Thursday, February 14, 2013
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. Some recent dividend increases include:
Lorillard Inc. (LO) recently raised its quarterly dividend 6.5%, from an old rate of $0.5167 per share to $0.55 per share. LO is increasing market share at the expense of rivals and they are also experiencing early success with the e-cigarette business with already a 30% market share. You have to love a 6.5% raise on a yield that is currently over 5%. Although I'm not a fan of the fact that LO operates only in the U.S., I do see growth ahead for the foreseeable future. I wouldn't mind a larger position in this stock, but would likely only come after a significant share price drop from here. This is the 6th consecutive year of dividend growth from this stock.
Phillips 66 (PSX) decided to reward loyal shareholders with a dividend raise of 25%. The new quarterly dividend is paid at a rate of $0.3125 per share, over the old rate of $0.25 per share. This is the third dividend in as many quarters, and this company has raised its dividend with every payout since spinning off from ConocoPhillips (COP). This has been an extremely strong performer for me, and even though the yield is low at 1.93% I plan to continue holding.
Wells Fargo & Company (WFC) has increased its dividend by 14%. The new quarterly payout of $0.25 per share is a nice boost from the old rate of $0.22 per share. There is even speculation that there may be another dividend increase on the way in time for the usual summer raise if regulators allow this to happen. The new yield is currently at 2.84%, but with a payout ratio of only 30% I anticipate significantly higher dividend payouts, and yield, once WFC has further flexibility. That yield is also not counting the special dividend that WFC has paid out over the last two years. This is the third year of dividend increases since WFC was forced to cut distributions during the height of the financial crisis. They had a 20-year streak before that and management appears eager to get back to those levels.
3M Co. (MMM) now has 56 years of consecutive dividend growth under its belt, as it recently raised its quarterly dividend by 7.6% to $0.635 per share over the old rate of $0.59 per share. The current yield stands at 2.47%. What can you say about 56 years of dividend growth? There aren't a lot of superlatives that can't be used here. Simply phenomenal and it's a company I wish to own a piece of at some point.
Owens & Minor (OMI) increased its dividend by 9%. The new quarterly payout is $0.24 per share, over the old rate of $0.22 per share. This is the 16th year of dividend increases, which puts this OMI in pretty good company. I like OMI from a fundamental standpoint, but qualitatively I'm worried about the business model. As a middle-man supplier, they face low margins and no true economic advantage. It's a company that continues to be on my watch list, and continues to surprise me for the better.
What do you think of these dividend raises?
Full Disclosure: Long LO, PSX, COP, WFC
Thanks for reading.
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