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

Illinois Tool Works Inc. (ITW) recently boosted its quarterly dividend by a full 10.5%. The new payout is $0.42 per share over the old rate of $0.38 per share. A very nice boost, indeed. ITW, the manufacturer of industrial products and equipment, has been one of my best investments to date and I think it’s a fantastic company and one that’s fairly valued right now. The yield on the new payout is 2.26%, based on today’s price and on top of the increased dividend ITW also announced a $6 billion share buyback program to be commenced after the current $4 billion buyback program has ended. Good stuff! ITW now has 39 years of consecutive dividend growth.

Marathon Petroleum Corporation (MPC) increased its dividend to $0.42 per share quarterly over the old rate of $0.35 quarterly per share. This is an increase of 20%. MPC is a well-run petroleum refiner and I think it’s attractively valued here at a P/E of 7.31 with an entry yield on the new payout of 2.34%. MPC has been actively boosting the dividend ever since it was spun-off from parent company Marathon Oil Corp (MRO) in July, 2011.

Union Pacific Corporation (UNP) recently hiked its dividend by 14.5%. The old payout of $0.69 has been superseded by a brand new quarterly per share dividend of $0.79. UNP now has 8 years of dividend growth under it’s belt. I really love UNP, among most of the big railroads. However, it’s a bit richly valued for me here today but I would be highly interested in investing in this company at a better valuation.

Norfolk Southern Corp. (NSC), another big U.S. railroad company, raised its dividend recently by 4%. The new payout of $0.52 per share quarterly is a boost over the old rate of $0.50 quarterly per share. I’m a bit disappointed by the size of this raise, but rather unsurprised. This is a prudent move by management to still reward shareholders through additional income, but also stay conservative as earnings have been hurt by reduced coal demand. I hope that improvements in other aspects of operations allow NSC to raise the dividend by a larger margin next year. With this raise, Norfolk has now raised the dividend for 12 consecutive years.

Own any of these companies? Think these raises are appropriate?

Full Disclosure: Long ITW, NSC

Thanks for reading.
  
Photo Credit: FreeDigitalPhotos.net

Comments

  1. says

    I love seeing dividend increase announcements. I only own NSC out of these companies but I’d like to own both UNP and ITW. I was close to buying some shares of ITW late last year but so much for that now. I’ll just have to wait until the next slowdown in the economy to bring better prices. I like the industrials because it’s quite predictable that you’re going to get a chance in the next 7 years or so to buy shares for very cheap.

    • says

      Pursuit,

      NSC was a bit disappointing, but it was prudent. I hope other shipments (intermodal) help pick up the slack from the reduced coal demand, which may be in secular decline. We will see in time.

      ITW has been a fantastic investment for me so far. It flies under the radar, but just continues to do the right things.

      Best wishes!

  2. Anonymous says

    I DM!
    Love your articles and i’m always waiting for news from you.
    What are you you going to do about INTC know that they didnt raise their dividend for 5 consecutives quarters?

    Cheers
    Alesso

    • says

      Alesso,

      Thanks so much! I’m glad you enjoy the blog. It means a lot to me to have loyal readers like yourself.

      INTC is one I’m watching very closely. They’re releasing some products in Q3 and Q4 that will gives us investors a better idea on the long-term viability of it’s mobile strategy and strength. If these new products don’t make waves, then it will likely be time for me to look elsewhere. The dividend cut wasn’t that big of a deal because they still will pay out more this year than last, but if the new products don’t help with the secular decline of PC sales then I think a static dividend will only be the beginning of the troubles. On the other hand, if these new products start to make inroads into tablet/mobile computing then this could be a fantastic investment.

      I think that Intel’s risk/reward profile right now is a little bit different than I usually prefer in my conservative blue-chip portfolio, but I’m giving them the benefit of the doubt right now. However, after two years (since I first initiated a position) my patience is running thin. We’ll have a good idea of where this company is going (for at least the foreseeable future) in the next six months.

      Best regards!

    • Scoonie says

      If you’re looking for another option in the tech sector, I would take a close look at CSCO. They just started paying dividends in March 2011, but have rapidly increased their dividends in the past two years and have committed to using 50% of their free cash flow for dividend payouts and stock buybacks.

      I see a lot of DGI investors own Intel, but very few seem to own Cisco. I think Cisco is the better pick for future returns. They are on my watch list, and I am planning to purchase next time there is a dip. Their stock price is right near their 52 week high right now.

    • says

      Scoonie,

      Thanks for adding that.

      I was actually looking at CSCO back in may around $21/share. At the same exact time I was investigating the company, it shot up something like 10% overnight and out of my price range. It happened very quickly. I wish I would have taken a look at the company a little earlier, because I was within a day or two of purchasing an equity position in the company. Unfortunately, I was just a bit too slow on that one. If I could go back in time I’d likely sell off INTC shares to fund a purchase in CSCO so that my tech allocation wouldn’t go up. Hindsight is 20/20.

      If it comes back down I’d be interested in possibly initiating a position.

      Best wishes!

  3. says

    Nice raises except for NSC that is the only one of the list that I own. MPC is very interesting and ITW not bad at all. I owned 2 or 3 years ago UNP and regret a bit having sold too soon. I think I will go long ITW and MPC next week, although the yields are rather low (I would prefer close to 3%) Thank you for the ideas.

    • says

      Aspenhawk,

      I think all of the above companies make great investments at the right prices. I would argue that MPC is probably the most attractive out of all of them, but ITW and NSC wouldn’t make bad choices at current prices. UNP is a bit pricey for me here, but operational history is excellent (and probably deserves a premium).

      Best of luck!

      Take care.

  4. Spoonman says

    Thanks for the updates. I’ve been a long time ITW share holder so it’s nice to see them boost their dividend by a handsome 10.5%. In years past they’ve only increased their dividend by 5-6%, which in some sense it’s understandable because their earnings took a serious hit after the financial crisis.

    I bought NSC a while back in the low $60’s, so I feel lucky I got to get some shares before the run-up. The price has been somewhat volatile these past few years, so if we hang in there we can get it at a nice discount.

    • says

      Spoonman,

      I’m with you on ITW. Earnings are going to be cyclical with the economy due to their business model, but they’re one of the better companies at managing growth and shareholder returns.

      I’m comfortable with my NSC position here, but would like to add to it with a position in UNP and/or CSX. I’m glad I purchased some additional NSC shares when it dipped below $60. If I remember right, it came down to about $55 for a bit. A great buying opportunity for the enterprising and patient investor. I didn’t catch it that low, but the wonderful thing is that it’s not necessary to catch stocks on the bottom to be a successful dividend growth investor. One just needs to buy high quality companies at attractive prices and reinvest the dividends. That simple.

      Thanks for stopping by! I hope everything is well! :)

      Best regards.

  5. says

    DM,

    All were great investments at attractive prices. Don’t own any currently. I have a little bit CSX and XOM in railroad/oil and gas. UNP is pricey for me now, but if I got in cheaper would have been a nice play. I used to own only a few shares of AAPL a few years ago at $93.68 years ago, but took profits. If had more capital during the recession could have had more of companies like CAT and Boeing in the $30’s also. I found dividend investing to beat speculation. Although I have played with a couple options in the last year for the first time to try and enhance returns so I can buy more shares of a company at once. I don’t like to take too much risk of losing out on that dividend income we all love to see :)

    I have trouble sometimes being patient and buy smaller increment of shares at a time which the commission can eat into short term returns at times.

    • says

      SWAN,

      I hear you on being patient. It’s tough sometimes. Certainly my limited patience has been greatly aided by the high prices on high quality shares right now. Just not a lot out there to really get me excited. However, I did purchase something recently which I’ll be talking about tomorrow. Not a lot else out there I really like though and my purchase was probably a bit riskier than I normally like to go.

      I wish I would have started this journey back in 2008 or 2009 when there were some serious bargains out there. That would have been incredible! :)

      Stay patient. You’ll get some attractive prices at some point. The market always reverts back to the mean.

      Take care!

    • says

      DM,

      I’m looking at one of the closed end funds I purchased recently (GGN). I would rather own individual stocks much like your portfolio, but this yield seems too high at 13.33%(maybe a little riskier, but hopefully stable after a recent cut). PHK is another CEF of the many different Pimco ones for example with high yield at a premium run by Bill Gross, but uses a lot of leverage according to what I have read.

      GGN has an interesting strategy of investing in gold and natural resource equities and generating a high dividend yield by writing covered calls to help fund that dangerously high yield.

      Only problem with a lot of them from what I can tell is the return of capital and this particular management fee may be a little high. If anything I will have a little exposure to precious metals I guess.

      Have you ever considered these funds? Are they too risky and what drawbacks do you see?

    • says

      DM,

      Thanks for that it makes a lot of sense! I opted out of one of the professional management companies in one of my retirement accounts for the same reasons. I still contribute to it, but unfortunately not getting a match and cannot invest in individual stocks like I would prefer to. I think we ultimately can DYI better then most of the professionals who charge fees whether they perform well or poorly.

  6. Anonymous says

    Dividend Mantra,

    Recently I buy my first stocks and begin my road to an early retirement. I’m young and looking for a way to invest in stocks, find your blog and since then I’m an avid reader of your blog. In the next week I’m going to receive my first of many dividends from INTC. Living outside the US, your blog help me to find an inteligent way to invest. Keep the good job,DM!!!!

    • says

      Anonymous,

      I’m glad you found the blog!

      I wish you the best on your journey to early retirement. Great to hear that you’re getting your first dividends soon! It wasn’t that long ago I was just starting as well. The progress can happen quickly. Just keep at it!

      Best wishes!

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