Recent Dividend Increases

moneytruckAs 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. A dividend raise typically means operations are doing well, and management is confident enough about cash flow to give shareholders a raise. All in all, it’s a very 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:

CSX Corporation (CSX) recently gave shareholders a raise, increasing its quarterly dividend by 6.7%. The new dividend of $0.16 per share is a $0.01 increase over the old rate of $0.15. This marks eight years of consecutive dividend raises for the railroad company. I’m a fan of railroads in general due to the huge competitive advantages they have since it’s nigh impossible to just go out and start a new railroad business tomorrow; the barriers to entry on building new track are just too high. This was a prudent, if conservative, raise by management, but the payout ratio remains low at 36.2%, which gives management flexibility in multiple business cycles. The yield, however, is a bit low as well here at 2.27%.

The Southern Company (SO) just boosted its quarterly per share dividend by 3.5% – up from $0.5075 to the new rate of $0.5250. The new yield on shares is now 4.65%, which is rather solid in today’s market. SO has been increasing its dividend for 13 consecutive years now, which is certainly wonderful. However, the payout ratio exceeds 100% from both earnings and free cash flow. Factoring that in with the rather low dividend growth rate (3.8% over the last 10 years) means I’m on the sidelines here.

Kinder Morgan Inc. (KMI) keeps on rewarding shareholders. They just increased their dividend by 2.4%, upping the quarterly payout a penny from $0.41 to $0.42 per share. There’s a lot of controversy surrounding KMI lately; the only controversy for me is where to reinvest my newly upped income! I’m a big fan of KMI at these levels. Where else can you get a 5.02% yield backed by high-single-digit dividend growth. KMI is increasing the dividend almost every quarter based on its historical track record, and there’s not a lot to dislike here. They’ve now tripled their quarterly dividend since going public in 2011. Yes, tripled. And with a stable base of pipeline assets and diversified energy operations, as well as management firmly in the corner of shareholders – CEO Richard Kinder earns $1/year in compensation, but makes over $400 million per year in dividends from his KMI holdings – I’m confident KMI will continue growing its dividend.

Omega Healthcare Investors Inc. (OHI) just increased its quarterly dividend by 2%. The new rate of $0.50 quarterly per share is a nice improvement over the old payout of $0.49. However, what makes this impressive is that this is the seventh straight quarterly raise. Not seven straight years – seven straight quarters. And they have twelve consecutive years of dividend growth on top of that. The yield is very healthy here at 5.75%, and the growth is solid. I’m a shareholder, and a happy one at that.

The Procter & Gamble Company (PG) recently increased its dividend for the 58th consecutive year. The new quarterly per share dividend of $0.6436 is a 7% raise over the old payout of $0.6015. PG is the holy grail kind of stuff us dividend growth investors are after. You’ve got a stable of high-quality brands (25 $1 billion brands) that are sold all over the world. And they share their hefty bottom line with shareholders in the form of dividends. And they don’t stop there; they continue to raise that share of the profit pie year after year since the pie itself is expanding constantly. 58 years of dividend raises is not something that happens by accident. This is the result of a fantastic business model, growth in the underlying business, and prudent management. I consider PG a core holding for me, and while I don’t consider it a steal at today’s prices, one would likely never go wrong paying full price or slightly more for a company like PG. The yield on shares is now 3.16%.

Full Disclosure: Long KMI, OHI, PG

How about you? Own a piece of any of these companies? Happy with the raises? 

Thanks for reading.

Photo Credit: renjith krishnan/FreeDigitalPhotos.net

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51 Comments

  1. I can’t get enough of KMI. My only complaint is that I did not pick up more shares when I last bought it @ $31.00.

    I am also tracking the railroads and will pounce on CSX and SO if we get a pullback on the choo choo stocks, soon.

  2. Jason
    I picked up KMI today in the morning and of course dropped 1% by the afternoon. Been wanting this stock for a while and now finally got some money for it. A dividend raise is very nice.

  3. Hi Jason, I bought few shares of KMI back in February for 33.69/share and added some more when it went down to 31.64. Thank you very much for your advice. Before, I used to be anxious when my stocks goes down but not anymore. My problem now is pulling the trigger when the price is higher than my purchase price lol. Anyway, I have a question about KMI, for the year 2013, the eps was 1.15 with the dividend of 1.56 payout ratio of 136%. cash flow was 2.9 according to s&p capital iq, which will make the payout ratio to 53.8%, question is, what is the better indicator of payout ratio for most company? Thanks for taking your time answering my questions, I will keep on bugging you in the future whenever I have questions, I hope u wouldn’t mind 🙂

  4. I have roughly 225 shares of CSX. An increase of $ .04 means an extra $9/year. I doesn’t seem like much. But if I think of it in percentage terms, 6.7% is fantastic.

    Roger H

  5. I liked the increases from PG, KMI, OHI. Annual dividend increases I get, that are higher than the raises I receive at my day job, where I spend 50 – 60 hours/week, and have to stress about timelines, bosses, coworkers etc

  6. I’m interested in getting some OHI because I think there’s a great opportunity for them in the long term thanks to the demographics shift that’s ongoing. KMI and PG were about what I expected but I’m looking forward to see what XOM and CVX do later this month.

  7. I really enjoyed that KMI raise, and cannot wait to see it hit my account. I think O (Realty Income) upped their dividend recently too, by a small percentage last month. Still, a penny here and a penny there all go towards the dream.

    -Gremlin

  8. It’s tough to be patient, but once you’ve got a portfolio of 30+ holdings, the increases are inevitable and start to become more noticeable as time goes on.

    Good strategy, and hopefully all continues as planned for at least the next 5 years.

    I feel the frustration in my own portfolio, but only because I’m not a patient person. However, I haven’t made any rash decisions and do not actively trade (probably 5 sales since 2012). It does make me drool to think about how much I’ll hold in various accounts in the aggregate within 5 yrs.

    We are all very fortunate. Good luck to all!

  9. Thanks for the heads up on the div increases! I actually own SO but didn’t catch the headline.

  10. I can honestly admit that I had never considered DG stocks until I read your blog. Over the past six months or so, I retooled my entire portfolio to more closely match a DG mindset. I own a few of the stocks you mention, and it’s so nice to see a raise in my payout with very little work.

    Thanks for YOUR hard work maintaining this site and sharing your ideas.

  11. If you had to pick 1 stock to hold for 30 years, what would that 1 stock be? I would choose JNJ. Curious to see what others think.

  12. Thats great news. In all your dividend income these small raises totals how much? 0.5%? Nice to have this kinf of raise every time you update this list.

    Cheers!

  13. That is a great question. Funny enough, I’d also choose JNJ. Others I’d consider would be Coke, Disney, Exxon Mobile, and General Electric.

  14. I’m inclined to agree with your analysis that the market is being overly negative on KMI, my one hesitation comes from its youth as a dividend payer. Obviously I’ll be kicking myself 10 years from now if I don’t get into it simply because it’s new to the field and it continues to perform, but equally obviously there’s greater risk for a new player. What are your thoughts on age vs. dividend performance, and what’s your metrics for investing in a company despite lacking a long-term track record of payments?

  15. Yeah it’s really tough to be patient! I agree! I’d like to have a million invested by tomorrow and to finally retire from the rat-race. If only I could have started investing 10 years ago. I instead throwed my money away in restaurants, bars and stupid purchases + a huge mortgage… because I didn’t know how to invest it with some intelligence and because I thought that I would love working in my field and could spend all my life in a 9 to 5 job like my dad did… But no… I can’t.

    I guess I’ll teach my kids to do better than me in life lol I’ll make them become dividend growth investors as soon as possible and try to make them financially free in their ’30s.

    I didn’t have any dividend increase in my very small portefolio yet but I’m waiting for a nice bonus to finally be deposited in my trading account (these transfers between financial institutions take so long…). Maybe if they wait long enough there will be a nice market correction… Who knows? 😉

  16. Pursuits,

    Absolutely. No need to bend over backwards for management or beg and plead for more money. Owning high-quality companies means you’re likely going to get a raise simply because they’re doing better and they want to share that with shareholders. This is why I’m slowly moving away from the working class and toward the investor class. 🙂

    Cheers!

  17. Matthew,

    KMI looks great here. I’m hesitant to add more, though, because of the risk involved. It’s a highly leveraged business, so that’s something to keep in mind.

    And CSX is one of those companies that I’d like to eventually own a piece of. I’d like to be like Monopoly and own four – NSC, CSX, UNP, and CNI. 🙂

    Best regards.

  18. Charles,

    I think you’ll be happy with KMI over the long haul. I’m interested in adding more here, but I’m also a bit tight on capital and I’m already heavily allocated to the company. I do think, however, that it’s one of the better opportunities available right now.

    Take care!

  19. Christian,

    The best way to look at MLPs and GPs is to look at DCF (Distributable Cash Flow). This tells you what’s available for dividend payments. KMI has typically come pretty close to 100% a lot of times in terms of its payout ratio from this figure, and a couple of times has exceeded it. However, this is due to KMI’s self-proposed rapid dividend growth rather than an issue with DCF. Furthermore, the reason you don’t use earnings for these businesses is, because like REITs, they face large depreciation and amortization costs.

    I hope this helps!

    Cheers.

  20. Ronald,

    Thanks for stopping by!

    Glad to have you as a fellow KMI shareholder. I don’t know about you, but I’m pretty happy. Richard Kinder (same initials as you!) has been very open about what he wants to do; he then goes out and does it. I love that type of communication and conviction. The fact that Mr. Market isn’t favoring the stock right now just makes it all that more attractive to me.

    Best regards.

  21. Roger,

    $9 doesn’t seem like much, but think about it like this: At a 2.27% yield, you’d have to invest almost $400 to receive that $9 in annual dividend income. That’s $400 less you now have to invest to achieve the same end result. Pretty cool, right? 🙂

    And every penny does indeed count.

    Cheers.

  22. DGI,

    Couldn’t agree more. It doesn’t matter if I’m a piss poor shareholder, I’ll receive my raise no matter what. Contrast that with your role as an employee, and you’d better be a damn great worker to get 7-10% annual raises like clockwork. It’s a totally different relationship, and I much prefer being a shareholder! 🙂

    Best wishes.

  23. JC,

    March was fantastic for dividend raises, and April is also fantastic thus far. I’m also looking forward to XOM and CVX. In addition, JNJ should be announcing a raise any day now. As its my largest holding, I’m VERY much looking forward to that one.

    It’s just great to be a dividend growth investor. 🙂

    Cheers.

  24. Steve,

    I track my portfolio using Seeking Alpha’s portfolio tracking tool. You can enter in the holdings you want to follow, and they’ll send you emails whenever press releases are announced, changes happen, or articles are published regarding the companies. I also tend to know off hand when certain dividend raises are coming and keep an eye out for announcements.

    I hope that helps!

    Take care.

  25. Gremlin,

    I’m with you: I’m also very excited to receive the now larger dividend from KMI.

    And O did up their dividend recently by a very small amount in typical fashion. I don’t often write about very small increases like what O does, but that doesn’t make it any less important! More money is always good. 🙂

    Cheers.

  26. Ravi,

    We are indeed fortunate. I often think of how fortunate I am. To be adopted at a young age and be removed from a very dangerous situation in Detroit literally saved my life. And just to be born in the 80s in modern day America puts me far ahead of most of the people who have ever walked the planet, and probably ahead of 90% or so of the people alive today. In addition, I wasn’t born with a disease or mental disorder. Like Buffett says, I won the “ovarian lottery.”

    To be able to then save some of my income and invest it regularly just skyrockets my good fortune into the stratosphere.

    Thanks for adding that. I couldn’t agree more!

    Best wishes.

  27. fiveoh,

    Glad you found some value in the post. I don’t publish every dividend raise, but I try to catch most of the major raises and write an article on them when I can. Dividend raises are obviously exciting, so I’m always happy to talk about it. 🙂

    Best regards.

  28. Liam,

    Hey, glad to hear that. I hope the new strategy works to your benefit. I think you’ll do well over the long haul if you stick with it, but, of course, anything can happen in the short term. In the meanwhile, collecting even more income via a raise is quite fun, isn’t it?

    And thanks for the support. I’m more than happy to write, share, and inspire because the audience here is so receptive and kind. I’m really lucky!

    Best regards.

  29. Jon,

    That’s an interesting question. If it was like Highlander and there could be only one, I suppose my pick would be The Coca-Cola Company (KO). Hard to argue against owning the world’s largest beverage company. Sure, carbonated beverages may not be around as much 10 or 20 years from now, but people are always going to drink SOMETHING. Whether that’s juice, tea, water, coffee, or sports drinks, KO has an answer. JNJ would probably be in my top three. It’s my top holding, so I’m obviously a fan. 🙂

    Cheers!

  30. Trader,

    I haven’t actually tallied up how much my dividend income increased on a % basis against total income, but it would be an interesting exercise. I typically look at this on a quarterly or yearly basis, but looking more often would be interesting. 🙂

    More money – no matter how small a sum – is ALWAYS a good thing. Those little raises add up over 20-30 years, that’s for sure!

    Take care.

  31. Michael,

    That’s a great thought there. I should put together an article on this sometime soon.

    I prefer investing in companies with at least 10 years of dividend growth; however, I do consider more than just raw numbers. For instance, I invested in PM a while back even though it was far from 10 years of dividend growth, and this is because it was a spin-off of MO, and already “technically” had a lengthy dividend growth record. And KMI makes sense to me because it’s not a “new” company. It was public, and then brought private by Kinder and investors. Now, it’s public again. It’s not a new tech startup with no history to speak of. So that’s something to consider when looking at dividend growth records. In addition, one should look at prior dividend growth records. WFC and GE are examples of companies that had lengthy dividend growth streaks and fell on hard times that may come around just once in a generation. And now they’re back to aggressively growing dividends. So you can kind of see a culture there where if management can pay you more, they’re going to. That says a lot about how they value shareholders.

    Just some thoughts!

    Best wishes.

  32. Allan,

    I hear you, my friend. I wish I could travel back in time and tell my 21 year-old self what I know now. I definitely would have never wasted away an inheritance. It’s certainly likely that I’d be very close to financial independence right now, or perhaps already there. But such is life. The important thing is that we learn from our mistakes and become better individuals. Experience is sometimes expensive; they key is to use that experience to better yourself in future circumstances. At least then you’re getting your money’s worth. 🙂

    Cheers.

  33. Mark,

    I’m with you. I’m loving the raises. More money in my pocket is more capital I can reinvest, thereby buying more shares and more future dividend income. The snowball just keeps rolling. 🙂

    Best wishes.

  34. DM,
    I was happy to see CSX and PG (new in my portfolio) raise dividends. Although CSX called the increase 7% in their press release. I thought that was a generous round-up! But I’ll take it.
    -RBD

  35. Interesting question by Christian.
    Jason,
    Could you please clarify your understanding of “KMI’s self-proposed rapid dividend growth”? Who benefits the most which such a policy wherein PO>100% and what do you think could be the cost basis of those shares which benefits the most from such a policy?

    It’s been a long time since my last comment on your blog. The last was when someone was wrongly splicing your views from different time points around REITS back in 2013. It seems such readers have gone away.

    Great blog here. Keep up the good work. It’s not easy to run such a blog and actually reply to each one of the comments. Tremendous effort. Best wishes always to you.

  36. Like monopoly, nice!
    I would add KSU to that list too. Low-ish yield for now, but nice recent dividend increase – and management mentioned a commitment to increasing the dividend over buying back shares. (And a great geographical position with the Mexican economy).
    I’m long KSU, CSX and UNP. (KSU is a slower long term grower like V to me).

    Over the past weeks I’ve added to BP, KMI and swapped out some WMT for ARCP, but that was mainly because it’s in my Roth and REITs are so much better to hold in a Roth. I think I will dedicate my Roth for REITs only, so I will be shuffling my O and OHI around too.

    Also loving the dividend increases, long PG, CSX, KMI, OHI.
    I got into WEC last month before the run up to add a bit of utilities to my portfolio. Might have a look at SO.

    I know you’re not too much into tech, neither am I, but might be worth having a look at digital real estate? STX and WDC are part of my portfolio (they do add some volatility though and their div history is young).

  37. RBD,

    If I were a CSX shareholder I’d be pretty happy with the raise. I wish I would have bought some CSX back when I was loading up on NSC around $60/share. Railroads were pretty cheap back then!

    And I’m glad to have you on board as a fellow PG shareholder. The more long-term investors, the better. 🙂

    Best regards.

  38. All About Dividends,

    I’m all about dividends, too. 🙂

    As far as Kinder Morgan’s dividend policy, I suppose those who benefit the most are the largest shareholders. Of which, Richard Kinder himself is tops. I would suspect if I ran my own company I would do what’s in the best interest of the ongoing operations, especially if that’s my cash cow.

    And thanks for stopping by and commenting! I really appreciate it. My articles are of some value, but the comments surpass that value by far. 🙂

    Cheers.

  39. AlphaTarget,

    I guess I could add KSU to that list. They’re not exactly building new track these days. 🙂

    I haven’t looked at STX or WDC yet. Maybe I’ll have to take a peek under the hood and kick the tires.

    And nice job on WEC. I looked at it a while ago and unwisely passed. It’s been a fantastic performer in all aspects.

    Best regards!

  40. Last monday KMI became my first investment into dividend growth stocks. High yield, high growth and a fair price. I think I could have done worse. Can’t wait for the first dividend to flow in and be reinvested!

    Best,

    DW

  41. DW,

    I think you could definitely do much worse than KMI right now. I think you made a fantastic choice. I tell you, if I weren’t already so heavily invested I’d be right there with you loading up! 🙂

    Cheers.

  42. DM, I would keep an eye on SO for an entry point. I concur with you about the current high payout ratio, but over the last 10 years it’s been closer to 75-77 percent. I like the forward thinking of management, not to mention a very healthy dividend…….CapeCapMgmt

  43. David,

    Thanks for dropping by!

    I appreciate your perspective, so I’ll keep an eye on SO. I suppose one could drop the discount rate down a bit for utilities considering their stable revenue base. However, are you not concerned about the FCF? The payout ratio against earnings looks bad, but against FCF it’s even worse.

    Cheers!

  44. I concur DM, and share your concerns, but keep in mind, the long term average earnings payout ratio for this company, has been in the low to medium 70’s……And the consensus earnings for the next few years will put the payout back into the 70’s again. As for the free cash flow payout, which is important to me as a cash flow watcher, remember the company is in the middle of a massive construction/expansion program in several locations which will increase capacity to meet future growing demand for energy in the Southeastern US. This is certainly driving the capex portion higher, which reduces the free cash flow. Remember, capex spending is a good thing provided it is for the right reasons……
    I am also long WEC and certainly like their current payout numbers better than SO today, but I think SO is planning for the future and with a 60 year track record of paying dividends, I am comfortable having them as a business partner. Doesn’t mean I don’t continue to monitor them, as I do all my 45 companies. Always good to see your articles DM. Continued good luck and stay in touch!!

  45. David,

    Thanks for adding that. And I hear you on the expansion program affecting FCF. They’ve had negative FCF going back a number of years, but as long as you’re comfortable as a business partner that’s all that really matters. And I’m not saying it won’t be a fantastic investment. Rather, I’m just a bit leery considering the current yield and growth rate. On the contrary, I hope it turns out to be fantastic for you! 🙂

    And WEC is a great utility. I totally missed out on that one. Great job there.

    Best regards!

  46. More dividend raises!

    IBM .95 to 1.10. 16% increase
    WFC .30 to .35. 17% increase

    These are some quality income boosts.

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