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 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:

Aflac Incorporated (AFL) recently increased its dividend 5.7%, increasing the quarterly payout to $0.37 per share from the old rate of $0.35 per share. The yield on shares is now 2.3%. Although this raise was a bit lower than I had anticipated, it’s still a healthy boost and puts AFL into rarefied territory with 31 years of consecutive dividend growth. Although I still think AFL is a smart pick for a dividend growth investor seeking exposure to an insurance company, my current position in AFL is about as large as I’d like it to be since I loaded up on shares at much lower prices and the run-up has pushed AFL into a major holding for me.

Abbott Laboratories (ABT) surprised investors with a huge dividend raise, boosting the quarterly dividend by a full 57%. The company now has a quarterly dividend of $0.22 per share, which is a big jump over the old rate of $0.14. Shares now yield 2.36%. I didn’t think ABT would raise the dividend that much right out of the gate, as they now operate separate from the legacy pharmaceutical business that was spun-off into AbbVie Inc. (ABBV). It looks like I’m going to end up regretting selling my ABT shares earlier in the year, but I’m comforted by the knowledge that I can always initiate a position in the company again (and may do so).

Kraft Foods Group Inc. (KRFT) recently raised its quarterly dividend to $0.525 per share, an increase of 5% over the old quarterly dividend of $0.50 per share. Not a bad raise at all, considering that shares in KRFT currently yield 3.88%. I personally go back and forth on KRFT. The business model is attractive and easy to understand, but they operate solely in a mature U.S. market and they also have a fair amount of debt. Shares aren’t overly expensive with a P/E ratio of 17.25, but they’re not cheap either.

Phillips 66 has been an outstanding serial dividend grower since being spun-off from ConocoPhillips (COP) in 2012. They recently raised their quarterly dividend by 24.8%, now paying out $0.39 per share over the old rate of $0.3125. They’ve now raised their dividend three times since their initial dividend was paid out in September of 2012. Shares now yield 2.43%. I continue to be pleasantly surprised by PSX and I’m surely glad I held on to shares after the spin-off was completed. PSX is now the largest independent refiner in the U.S. and operations continue to do well.

United Technologies Corporation (UTX) recently gave shareholders a nice raise, increasing its dividend by 10%. The new quarterly payout of $0.589 per share supersedes the old rate of $0.535. UTX shares currently yield 2.19% after factoring in the raise. UTX is one of those steady companies that just continues to hum along. I regret never buying shares in this industrial titan, but for one reason or another always found other companies with which to invest my capital. As I like to say: so many companies, so little capital! However, I once again find myself with a reason to not invest in UTX; shares currently sport a P/E ratio of 19 with a fairly low yield.

BP plc (BP) boosted their dividend recently by 5.6%, raising the quarterly payout by $0.03 from $0.54 per share to $0.57 per share. The yield on the new rate is 4.85%. This raise isn’t bad at all considering the high yield, and I personally find BP shares fairly attractive here as evidenced by my recent investment in the company. The P/E is currently south of 6 and I believe that as BP moves past the ongoing litigation surrounding the Deepwater Horizon incident the shares will recover. BP has been actively raising the dividend since the spill, and this is now the fourth dividend increase since the dividend was temporarily suspended in 2010. I’m confident they’ll continue increasing it at a modest pace going forward.

Emerson Electric Co. (EMR) just today announced their 57th consecutive annual dividend raise, increasing shareholders’ quarterly per share dividend from $0.41 to $0.43 – an increase of 4.9%. Although dividend raises have never been outstanding with EMR, you can count on them like clockwork. This raise is still well above inflation, and hence increases purchasing power if you’re a shareholder. The yield on shares is now 2.57%. Although I’m not particularly enamored with EMR at current prices as a new investment, I’m a happy shareholder who’s content to continue holding long.

Own any of these companies? What’s your thoughts on these raises? 

Full Disclosure: Long AFL, PSX, COP, BP, EMR

Thanks for reading.

Photo Credit: FreeDigitalPhotos.net 

Edit: Added BP and EMR raises.

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27 Comments

  1. DM,

    That ABT increase was a great surprise, its the only one I own out of these. It was odd when the split-up was finalized that ABBV had a much greater yield. This increase shows the company is serious about staying on the div aristocrats list and is confident of its balance sheet and pipeline. Also, the more I read about PSX, the more I like.

    -RBD

  2. RBD,

    That ABT increase was phenomenal. I wish I would have held, but of course I purchased some additional shares in JNJ with some of the proceeds so I can’t complain too much. I may invest in ABT again, especially seeing as how after the huge increase the yield is somewhat attractive.

    Best wishes!

  3. fiveoh,

    Nice. I didn’t catch that one yet. Not too shabby.

    I need to publish a second article I think – I also forgot to include BP’s recent increase. Doh!

    Best regards.

  4. I was happy with the 5% compared to last years 2.5%. If you look at their div increases they are very cyclical, just like the companies earnings. Hopefully if ’14 is a good year they will bump it even more.

  5. I miss having ABT in my portfolio, I will consider adding it back as well (or maybe ABBV). I was somewhat disappointed by AFL’s low increase. The stock has sky rocketed since I bought it at $33, so presumably the business is doing great. It’s difficult to complain though, 5.7% is way higher than the silly increases I get at work.

    I just became a proud owner of BP!

  6. Increases greater than inflation continue to expand our dividend purchasing power. I am a little disappointed with the AFL increase as they have really exploded, but I am content to ride them and let them keep on growing that distribution.

    Hindsight is always 20/20, so selling my BP holding this past summer, even though for a small gain, is something I regret. I will probably look to jump back in a some point soon.

  7. I knew that AFL and EMR were due to announce prior to the next payout but couldn’t remember when to expect them. I’m not super excited about the increases, nothing like V’s recent 20%+, but steady 5% increases will still do the job and increase my purchasing power faster that inflation. Would love to see ABT get up to the 2.7% area to start a position. Current yield on PSX 2.4%, YOC for my shares 5.1%. That’s the power of DG right there. Too bad the position was so small. I never got a good chance to add to my COP position as the shares seemed overvalued as they shot up in price after the announcement of the split.

  8. I ended up with a lot of positions that are like this (they pay relatively well but I didn’t buy a full position for some reason or another mostly because they seemed too expensive at the time). So I have started a kind of dollar cost averaging on them using my Sharebuilder account and dividing the amount of cash I am investing at the time by all these positions which are lower than my average position size. However, I did the math on the amount of them I have and I need to add at least $150 to each position each time in order to make it worth my while (as opposed to saving enough to pull the trigger on each position, this is in terms of the justification for the transaction cost of the trade). But over the course of a year I should be able to bring them all up to speed, regardless of whether I bought at the perfect time, though I still hold back some cash to buy more on dips.

  9. All of these companies have been on my radar & I own 2 of them – AFL & BP, which I got into cheap. I still consider BP a good value.

  10. Spoonman,

    I also miss ABT. It was one of the first dividend growth stocks I purchased and I held firm all the way until just after the split. I should have kept ABT and ABBV.

    AFL’s last two dividend raises haven’t been fantastic, but they’re keeping the streak alive and they’re still rewarding shareholders. Like you said, it’s still a lot higher than we’ll see at our jobs! 🙂

    Great to see you as a fellow shareholder in BP. I think you made a great call there. In my opinion, it’s one of the few clear values in the market right now, even after the spike.

    Best wishes!

  11. w2r,

    Hindsight is definitely 20/20. I regret selling ABT and ABBV, so well make mistakes. Can’t get them all right. In the end, I just look back and see if I made a good decision based on all known factors. And usually I can answer “yes” to that. I re-read my article where I talked about selling ABT and ABBV and the reasons make sense, even today. However, the benefits have outweighed the drawbacks (thus far) and both businesses continue to to well. Oh, well.

    It’s always possible to buy back in. 🙂

    Take care.

  12. Pursuit,

    I’m also not super excited about the increases, but they’re not horrible either. I think AFL has great potential to really start raising the dividend over the next few years. I’m comforted by the knowledge that many companies go through a 2-3 year stretch or more where dividend raises are somewhat conservative, then they break out with double-digit raises. In the meantime, I’m happy.

    V has been killing it. I still kick myself over not buying below $100. That was a dumb, dumb move on my part. SBUX has also been killing it.

    Best regards.

  13. D-S,

    No worries. It takes time to build up a substantial portfolio of high quality companies. It took me more than three years to get to where I’m at today. Time is on your side.

    Best wishes.

  14. Chris,

    I agree on BP. I think there is still value in the shares even after the recent pop and dividend increase. I wouldn’t mind at all buying more today, but I already have a fairly large position in the company. On top of that, Big Oil is a big part of my portfolio.

    Great job buying AFL cheap. I also bought most of mine in the mid-$30’s and I’m happy I did.

    Take care.

  15. Captain Dividend,

    That’s okay. You’re building your portfolio at a fairly prodigious rate. I’m sure you’ll own one or two of the above soon enough. 🙂

    Best wishes!

  16. From this companies I own at the moment no one!
    But they are all on my watchlist!
    I need more time to build the portfolio up…

    Best regards!
    D-S

  17. I have long positions in 3 of those companies (ABT, EMR, KRFT). Happy with all those raises this year. I hope to purchase some more Abbott, no reason to question the new ABT’s dividend policy any longer. Emerson continues to be steady Eddy. Happy with Kraft too. Some great brands with KRFT, but the competition is fierce and some of those brands need more attention. I cannot justify paying current prices with KRFT, I need a lower price to get interested again. Kraft also operates in Canada by the way.

    Still kicking myself for unloading PSX last year, that was a bad move 🙁

  18. CI,

    Great catch on KRFT. I should have wrote U.S. and Canada. Although the facts are still true in that it operates in a very mature market. Plus, it’s lost some of its key brands (like Oreo). Overall, the best play might be to open positions in both KRFT and MDLZ – that way you own the legacy Kraft in its entirety.

    You’re kicking yourself for unloading PSX, and I’m kicking myself for unloading ABT and ABBV. We can’t get ’em all right though, right?

    Take care.

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