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.

Photo Credit: FreeDigitalPhotos.net

Comments

    • says

      Relic,

      Nice catch! I didn’t know if anyone would notice that. :)

      I’ll be talking this weekend about the WFC position (which I initiated yesterday).

      Thanks for stopping by. Always glad to hear from you. Hope the portfolio is doing well!

      Best regards.

    • says

      Cool! I appreciate the diversification.

      My portfolio is doing excellent, of course…I am very happy…Wish the prices were lower of course, but hey, there’s ups and downs in most every market, I suppose.

      Best wishes to you.

  1. says

    Thanks for sharing your progress. Your blog is one of my must read personal finance blogs and helped inspire me to start my own, Net Worth Snowball, to share how I’m growing my net worth to pursue financial independence within the next 5 years in my early 30′s.

    Thanks for sharing these dividend increases. I have a dividend play that is worth your review, Molson Coors (TAP)

    *Strong brand value domestic and abroad including Coors Light, Blue Moon, and Molson product line
    *Generate large amounts of free cash flow
    *Very solid balance sheet
    *Low Valuation- PE= 11x forward 2013 EPS estimates
    *Yield is around 3% but quarterly payouts have doubled over the past four years and tripled over the past 10 with a 5 yr dividend growth rate of nearly 15%
    *They are growing revenues internationally

    It looks like there might be some buying opportunities following their latest earnings report, and I’m looking to add to my position in the low 40′s. Cheers!

    • says

      Net Worth Snowball,

      So glad to see you started your own blog. I like the look – very clean! I’m especially glad this humble spot on the internet had something to do with it. It looks like you’re on an excellent trajectory with your high savings rate.

      I’ll have to take another look at TAP. I’ve looked at it in the past. The balance sheet is very attractive and it’s currently trading for book value. Nice. The last time I knew there was concern over volume decreases, especially in key markets. Also, the ROE was a bit low. The dividend growth is also a bit erratic, although they do have a 5-year streak.

      I’ll have to take a more in-depth look over the weekend.

      Best wishes!

    • says

      DM, thanks for your compliment! I have been tinkering with the look of my blog and am glad that you like the format.

      I’m eager to hear your thoughts regarding TAP. I agree that the ROE isn’t stellar, averaging 9% over the past three years, but I do think the low valuation, strong balance sheet, and most importantly the potential dividend growth merit your consideration (current dividend payout is just 32% of 2013 EPS estimates, and ideally they’d continue their strong recent series of increases).

      Keep up the good work.

  2. says

    I’m pretty excited about PSX and WFC. I got PSX from the COP spinoff and I’m loving the company so far. I think it’s going to be a dividend cash cow. I’m almost tempted to buy some more despite the currently low yield.

    And WFC excites me too, because currently I am underexposed in financials.

    You’ve given me a some things to think about.

    • says

      Journey,

      PSX has been a total surprise. A real blockbuster. I’m definitely holding my shares and although the yield is low, it’s a small position and the only one in my portfolio quite like it.

      WFC excites me as well. I looked at them in the mid-$20′s and regrettably passed. I got a bit worried about my lack of ability to fully analyze a bank. That’s an ability I still lack, but I feel the size and scope of this bank (especially now with the Wachovia acquisition) will help offset any potential risk. In addition, from my analysis management is the best in the business. Rising interest rates may help as well.

      Best wishes!

    • says

      Headed Home,

      I definitely have no plans currently to unload PSX. I can’t imagine this kind of dividend growth to continue, as management anticipated much lower growth, but I’ll take it for as long as I can get it.

      Best regards!

  3. says

    I’ve been very pleased with recent dividend increases. 2013 is starting on a high note, no doubt! You can also add AVA and PEP to your list. AVA did 5.1%, PEP 5.6%. I expect KO and UNS to report boosts before the month is done. All the increases put together is just as good as buying a new position (income wise) for me. It’s fantastic!

    OMI broke their streak of 10%+ increases, it was over a decade straight. 9% is close enough. I need to see a better increase from UNS this year. If it’s another 2% raise I might put my money in a different utility, there are no shortages of choices in that particular sector. Happy with LO. Happy with AVA. I’m ok with PEP, but it’s only mediocre and nothing to get excited about.

    March should be a blockbuster month too.

    • says

      Compounding Income,

      Thanks for adding those. I forgot about AVA’s raise, or else I would have included it. PEP is interesting. It’s one I continue to watch. Not very impressive raises over the last couple years, but I actually like what Nooyi is doing in regards to healthier snack options. I truly believe this will benefit the company, and shareholders, over the long-term. I also like her steadfast resistance to any talk of splitting the beverage and Frito-Lay businesses. A split would instantly cause me to consider selling.

      OMI is interesting. Again the low margins and lack of real moat concern me, but they seem to really be making the most of their position.

      AVA is one I had planned on increasing my position in, and then the ABT and ABBV sale took up a lot of my focus and attention and AVA got lost in the shuffle. I still may add, as I think it’s at a fair price. It’s unfortunately up almost 10% YTD. Deals are getting very difficult to find.

      LO is working out great so far. I’m happy with my position size, but further weakness may have me questioning that stance.

      Thanks for stopping by.

      Take care!

    • says

      Hehe I admit that I usually skip the PEP conference calls. I cannot stand listening to her. I prefer to hear developments directly from the CEO and top executives, but in this case I’ll just read about it. HA! While the recent increase isn’t the greatest it’s good enough imo.

      OMI is a tough one. I get the impression there is pretty stiff competition from CAH and MCK among others. The Movianto acquisition could prove to be a huge benefit, but they need to increase European sales dramatically to have it contribute to EPS. I think a 10% drop from the current share price might be a good starting point here. It does have strong fundamentals and an extremely strong dividend policy. I think management is top notch and a main reason the dividend growth has been uncommonly high for an extended period in the past.

    • says

      CI,

      Great insight there on OMI. It’s one that I kinda regret passing up on. I didn’t see how the business model could sustain the growth, but it looks like management has done a great job of maximizing the business potential.

      I’m not surprised you’re not feeling Nooyi. A lot of long-time PEP shareholders blame her for the lackluster stock performance. They are going through some pain now for what is hopefully rewards down the road. We’ll see how it shakes out. Either way I’m just glad she isn’t keen on splitting the company.

      Best regards!

  4. Anonymous says

    PSX is actually returning over 4% based on inital split/spin off price. I ended up with 50 shares post split, and am keeping them considering the effective dividend and the realized capital appreciation

    • says

      Anonymous,

      Great point there. The YOC has risen quite dramatically with this one. I’m really glad I decided to keep PSX after the split.

      Looks like us shareholders are reaping the rewards of a very generous and friendly management.

      Best regards.

  5. says

    I keep a spreadsheet that tracks the dividends of the stocks I own as well as stocks I am looking at. It is a bit tedious at times, but it helps me to see which stocks are really growing dividends. I made some Google News alerts that find stories about the announcements of dividends. I spend a few minutes once a week looking through them.

  6. says

    Thanks for pointing out the OMI increase. I hadn’t even noticed that one until now. Their stock price has not really kept up with the market so I was thinking of adding more. I ended up just keeping what I have for now while catching up other positions.

    • says

      AAI,

      OMI has been extremely impressive considering the business model – a low margin middle man. I’m impressed they’ve been able to do so well. The company continues to remain on the sidelines because even though it’s a great stock, I’m not as enamored with the business. We’ll see what happens. If there is a dip I may change my mind.

      Best wishes!

  7. says

    DM,
    Do you use a single site to learn of new dividend increases? If so which one’s? Or do you just browse the news for each of your holdings?

    Thanks

    • says

      Jason,

      Thanks for stopping by.

      I use Seeking Alpha for alerts at:

      http://www.seekingalpha.com

      Otherwise I’m pretty good at monitoring my portfolio and holdings. I also typically know when certain companies are going to raise dividends based on historical schedules and as such I keep an eye out during earnings season.

      Take care!

    • says

      Kanwal,

      Thanks for stopping by and thanks also for including me in your roundup!

      Those are some pretty solid dividend increases. I see NA raised there dividend at a fairly solid level. What’s the favorite Canadian bank for dividend growth investors in Canada?

      Best wishes!

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