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

In addition, dividend raises from companies I own a stake in means my personal dividend income is increasing, thereby speeding the effects of compounding since I’ll be able to reinvest larger dividend payouts back into dividend growth stocks that are also regularly paying and raising dividends. It’s a truly wonderful cycle. And it just brings me that much closer to financial independence.

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:

Target Corporation (TGT) recently announced a huge dividend raise, boosting its payout by 20.9%. The new quarterly per share dividend of $0.52 is a nine cent increase over the old payout of $0.43. This is a welcome relief, as shareholders have been on a bumpy ride over the last year. This troubled retailer has been rocked by a massive data breach and a Canadian expansion effort that hasn’t panned out as expected. However, changes in management and this recent raise gives me confidence as a partial owner in the company that Target takes its shareholders seriously, and is anxious to right the ship. With this raise in the books, Target has now boosted dividends for 47 consecutive years. The yield on shares is now 3.63%. If I wasn’t already heavily invested in Target, I would be buying shares at today’s price.

Helmerich & Payne, Inc. (HP) just boosted its dividend for the 43rd consecutive year in a row, upping its quarterly per share dividend by 10% – now paying out $0.6875 per share over the old payout of $0.625. HP has been aggressively increasing its dividend over the last few years, and as such has come into the radar of dividend growth investors like me as its yield on shares has risen. Historically speaking, HP’s shares have often yielded less than 1%. But with a yield on shares that currently stands at 2.43% and a very lengthy dividend growth streak, this contract driller deserves a little more attention.

Caterpillar, Inc. (CAT) gave shareholders a nice raise, recently increasing its dividend by 16.7%. The new payout of $0.70 per quarter per share takes precedent over the old rate of $0.60. This is now the 21st consecutive year in which Caterpillar has increased its dividend payout. I took a good look at CAT last summer when it was priced at just over $80 per share, and it’s been on a heck of a run since then. I passed because I was concerned about the cyclical nature of its business, high capital expenditures, and competition. But perhaps I made an incorrect read there as management has a very optimistic view of the business and the underlying operations seem to support that view. Of course, I tend to stick  to companies that experience more secular growth so I don’t feel too bad about missing out on this particular opportunity. The yield on shares is now 2.62%, which is fairly solid for this industrial giant.

FedEx Corporation (FDX) recently increased its quarterly per share dividend from $0.15 to $0.20. This represents a 33.3% increase in the payout, which is fantastic. Unfortunately, the yield on FedEx shares at just 0.57% is too low for me to get very excited about. While I’m occasionally willing to invest in a company with a yield below 1%, the dividend growth has to be especially high to compensate for the low starting income. And with a 10-year dividend growth rate of just 10.7%, FedEx doesn’t make the cut for me here. However, that could change in the future more raises in line with this one. FedEx now has 13 years of consecutive annual raises under its belt.

Full Disclosure: Long TGT.

Are you a shareholder in any of the companies listed above? A fan of these recent increases? 

Thanks for reading.

Photo Credit: renjith krishnan/FreeDigitalPhotos.net

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46 Comments

  1. Very impressive!
    For an european (I live in Portugal) guy its awsome to see that and I feel jealousy I can’t invest there. Too many fees and taxes for a small wallet like mine.

    Around here the only good dividend payers are over-debted in my opinion and I don’t feel its good to take debt to pay dividends. it’s just not for me.

    By the way, do you like soccer? many big companies sponsor thes world league in Brazil.

    Cheers!

  2. My wife and I are both rejoicing at the friggin awesome TGT dividend increase. It’s that type of epic increase that gives us confidence in our FI future. And guess what we had to do to receive such an awesome increase? Just hold on to the shares, even through a bumpy year. The company is fundamentally sound and this increase makes that very clear.

    I hope next year WMT will do another large increase. I sure hope it’s better than the 2% increase they gave last time.

  3. The size of Target’s raise shocked me, but it shows that management is STILL committed to returning capital to share holders……….and still confident about the company’s future. It was heartening to see. Hope you enjoyed the lake. Have a great week buddy
    -Bryan

  4. Target has definitely had a rough time lately. Its good to hear things are looking up. Does the Dividend payout speak well of the company as a whole, or does an increase suggest an improvement in a smaller portion of the company?

  5. Trader,

    I agree that we’re lucky over here in the US with our easy access to the stock market, and the fact that the market is chock-full of high-quality businesses that pay and regularly raise dividends.

    However, if I were living somewhere else I’d just try to figure out what advantages that system offers and make the most of them.

    I don’t really watch much soccer, but I do hope some of the companies we’re invested in take advantage of that platform. 🙂

    Cheers!

  6. Spoonman,

    I’m with you. An epic increase, indeed. And it’s certainly worth rejoicing. 🙂

    I can imagine how a raise like this certainly brightens the prospects of living solely off of dividend income. When inflation is running at ~2% and you’re getting double-digit pay raises it’s easy to see how the spread between income and expenses increases over time.

    I also hope we have a bigger dividend increase coming our way from WMT next year. Another 2% or so raise and it might be on the way out for me.

    Thanks for stopping by!

    Best regards.

  7. Bryan,

    Oh, I had a great weekend. It was so nice to spend time with family, and the weather was really nice. It was just a tad chilly, but the sun was shining bright and the lake was beautiful. We had a bonfire on Saturday night and goofed around. Good times.

    I wasn’t expecting such a big raise from TGT, but I certainly won’t turn it down!!

    Hope you have a great week as well. 🙂

    Best wishes.

  8. I am shocked at the dividend raise on this magnitude from Target. Up her in Canada, the stores are not doing well. Their prices up here were high compared to their main competitor Walmart. The new person in charge of Target for Canada said if they have to lower prices they will. So, if this new guy turns the Canadian operations around then I would expect another double digit increase next year.

  9. The Wallet Doctor,

    Well, the dividend increase speaks to the entire company because the payout comes from cash flow that is generated from company-wide operations. I’ll be honest and tell you I wasn’t expecting a raise like this. If I would have had to predict the raise, I was expecting a 7-10% raise, which would have put the new dividend somewhere around $0.47 quarterly per share.

    Obviously, management is extremely confident about turning things around. I’m not real concerned about the data breach, but I am hoping they get things turned around in Canada. But things are looking up. The recent news from Target has talked about improvement in the Canada segment, and the change in management should shake things up for the better. In the meanwhile, shareholders are getting paid (more) to wait.

    Cheers!

  10. TGT is about 3% of our dividend holdings. I’m down about 7% on paper, in that I apparently jumped the gun on purchases. In the past, TGT never got to a 3% yield. Now that it’s at 3.6%, it seems that the market has a very low opinion of the company.

    Needless to say, I was thrilled at the size of the div increase. They like to broadcast their intent to continue with dividend raises, but I never thought it would be so huge. I’m tempted to buy more and bump it up to perhaps 5% of our holdings. Still, I think they have some issues to work through, with the biggest problem being Canada. The data breach will slowly fade away, assuming it doesn’t happen again.

    Other concerns:
    * A new CEO is coming. Is that bad or good? Hard to say.
    * Canadian operations President is being replaced. Again, bad or good? Probably can’t get worse.
    * Problems growing revenue overall?

    For at least the immediate future, TGT is not a slam dunk stock. I also think it’s likely that the dividend increases will start to taper back, at least a little. The payout ratio has taken a huge jump from previous years. Sooner or later, the div increases will have to align with earnings growth. My biggest concern for now is for earnings going forward. They have their work cut out for them. For these reasons, I won’t consider buying any more unless the price drops to $56 or below. Just my .02.

  11. DM,
    I was delighted to see the increases from TGT and CAT last week. They were the only sunshine during my cloudy week at the beach! I don’t expect to see any more increases in my portfolio until next month when we should hear something from VZ. Not a guaranteed raise by any means.
    -RBD

  12. No surprise I am another one ecstatic about the raise by TGT which is also in my portfolio. I will be making my quarterly contribution to my portfolio this week and I am targeting Target for possible accumulation. Keep up the great work DM. Always looking forward to your next article.

  13. RBD,

    Man, sorry to hear about the bad weather during your vacation. That sucks!

    At least you got some serious dividend raises, so that counts for something. Sunshine, indeed. 🙂

    Now that I’m a shareholder in VZ I’m anxious to see what we get there. I expect something in the low single digits.

    Take care.

  14. BCS,

    Targeting Target, huh? I like that.

    I had no prior plans to buy any more TGT, but with a 3.6% yield it’s tough to not get a little greedy during when others are fearful. I was honestly looking at BAX and V up until now, but TGT is enticing. We’ll see.

    Thanks for the support. I really appreciate it!!

    Take care.

  15. TGT’s increase was quite surprising to me. Given all of the recent negative news I think just about all of us would have been happy with a 5% increase. But wow! 21% is awesome. I’m interested in Fedex and need to take a look at them and UPS to see how they compare and how the DG streaks are. Hope you had a great weekend with the family.

  16. Steve,

    I’m totally on the same page.

    I think TGT has a lot of questions, and this dividend increase only answered one of them. The CEO change, the problems in Canada, the ultimate costs of the breach, and growth in e-commerce are all questions that are still out there.

    However, earnings are abnormally depressed right now. I expect dividend growth to remain strong, assuming earnings normalize over the next 12-24 months. The breach shouldn’t be a problem for the company looking out over the long haul. And I’m confident the board will pick the right managers, but we’ll see.

    But this is definitely no slam dunk stock. But the valuation and yield does merit some serious interest here. I don’t anticipate buying any more, but a 3.6% yield just kind of screams opportunity. I only wish I wasn’t already a bit loaded up on it.

    Cheers!

  17. Investing Pursuits,

    I was also surprised by the size of the dividend increase. Although the company had mentioned a raise near this level in prior earnings reports, I expected something smaller. But I certainly won’t turn more money down! 🙂

    I agree things need to turn around in Canada. I think that’s their biggest issue right now, as it’s been reducing earnings heavily. I’m anxious to see how new management turns things around. They need to focus on what the customers want, and from what I understand merchandise selection and price are the biggest issues.

    Best regards!

  18. JC,

    Yeah, I was surprised by the raise as well. Although the company had talked about raising the dividend on par with what they delivered last year, I expected with everything that’s been going on for the actual raise itself to be lower than expectations. I figured somewhere closer to 10%, and I still would have been happy.

    But I’ll gladly take this raise! 🙂

    Looking forward to seeing what you come up with if you take a look at UPS and FDX.

    Thanks for stopping by.

    Cheers!

  19. An increase in dividends is always good – it brings you one step closer 🙂 hope you’ve had a good weekend!

  20. Everyone went wild over the TGT increase. By far one of the most surprising increases. A nice change of pace considering many were disappointed with the most recent CLX increase.

  21. Hey Jason, greetings fr Tokyo where I’m on a work trip. I too own Target but it remains a low conviction holding for me…

  22. TGT’s raise really surprised me, but as a shareholder, I am really happy. I think the board wanted some good news attached to the company after a long time. I hope the company bounces back from the recent troubles.

  23. Too sad :(. I don’t have the stocks you mentioned above.

    Regarding the Target (TGT), I know it is a great company in US, but I guess it didn’t land properly in Canada. Actually, Canadian were disappointed from the beginning (during the entry period) with Target stores because of high price, and people stopped visiting there. My wife and I went to one of the Target store near Toronto (it is in very busy shopping mall) last weekend to check the prices and noticed there were more employees than customers. We went to the Grocery units to see the prices, and learnt that the prices are 50% or more higher than a grocery store, NoFrills, just a block away from the Target where people were line up in cashiers. Finally, we left the store without spending a penny.

    Employees at Target were chatting with each, some texting or playing games and some dedicated stuffs folding cloths that were already folded. Honestly, I thought new Canadian head may make changes, but , unfortunately, I don’t see any improvement.

    Regards,

  24. DM,

    The Target increase was fantastic as well as unexpected. I was a little concerned as this is one my of larger holdings, but they came through with a big statement. I think with a 3.6% yield more value investors and mutual funds might renew their interests in Target. Also, maybe someone at Intel will take notice. 🙂

    MDP

  25. DivHut,

    This is exactly why we diversify. You get a 4% increase here and a 20% increase there, but in aggregate you’re getting a really nice boost in YOY dividend income. As long as I’m outpacing inflation by a decent margin that’s all that really matters to me. It’s all about increasing purchasing power.

    Thanks for stopping by!

    Take care.

  26. DD,

    Greetings! Never been to Tokyo. Would love to visit, although I understand it’s pretty crazy over there. Enjoy the trip. 🙂

    I hear you on the low conviction. Retailers in general face a lot of headwinds, so I can’t blame you. I also do not have the same conviction in Target as many of my other holdings. I have a slightly bigger position in the company than I’d like, and that’s simply because the price was right.

    Best regards.

  27. DGJourney,

    Yeah, I was a bit surprised by the raise as well. Even though management foreshadowed this raise it’s one thing to talk about it and another to actually do it.

    I also hope they can eventually bounce back, especially in Canada. We shall see!

    Cheers.

  28. Arun,

    Your anecdotal experience with Target in Canada is very similar to what I’ve been hearing. From what I understand, it’s a merchandise and price issue. These are both aspects of the business that Target can control and fix. So I can’t see this being a long-term issue, but maybe burned consumers will never come back.

    We’ll see what Tesija and Schindele are able to do for Canadian operations. The good news is that it can’t get much worse.

    Best wishes.

  29. MDP,

    This was definitely a wonderful raise. I know management had been open about intentions to raise the dividend this much, but I assumed we’d still see something lower with the CEO ouster and continuing questions in Canada and ultimate costs in regards to the breach.

    I thought about adding to my TGT holdings after this recent dividend boost, but I think I’m going to hold pat. I never intended for TGT (or any retailer) to be a big position, so I’m just going to enjoy my pay raise. 🙂

    Best regards.

  30. Dave,

    You could very well be correct there. I think it’s more a question of timing, though. Will physical stores go away in the next 10 or 20 years? I find that hard to believe. In addition, as e-commerce grows (because people still have to buy stuff from someone) these big box stores will have to bolster their offerings there. WMT has been doing much better here than TGT. And these stores can still provide a boon for logistics, as WMT is still building out its stores as shipping points.

    I guess we’ll see what happens. I’m not real bullish on retailers in general because of low margins and the fact that history isn’t kind to many big retailers. However, I don’t think all physical stores will be extinct any time soon.

    Take care!

  31. TGT sounds pretty good right about now. Maybe I should pick up a few shares. Everyone I know like Target and I think they’ll stick around for a while. It’s always packed there where we live.

  32. Joe,

    Thanks for stopping by!

    The yield is certainly enticing here. I think it basically comes down to whether you believe TGT will be a bigger and better company five years from now. I can’t imagine them doing much worse, but there are still general trends in retailing that aren’t working to their favor.

    I believe they’ll fix things in Canada and the breach will be forgotten a year or two from now. However, they need to get their “chic” back.

    Best wishes!

  33. Two of the companies mentioned here (TGT and HP) have been paying increasing dividends for over 40 years. Any idea what the longest streak of paying increasing dividends might be? The Dividend Champions list only contains companies that are still on their increasing streak. I have not been able to find a list of former Champions other than the snippet on the “notes” tab of the Dividend Champions spreadsheet.

  34. Jake,

    That’s a great question. I’ve never heard of a company with 60 or so years of dividend growth all of the sudden stop. But while I doubt you’ll have any companies with longer streaks than what can already be found via companies like Diebold and American States Water, perhaps David Fish might be the best guy to ask? Although, I’m pretty sure the notes section contains all of the prior Champions that have been cut due to eliminated/reduced/static dividends. Maybe I’ll see if David can answer this for me.

    I’ll get back to you if he responds to me.

    Best regards!

  35. DM,

    Great article! Of course I was hoping to see TGT in here.. adding to your position may not be a bad idea of you have capital. Also – have always loved CAT, but like you – was weary of the cyclical patterns, as well as the industry. Never really saw that “right” price for CAT, but me saying that tells me that’s the wrong mindset as an investor. If it’s a strong company, with strong fundamentals and a track record for performance and dividend growth then…. But obviously would like them at a smidge higher yield. Great article, thanks again DM for placing this out here.

    -Lanny

  36. Lanny,

    Yep, I passed on CAT around the $82 mark for the exact reasons you cite. I regret that a bit, but I still feel the same way today about the cyclical patterns of its profitability and rising competition. I think we’re looking at a very similar situation with DE right now at $90. However, DE is looking at even worse profitability forecasts over the next two years. But if we are truly long-term investors, does this matter? Interesting question. Of course, while I’m not recommending timing, it’ll be interesting to see what happens with DE over the next 12-24 months. Either the P/E ratio will expand or the price will fall. Either one could present even better opportunities. 🙂

    Thanks for stopping by!

    Cheers.

  37. Aspenhawk,

    Glad to have you on board!

    I think you’ll be very happy if you’re in it for the long haul; the short-term could present a lot of volatility. The shares are depressed right now, which has led the yield to an all-time high. Target just needs to execute now.

    Best regards.

  38. DM,

    The current longest streak for increasing dividends stands at 60 years (AWR and DBD as you mentioned). Seeing a company increase its dividends for many decades seems like a good sign. Yet at the same time it can make you wonder if the company is nearing the end of its “winning streak.” That said, there are several companies that have been paying dividends for over a century so a dividend freeze every few decades may not be that bad. I (and probably other readers too) would curious to see if David could offer any more details.

  39. I was very surprised that TGT raised dividends by huge %…. I was considering to open position in TGT couple of years ago, but after they started to do business in Canada and I’ve seen completely deserted stores in Ontario (cannot compate even close to Walmart or SuperStore), I decided not to buy TGT….
    Also was watching HP for some time, but it always looked expensive to me….

  40. btw, Jason, was wondering if you ever took a look at SDRL…. I recently opened position….this driller increses dividends practically every quarter, has above 10% yield, extremely low P/E = 3.7 and payout just 37%!

  41. gibor,

    They’ve got some issues in Canada, no doubt about it. But I’m confident they can fix it. It’s simply a merchandising and pricing problem, and that’s something that they’ve got plenty of experience in. But I don’t blame you for having a bit of hesitation there. I like the company and the stock here, but I also never planned on having a big allocation to it as I’m not a real huge fan of retailers in general. I actually like WMT the best, and I didn’t mean for my TGT position to be larger.

    SDRL is interesting, but I can’t get a compelling case going other than the yield. And a high yield like that is usually a red flag. The short-term and long-term debt are being piled on, and they’ve been issuing additional equity on top of it. As I understand it, that’s to fund the rigs. But I’ve read that the rates are declining there, and there’s a possibility of an overbuild. Earnings are erratic. Revenue is going in the right direction, however. My biggest issue might be the cash flow, though. The FCF situation is horrendous, and I can’t see how they’ll continue funding that dividend at this rate. Well, actually I do: By issuing more debt and equity, unfortunately.

    Just too risky for me, my friend. But I wish you luck with it! 🙂

    Cheers.

  42. gibor,

    I read that. The backlog is compelling, but the financial statements paint a picture that just doesn’t agree with me. Furthermore, that “special fund” at $0.16 per share is basically worthless when the dividend is already $4.00 per share.

    I have no skin in the game, so I’m just giving you an outsiders opinion. I wish you the best of luck with the investment. 🙂

    Take care.

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