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. 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:
The Coca-Cola Company (KO) just gave shareholders a 8.9% raise by increasing the quarterly per share dividend from $0.28 to $0.305. This marks the 52nd year of consecutive dividend growth for this beverage giant. I’m obviously bullish on Coca-Cola at these levels, as I recently increased my position for the second time in the past month. The yield on shares after this raise is 3.28% – which is quite high for Coke, historically speaking. I just don’t know how you can go wrong with a company that sells more than 500 products in more than 200 countries, is fairly priced, and is shareholder friendly enough to raise dividends for 52 years running.
Wal-Mart Stores, Inc. (WMT) just hit 40 years of consecutive dividend growth, increasing its quarterly dividend by one penny to $0.48 per share. This represents a raise of only 2.1% over the old quarterly dividend of $0.47. This is a rather disappointing raise; however, I try to keep in mind that, on average, WMT tends to reward shareholders with wonderful raises over the long haul. Their 10-year dividend growth rate stands at 18% before this raise is factored in, and last year’s raise was more than 18%. WMT still has a low payout ratio, so I was quite shocked they didn’t raise it more than this. I’ll definitely be watching WMT moving forward and it’ll be very interesting to see if they make this up to shareholders with a large raise next year. This rather lackluster raise is why we investors diversify. When one company is unable to keep up with past trends for a year or two, you have other companies that can make up for it. And this raise is not necessarily indicative of lackluster raises going forward. For instance, PepsiCo, Inc. (PEP) had rather disappointing raises the last two years before knocking it out of the park for this year’s raise. Furthermore, a 2% raise, while underwhelming considering WMT’s history, is still actually not all that bad when you consider what kind of yearly raises you might get at your day job. At least, that’s how it is for me. WMT now has a 2.62% yield after factoring in the new dividend payout.
Lorillard Inc. (LO) just increased its quarterly per share dividend by a full 11.8%, now paying out $0.615 per share over the old rate of $0.55. This brings Lorillard’s yield up to 5.13%. Lorillard now has 7 years of dividend growth under its belt after being spun-off from Loews Corporation (L) back in 2008. LO has been a fantastic holding for me, with huge dividend growth -the company has doubled their dividend over the past five years. They’ve been able to steal market share from competitors in the U.S. traditional cigarette segment, and management was prescient enough to see the growth in e-cigarettes by acquiring blu e-cigs – which has grown tremendously. However, I remain cautious with Lorillard to the ever-present risk of significant regulation from the FDA on the manufacture and sale of menthol cigarettes – a move, that if ever taken, would cause massive ramifications for Lorillard as menthol-based cigarettes account for ~90% of the company’s revenue.
AbbVie Inc. (ABBV) finally gave shareholders a 5% dividend raise after five straight quarters at $0.40 per share. The new quarterly dividend is $0.42 per share. ABBV’s stock has gone on a huge run since I sold my entire position in early 2013. However, I remain confident about my decision because ABBV is simply not the type of company I traditionally invest in. I typically don’t like to invest in pure pharmaceutical companies because of patent risk and the lack of diversification across healthcare.
Full Disclosure: Long KO, WMT, PEP, LO
How about you? Own equity in any of the above companies? Happy or disappointed with these raises?
Thanks for reading.
Photo Credit: renjith krishnan/FreeDigitalPhotos.net
While I don’t currently own any of these companies I do hope to someday in the future. Dividend growth is what really appeals to me about this form of investing. Automatic pay raises are always welcomed!
I know I have gone years without raises before and even had a decrease in my wages once.
It wasn’t all that long ago that I didn’t even realize how dividend growth worked and I actually wrote a post about it recently. I had to give credit to this site for helping teach me how it all works.
Thanks for all you do!
BJ
I was ecstatic about the KO raise even though it only accounted for a tiny yearly increase for me. That increase from LO is absolutely fantastic. I am still extremely bullish on tobacco even though I own both PM and MO currently. The risk to LO’s menthol business has been enough to keep me from initiating a position until I diversify the portfolio a bit more, and hopefully the anti menthol legislation blows over. Congrats to you on your raises and keep up the good work!
Dividendasaur,
Raises are great! Dividends are money, but dividend raises are more money. And who doesn’t like more money?? 🙂
LO has a bit more inherent risk than I really like. Not only do you have all the risks that normal tobacco companies come with in the form of regulation, falling volumes, health concerns, taxes, etc., but you also have the menthol risk on top of it. While other tobacco companies sell menthol products, this is really LO’s world. And at 90% or so of revenue, any regulation changes could have significant adverse effects on their business model.
Thanks for stopping by!
BJ,
I just tweeted your post. 🙂
I’m glad that you’ve taken a liking to dividend growth investing. I think it’s a fantastic investment strategy if you’re okay with the necessary research and monitoring.
I just took a pay cut at my day job very recently, so this strategy has even more allure for me than it used to!
Building passive income is wonderful, and building passive income that is regularly increasing is even better. With dividends that rise faster than the rate of inflation you’re constantly gaining wealth. Your expenses may rise in step with inflation, while your income increases by a factor of two or more above this level. And that’s what’s great about this strategy with pursuing financial independence. If I’m able to claim FI at 40 on 20,000/year of dividend income, my income will go up way faster than my expenses will. Eventually, I’ll have much more income than I could even spend.
Money can work harder than I ever could. It works 24/7, and never calls in sick. Why get in the way of that? I say let it do what it’s meant to do.
Cheers!
Thanks for the tweet! I setup an account recently but still need to figure out how to use it, I’ll look for you to follow on there shortly.
I’m sorry about your job situation. You have built yourself quite a foundation with your freedom fund, that must make it so much easier to deal with.
I agree get out of the way of that money snowball, just let it keep on rolling!
Gotta love those dividend raises… Tim Horton’s, a stock that I own, just raised there dividend by 23% on Feb 20th. It is difficult for a person to get that much of a raise at their job. My yield is just slightly over 2% right now, but beats what a savings account will pay.
Althought I sometimes regret my decision to sell my shares of ABT and ABBV, I share your skepticism about ABBV. They’re riding heavy on Humira.
I am disappointed with WMT’s 2% increase, but we have to remember that they spiked it by 18% last year. I get the feeling this is more of a strategic move on their part and that they’re likely to spike it again in the years to come.
In any case, it’s great to see these companies increase they’re payouts. Show me the dividend!
I was a bit disappointed with the WMT increase but 29313-4 was a pretty difficult year, especially 4Q. I expect them to have a better increase next year. I own KO, WMT, and LO so it was a good week for me. Even better after PEP’s increase earlier this month. There should be one more holding of mine to announce in February and I think it’ll be another 10% raise which is great. Here’s to getting raises we didn’t have to work for and more to come.
I’ve got two of those, with both KO and LO coming in strongly. Certainly LO has its reglatory concerns, but I just don’t see an outright ban on methanol coming. Too much money at stake with too powerful of lobbyist to contend with. Sure the FDA can make the decision unilaterally, but I just don’t see it happening. In the meantime, I’ll take the risk and associated dividends!
Investing Pursuits,
Congrats on that huge dividend raise by Tim Horton’s! Very, very nice. 🙂
That’s one wonderful thing about dividend growth investing. There’s always the chance of that one really amazing dividend raise! Sure, you get the duds every once in a while, but for the most part the dividend raises by many of these high quality companies are outstanding.
Take care!
Spoonman,
Yeah, I’m just not sure about ABBV over the long haul. Maybe they do great, but maybe they don’t. There’s just too many other choices for me to sit and worry about what’s going to happen after Humira goes off patent.
And WMT did indeed disappoint with that raise. But last year was a blockbuster raise, and it’s had an excellent history. I’m hoping this is a one-off.
I’m with you, bud. Show me the money (dividends)! 🙂
Best wishes.
JC,
Yeah, even factoring in WMT’s disappointing raise this year is off to a wonderful start. I’m more than happy with these raises on the whole.
I’m hoping we continue to have a strong year!
Take care.
W2R,
LO is interesting. I think there is some significant risk there, over and above the usual risk associated with tobacco plays.
I think the most likely course of action by the FDA would be a limitation on menthol in some manner. Perhaps giving a time frame on elimination of it completely. Even Lorillard has admitted that’s a possibility at this point. I can’t see an outright elimination of it right off the top because you’d have a massive black market that would likely be much more dangerous than the regulated products currently on the market. You’d likely see a big uptick in crime with smuggling and what not. A ban just doesn’t seem smart, and I’m not saying that just as an investor. Of course, our government isn’t always known for its logic.
Thanks for the perspective. Always appreciated! 🙂
Best regards.
Nice post, and great comments about WMT. I was disappointed with the dividend raise but I am happy as a shareholder because WMT still feels like such a bargain at these prices. I feel like Walmart is one of those companies that will be around for years to come. In terms of size WMT is over 4 times as large in terms of market cap than it’s next competitor. It just blows away the competition.
Some good news, I own WMT and KO 🙂
Great stuff. KO seems VERY cheap now. Lots of selling.
Mark
Hey DM, nice post as always. So VOD finally finished the deal on Friday, net worth won’t change but i am assuming Monday i should have some VZ, half the VOD shares roughly and some $$ to play with. I still like VOD and i am probably not going to change anything, i think they will probably grow albeit slower over time, diversification is ok here especially with that lingering AT&T acquisition rumor….VZ could be interesting now they are receiving all that income from wireless that VOD was getting..and the cash, well i guess we can try and find a decent dividend position to start or add to…good times.
LO has been a great investment for me. I bought more in Dec 2012 for about 38. With a forward 2013 yield (at that time) of almost 6% plus the recent 11.8% increase, my income from this investment increased about 17% (including dividend reinvestment) in a little more than a year.
It’s not as attractive now, but the numbers are still good. For the next few years look for more 10% raises. There are short term headwinds because it is believed that the recent volume levels are soft. I am waiting before adding more, to take advantage of any bad sentiment.
If you don’t want the menthol risk but still want exposure, buy PM. With a nearly 5% yield, it is attractive.
Dexter,
Averaged out, WMT still has a dividend growth rate record that is outstanding; one I wish every company in my portfolio shared. There are always speed bumps along any road, and we just experienced one here with WMT. Still many miles ahead.
Thanks for stopping by! Glad to see you’re not acting without thought. 🙂
Cheers!
Mark,
Nice! Enjoy those raises. I’m sure the extra income will help you achieve some of your goals this year.
And I’m with you on KO. I’m a big fan at today’s price. Not super cheap, in my opinion, but a very solid buy considering the risk involved.
Thanks for stopping by.
Cheers.
talesfromthetape,
Thanks! Glad you enjoyed the update on some recent dividend increases.
As far as I understand the VOD deal, we should see the consolidation of shares on our VOD holdings, as well as the VZ shares in our accounts sometime on Monday. This may vary depending on your brokerage. However, I believe the cash may not hit until early March, at least according to this:
http://www.vodafone.com/content/index/media/vodafone-group-releases/2014/closing-of-vwt.yes.html
VOD lists the date for cash payments as March 4, 2014.
Either way, I’m actually not all that excited about it. I wish VOD would have stayed as-is, but I also understand that it was a tenuous relationship. VZ wanted to own the entirety of their business, and VOD wanted to concentrate on businesses it could control in markets they specialize in.
But at least we’ll have some cash to play with, so that’s nice! 🙂
Take care.
Sfi,
Thanks for stopping by.
LO has indeed been a great investment over the last few years. Especially if you were able to get in back when they had that menthol scare a few years ago.
I may decide to lighten up a bit on LO here, not only because of the menthol risk, but also because I’m heavily allocated to tobacco in general. PM is my largest holding, and I’m very happy with it. However, you add in LO and MO, and I’m heavier here than I’d really like to be.
It would be a shame to have to reduce LO, however, because they’ve got a lot of great things going on for them with blu and increased expansion west of the Mississippi.
Cheers!
I’ve been holding my ABBV ever since the ABT split and have been thrilled with its performance. It’s not a huge part of my portfolio, so I have no qualms about keeping it even if I probably won’t buy any more.
Bridget,
ABBV has done very well post-split. I would be thrilled as well. The dividend increase was modest, but pretty solid considering it’s a pure pharma play now. Shareholders should be pretty happy here.
Thanks for stopping by!
Best regards.