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:

AT&T Inc. (T) recently gave shareholders a raise, increasing its quarterly dividend by 2.2%. The new payout represents a $0.01 increase, going from $0.45 per share quarterly to $0.46. The yield on the new payout rises to 5.43% based on today’s price. T has raised its dividend now for 30 straight years, which is a wonderful track record. However, the more recent record of raising the dividend by just 1 penny per year is a bit troublesome as eventually the growth rate will fall below inflation. T is one of my smaller positions, and I’m not particularly inclined right now to increase it. I love the yield, which supercharges my overall portfolio’s yield and dividend generation power, but the growth rate leaves something to be desired.

General Electric Company (GE) decided to raise its quarterly dividend payout by 15.8%, now paying out $0.22 per share over the old rate of $0.19 per share. The yield on GE shares rises to 3.28%. GE has now raised its dividend four straight years after the crushing dividend cut back in 2009 during the height of the Great Recession. I’m a fan of GE here. I think they’re making great moves by divesting GE Capital and returning cash to shareholders while simultaneously boosting core industrial businesses.

Toronto-Dominion Bank (TD) surprised shareholders with its third dividend raise just this year. By boosting the quarterly per share dividend to CAD $0.86 per share over the old rate of CAD $0.85, this represents just a 1.2% raise. However, with this being the third raise thus far in 2013, TD has raised its dividend by a cumulative 11.7% YOY. While TD has a short history after restarting dividend growth coming out of the Great Recession, the bank didn’t cut its dividend during the crisis like many other banks did. On top of the dividend raise, TD also announced a 2-for-1 stock split on its common stock. The yield on the U.S. shares after the raise is now 3.62% (after factoring in exchange rate on CAD).

MasterCard Inc. (MA) recently gave shareholders a massive dividend raise, increasing its quarterly dividend by a full 83.3%. The new per share rate of $1.10 is a huge bump from the old quarterly per share dividend of $0.60. The yield on shares is now 0.56%. This is the third year of dividend growth for the company. MA also recently announced a 10-for-1 stock split on its common stock. If that wasn’t enough, they also announced a new $3.5 billion share buyback program. Whew! Great news for shareholders here. Unfortunately, I’m not long MA. The high P/E and low relative yield has kept me away, but weakness in shares or a significant increase in earnings would allow my interest to rise accordingly.

The Walt Disney Company (DIS) recently increased its annual per share dividend by 14.7%, now paying out $0.86. This is a nice increase over the old payout of $0.75 per share. DIS is building a nice dividend growth record, now with the fourth annual dividend raise. The yield on shares after the raise is now 1.24%. While I like Disney’s product and service lineup, along with the loyalty customers tend to display, the annual dividend and low yield keep me at bay for now.

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

Full Disclosure: Long T, GE, TD

Thanks for reading.

Photo Credit: FreeDigitalPhotos.net 

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25 Comments

  1. Hi Jason

    About ATT, it seems that the total yearly dividend is more than the yearly EPS. Am I right about this ? And wouldn’t it be worrisome in this case ?

    Erick

  2. Man, I completely missed the GE announcement. That’s a welcome surprise. I knew it was coming but wasn’t sure when as I had just added the position a few months back. The AT&T increase was exactly what I expected, but I’m okay with it at the yield is pretty high. The problem with DIS is that they spend much more on buybacks rather than dividends. That’s not the worst thing in the world, but I’d still like to see a bit of a shift in that policy. I’ve been interested in MA after I analyzed/purchased V. MC has much less penetration in the market so in theory they should be able to grow more. Even if they keep the same market share they’d still be able to grow as the number of credit/debit transactions continue to grow every year and isn’t close to being saturated yet. Have a great weekend! It can’t be that bad when you just found out you’ll be earning more next year without having to work any more to earn it.

  3. I totally agree that it is great when one of my companies raises their dividend. When you also automatically re-invest then I get a double whammy as the increased dividend gets applied to a larger number of shares.

    I have given an example of how re-investing dividends can really pay off on my blog, if anyone wants to see a real situation.

  4. It’s not only TD, but all canadian banks didn’t cut dividends during last resession and after it increasing dividends at least twice per year. Earlier also NA (Candian 6th largest bank) increased dividends and announced 2:1 split. I like it, as every time I can DRIP more shares

  5. I’ve held GE for a long time, and was thrilled to hear the announcement last week. I agree that it’s also good they have reduced the size of GE Capital over the years. It’s great to start the new year with a raise, it’s it?!! Have a great weekend.
    -Bryan

  6. Erick,

    T faces heavy depreciation costs, like other telecoms, which can skew EPS figures. The better bet is to look at the dividend against FCF, in which case the payout is comfortably covered here.

    Hope that helps!

    Best regards.

  7. Pursuit,

    I was anxiously awaiting what GE would do. I was actually expecting a rather healthy increase after the year they’ve had. The company sold out NBC Universal and has made great strides to reduce GE Capital. I think they’re in a great spot right now.

    MA and V are interesting. The growth has been phenomenal. Are you, as a V shareholder, concerned at all about the disruptions taking place in payment systems? It seems that this industry is ripe for disruption with technology rapidly changing and retailers looking for a cheaper way out. Certainly the incumbent players – like V, MA, AXP – are going to be healthy for a while, but it’s something to watch.

    Best wishes!

  8. FI UK,

    You’ve got it. That’s the real power of dividend growth investing. You have the organic growth of the dividend by the individual companies, and then you’re harvesting that organic growth by reinvesting the growing dividends. That supercharges the effects of compounding over time.

    Keep up the great work!

    Take care.

  9. gibor,

    Great point there about the other Canadian banks. I’m also long BNS here. They’ve all done well coming out of the crisis, and have been rewarding loyal shareholders regularly.

    May we both continue to prosper!

    Best wishes.

  10. Bryan,

    It’s definitely wonderful to start the new year with a big raise! And it’s great to be a shareholder. You don’t often (ever) walk into your boss’s office to find out you got a 16% raise.

    I hope you have a great weekend as well.

    Cheers!

  11. Thanks Jason.

    Maybe it could be the subject of one of your future article: how to evaluate dividends versus free cash flow when EPS is not a good metric. I know that dividends bellow 40% to 50% of EPS are a good sign. But what about FCF ? Unless you already covered this topic of course …

    In any case, it’s my first post here and I must say I really appreciate this blog.

    Erick

  12. Erick,

    That’s a great idea there. I think that’s a good topic to explore a bit. I use EPS as a quick check on the payout ratio, but ultimately dividends are paid as cash and should be checked against FCF generation.

    Thanks for stopping by and posting. I’m glad you appreciate the blog. And I want you to know I appreciate you as a reader.

    Stay in touch!

    Take care.

  13. DM,

    I’ve been very pleased with what GE has been doing this year to divest non-core operations, especially with GE Capital.

    As far as MA and V go, there’s the possibility that say Paypal or even the rumored AAPL payment systems could seriously disrupt their business model, but it’s not something I’m worried about yet. Given the amount of cash flow generation and essentially no capex requirements they have plenty of cash to throw at the situation if it gets really dire. Maybe it’s just me, but paying with my cell phone at a store seems weird and ripe for thieves to get access to your information. Plus I don’t think that a new dominant payment system getting in place in the US and other developed nations will be adopted as quickly in the developing markets like Brazil and India. How are you going to be able to pay with your cell phone or whatever new payment system comes in to place if you don’t even have a cell phone or the infrastructure isn’t in place to utilize those systems. That can help counter potential declines in the developed world. Definitely something to keep an eye on, as I’m sure that’s exactly what everyone was thinking when the first credit cards started rolling out.

  14. SWAN,

    DIS was just never on my radar. That is perhaps a pity, as the company has done incredibly well. I also think the purchase of Star Wars property will turn out to be a great business move. Disney customers are incredibly loyal. The annual dividend and perennially low yield have just kept it off my radar.

    Looks like it’s done very well for you. Great job!

    Best wishes.

  15. Warrior,

    I think GE is still a decent buy here even after the run it’s had lately. They continue to make up for the dividend cut, as the buybacks and dividend raises have been very healthy.

    Best regards!

  16. Yayy I’m a part owner of two of these companies. General Electric and Walt Disney Company in a ESPP account from the past! Wish DIS was as cheap as I was paying for it in the past

  17. I have been warming up to GE a lot lately and even added it to my watch list a few months back. I really like its plan to reduce the finance businesses. I want some heavy industrial stocks GE, among others, fits the bill nicely. I own 2 off this list (T,TD) and must say I’m happy. T continues to chug along and make nice payments every quarter. Its dividend growth will probably be eclipsed by inflation in the future as you point out. My sources tell me inflation is still below 2.2% right now. I only get a 1% automatic raise at work next year…

  18. CI,

    I hear you. A 2.2% raise is still very nice, and larger than many of get at work. I personally don’t get raises at work at all. My pay is 100% commission, so that’s why my income fluctuates so heavily from month to month. My “raise” simply comes in an increase in labor and/or parts prices, which trickles down to me in terms of tenths of percentages. My raises are practically non-existent. I did receive one big boost to my income back in early 2012 only because I moved to a department with more income potential due to larger volume and more expensive labor/parts.

    I think you did a good thing adding GE to your watch list. I think they’re making some great moves right now.

    Cheers!

  19. I noticed MCD also increased the dividend recently. My payout today was larger than previous and I still have the same amount of shares.

    What do you think would happen to MA after the split in January? Will it be a buy?

  20. Martin,

    The MCD raise wasn’t what some investors had planned for, but it’s still attractive and well over inflation.

    I’m not sure about MA. I still have concerns over the credit card companies, but my fears are probably overblown. Regardless, the yield is just way too low for me right now.

    Best regards.

  21. nickD,

    I just seen that. How wonderful! I wish I wouldn’t have passed on 3M a while ago. It’s had a monster run and continues rewarding loyal shareholders. Good stuff!

    My loss, but you can’t win them all. So many stocks, so little capital.

    Cheers!

  22. Mike,

    Heck yeah. An extremely small raise, but a raise nonetheless. O continues to consistently raise the dividend and management continues to show that it cares about shareholders first and foremost. Wonderful stewards of capital.

    Best wishes.

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