. Thanks for the heads up on the increases.

  16. Good news all around! I’m not currently long on any of these but I’ve considered Cisco and Stryker – might be worth taking an in depth look at them in the near future. I’m particularly intrigued by Cisco, especially using the next year or two as a timeframe for investment. I think that after the next 12-18 months, Cisco could see some really nice growth.

  17. Enjoying the PEP and DLR increases as well. While I don’t mind PEP not spinning off their beverage division(I assume management knows best), frito lay is where the growth has been and probably will be.

  18. I’m excited for the PEP raise. I have to say, DM, as my portfolio grows it gets more and more exciting to see stocks I actually own in your updates, rather than feeling like “oh, I wish I had that stock.”

  19. DM,

    I love the increases. Even though I don’t have many individual companies in my portfolio, I was lucky enough to get two raises (CSCO and DLR) in one day! I am planning on starting a position in Pepsi next week.

  20. PEP is cool!
    Is is smaller than KO – but it is useful as a supplement to security.
    At the long time, I want to have KO and PEP in my portfolio.
    One of the two will always make profit!

    Best regards
    D-S

  21. DM,

    Cisco is a bit different to consumer tech and Intel in my view. Enterprise tech typically results in a entrenched position with high switching costs. It’s relatively hard to displace someone like Cisco, who may be providing cloud infrastructure or network routing. Those migrations can be a pain! Intel had the misfortune of not seeing the writing on the wall with the decline in the PC base. They’ve also been too late to mobile. The issue with chip vendors is that the power of computer gives a shelf life of just a few years, before someone else outflanks you. They’re very much commodity products, with no sustainable moat. Best!

  22. CI,

    I’m with you. PEP’s increase was a nice reprieve from the rather unimpressive raises over the last couple years. Averaging them out over the last few years and you’re looking at pretty nice increases, overall.

    AVA has been solid. Although, I wish I would have held UNS a bit longer. Who would have seen that coming?!

    Thanks for stopping by, bud. Hope all is well! 🙂

    Best regards.

  23. w2r,

    Yeah, they announced the raise a bit early but I’ll gladly take it. It’s now “in the books”. 🙂

    February is definitely a great month for raises. The spring in general is pretty wonderful for dividend raises. Tis’ the time of year!

    CSCO’s raise was also pretty solid. They’re off to a great start in terms of dividend growth over the last few years.

    Cheers!

  24. Pursuit,

    I’m also thinking of buying more PEP here. It’s not overly expensive, and the yield after the raise is very attractive. The products are great and I like what the company is doing.

    SYK looks great from a growth perspective. And it would be a nice holding to compliment BAX and MDT for me, as well as JNJ. However, that yield leaves a little to be desired. I don’t mind going a bit low, but 1.5% is stretching it for me.

    Thanks for stopping by!

    Best wishes.

  25. TalesFromTheTape,

    I’ll have to take a look! Always enjoy new ideas, so thanks for dropping by and mentioning it. More research for this weekend. 🙂

    Take care!

  26. gibor,

    Thanks for adding some of the Canadian stocks there. Great names.

    What do you think of BCE? I might not mind getting in on that one here. It’s very much like AT&T in terms of its asset mix, yield and growth, no? Obviously, a much smaller company. They also own some content from what I remember.

    I haven’t looked at the Canadian telecoms in about a year now. I remember liking TU the best, but also liked Bell. I really liked Rogers’s asset mix, but the debt load was a deal breaker for me.

    Thanks again for the addition!

    Best wishes.

  27. Matt,

    Cisco could indeed be a great investment. Many investors don’t like gobs of cash on the balance sheet, but I think that’s helpful for tech companies as that allows them to be rather nimble in terms of acquisitions and what not.

    The growth is there with CSCO as well. And Donald Yacktman likes it, so that’s a good endorsement, in my opinion.

    Cheers!

  28. fiveoh,

    I’m not necessarily sure the snack division is where all the future growth lies. If I thought beverages weren’t a good investment I wouldn’t invest in KO. However, I certainly think the North American beverage segment will remain stressed for some time. A breakthrough could come in the form of a “healthy” sweetener so that their regular products still taste great with less calories. I know they’re aggressively working on this, so we’ll see.

    In the end, I like the company and all of the products. A spin-off wouldn’t kill it for me as I would own both pieces, but I prefer it as one piece for synergies and distribution networks.

    Best regards.

  29. D-S,

    You’ve got it! The key is to own both KO and PEP. That way you’ve got both bases covered. That’s what I do. 🙂

    Hope all is well in Germany!

    Best wishes.

  30. BuySmart,

    I’m with you. Growing your portfolio to the point where you’re receiving a dividend raise a few times per month is wonderful. It’s like “I got a raise! Oh, wait..I just got another raise!” 🙂

    Good stuff!

    Take care.

  31. Dividend Pipeline,

    Getting two dividend raises in one day is spectacular! Try getting that at your day job. 🙂

    I really like Pepsi. I haven’t purchased shares in a while, but I wouldn’t mind adding a little here. I love the assets and the customer loyalty. Who doesn’t have a bag of chips made by Frito-Lay and/or a beverage made by Pepsi somewhere in their house? Even though I’m eating pretty healthy these days I have four 6-packs of Propel in the pantry right now.

    Cheers!

  32. Integrator,

    Thanks for stopping by! Great points there.

    I wasn’t comparing Intel to Cisco. I was rather just letting off a little steam in regards to my frustration with Intel and tech in general right now. It’s not healthy to get emotional about stocks, but I got a tad burned with Intel and so it’s easy to transfer those feelings to other tech companies.

    I much prefer companies that focus on the enterprise side, and that’s why I invest in DLR and IBM as both focus on enterprise clients where the switching costs are relatively high. CSCO might fit well here, but I’d like to see a longer dividend growth streak. I’m a huge fan of Yacktman, and so his big bet on CSCO does sit in the back of my mind whenever I think about the company. Not that I would ever recommend following another investor’s actions, but I do respect very intelligent investors and their choices.

    Best wishes.

  33. Katz,

    I’m with you! Who wants to beg the boss for a 3% raise when Pepsi gives you a 15% raise without even asking? I know which situation I prefer. 🙂

    Take care.

  34. SWAN,

    The stub dividend from ARCP was very nice. ARCP is turning out to be a great investment so far. I only wish I would have bought a little more around $12. There’s still a lot to keep in mind here, and a lot of moving parts. But so far, so good!

    Best wishes!

  35. That Pepsico (PEP) raise was awesome! I don’t have many shares, but have owned and had them in a DRIP for the past several years. That’s another stock I’d love to add to. That DLR raise looks nice and payout ratio was good before it. I’m loving that special dividend ARCP paid and the regular one coming today with the raise and more shares because of the COLE merger.

    I was kind of hoping/voting for it would hold out for more since COLE was $2 more expensive then ARCP. Looks like it will work out and increase my income in the end and 1.0929 ARCP shares for each COLE is not so bad.

  36. BCE is a great company! This is my biggest holding… I also hold RCI and AT&T… Yes, BCE is like AT&T, only it’s growing dividends much more… last 3 years BCE dividend growth 25%, RCI 36% and AT&T just 7%.
    P.S. Interesting to see how Rogers Communications’ $5.2-billion NHL broadcasting deal will affect stock in future

  37. Hi Jason,

    What are your thoughts, or anybody else’s, on using margin? I use optionshouse as my second brokerage account and they offer some pretty good margin rates. I have never brought stocks on margin yet buy was thinking about it. Here are my thoughts… I go on margin for a small amount, say 2000, and buy T with that money. Since T pays out a dividend of 5.7% and the margin rate is 4%, I can pocket the difference of 2.7%. The only down side is if margin rates go up or T goes down in price. I can also pay down the margin overtime with my additional capital that I add every two weeks to the account. It seems like a good strategy if you don’t have any money left in your account and a high dividend stock comes down it price like T. Have you ever used margin or would you ever use it?

    Thanks,
    Frank

  38. Frank, I’ve been using a margin strategy to get extra yield. For example, I own Realty Income preferred’s that pay about 7%. I borrow at 1.3% (interactive brokers) and get an extra yield that puts the total return over 10%.

    AT&T could work, but this has the possibility of capital loss, more so than preferreds. One other advantage of this strategy is that the margin is larger than it appears. Because AT&T pays a qualified dividend, you get a larger margin because of taxes. For example, my margin tax bracket is about 32%.

    T (nominal yield): 5.5%
    T (fully taxable equivalent): 6.5%
    Margin Rate: 4% (you) ==> 2.5% return
    Margin Rate: 1.3% (me) ==> 5.2% return

    You can deduct your margin costs against your earnings. However, in the case of AT&T, you can’t deduct it. You need other fully taxable income. Here’s an example:

    T: (dividend): $100
    Margin: $100
    Other Interest Income: $100.

    You can deduct the margin against your other interest but not with the AT&T dividend.

    I probably wouldn’t do AT&T if my margin rate was 4%. However, if you want to buy short term until you can pay off the margin (due to a cash flow management), this would be OK in my book.

  39. Happy to see that your dividends are going up.

    One of the companies in my portfolio raised it’s dividend with 20% yesterday so I’m quite happy.

    Cheers,

    Geblin

  40. sfi,

    Very interesting. I didn’t realize you can deduct the margin cost. For example, what qualifies as other interest income – does capital gains from the sale of stock, Preferred or Nonqualified dividends count? It seems like borrowing money and buying high yielding stocks is a better strategy then selling puts. I hate locking in that much money for a long time while you wait for the put to expire or get assigned.

    Also, How do you get the extra yield on your Realty Income preferred? That’s a really nice return.

    Lastly, how do you like Interactive Brokers? I read a lot of bad review about them so I decided on Optionshouse, mainly for option trading. Do you have to be an active trader in order to benefit from using IB? That’s an amazing margin rate. I would probably get myself into trouble with a borrowing rate that low.

    Thanks in advance,
    Frank

  41. gibor,

    I appreciate your thoughts and perspective!

    Nothing wrong with BCE. A nice, high yield with moderate growth.

    RCI is really interesting. Like I said, I really like the assets. I like the diversification. However, the debt load is concerning. It doesn’t bother you?

    I may have to take a look at the Canadian telecoms again here. Although, I missed my chance when they took a big dip on the VZ rumors.

    Best wishes.

  42. Frank,

    I think sfi answered your question better than I could. I don’t use margin and very likely never will. It’s not necessary for me to acheive my goals, and I take on substantial risk already with an almost 100% allocation to equities. No need to amp the risk even more.

    I wish I could help more, but I just don’t really recommend margin unless it was very short-term to pick up some deals when you’re low on capital.

    Best regards!

  43. Love that DLR increase! I have been holding DLR since last year and that almost makes up for the drop in share price haha. Also keeping the position small relative to my portfolio.

  44. Hi Gibor,

    Although RCI did raise their dividend, I’m having doubts on their future to continue growing their revenue. I own BCE, T (Telus) and RCI and personally out of those 3, I would go with BCE and T (Telus). I see more growth opportunities with BCE and T rather than RCI in the wireless space. I believe both BCE and T are also expanding into IPTV which will affects RCI’s cable TV service (+25% of their revenue!). However RCI did drop recently and I am tempted to add more but the doubt inside me is keeping me in the sidelines.

    cheers!

  45. Thought I would chime in here too. I also have a position in IPL.TO and believe the dividend is solid. Its a stock that I see popping up a lot in the Canadian dividend conversations. I have been looking to add more to my position but it keeps going up when I have enough funds. I’m crossing my fingers for a pullback but you never know.

    cheers!

  46. Yeah ARCP was a specatcular call for the long run, i love the fact the insiders are buying in the 12’s aswell. If we’re lucky it may dip back down so we can load up some more, i’d love to see it catch up with O in terms of market cap, it is still about 2-3x smaller right now.

  47. I wouldn’t say that RCI’s debt is extremely higher and in my opinion RCI is going to perform well in future, I was tempted to buy on last week drop, didn’t buy only because it’s already one of my biggest holdings.
    btw, regarding Telus. … about 2 years ago when I was searching for cellphone for my mom, Telus really had the best deals and I signed with them, last year when I was buying cellphone for myself, Telus had already worse packages than before, but I still signed with them. Last month when i was considering cellphone for my daughter, Telus packages became too expensive and worse than RCI’s, so I decided to stay with RCI for now. So, I doubt that wireless growth opportunities for Telus better than for RCI

  48. Young Income,

    The DLR increase was pretty solid considering the yield. It’s tough to see the price drop like that, but I kept looking at the fundamentals and didn’t see anything that really bothered me much so I kept nibbling. It’s since bounced back a bit, and now with this increase I’m pretty happy.

    I like a lot of things about DLR, but I also want to keep it small because it’s hard to really predict the way trends are going to go with data center leasing. So far, so good. 🙂

    Best regards!

  49. Dexter,

    I’m with you! Who doesn’t like getting more money? 🙂

    This year is off to a great start in regards to dividend increases. Let’s hope that trend continues!

    Take care.

  50. Marvin,

    You definitely got a nice increase there with CSCO. Not much to dislike there. Management appears to be committed to growing the dividend. I’ll continue watching this one.

    Best wishes!

  51. Love the update, I own CSCO and was very happy to see the increase. 10 years from now I will be sitting pretty!

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