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.
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:
Johnson & Johnson (JNJ) recently gave shareholders a nice pay boost, increasing its quarterly dividend from $0.66 per share to $0.70 per share. This amounts to a 6.1% raise. Some might have expected more, but I’m happy anytime I receive 6.1% more income simply for investing in a high-quality business. I know I don’t get annual 6.1% raises routinely at my day job, that’s for sure. Furthermore, this marks the 52nd year of consecutive dividend raises for this healthcare giant. As this is my first $10,000 investment, I couldn’t be happier. The yield on shares after the raise is now 2.77%. JNJ is a core holding for me and I remain a very loyal and long-term shareholder.
Wells Fargo & Co. (WFC) just yesterday declared their new dividend at $0.35 quarterly per share, a 16.7% increase from the old payout of $0.30 per share. This is now the sixth dividend raise since the company was forced to cut its payout during the height of the financial crisis in 2009. I continue to like the conservative management style of the bank, the focus on customer relationships, and the diversified operations. The yield on shares is now 2.42%.
International Business Machines Corp. (IBM) recently raised its dividend for the 19th consecutive year. The new quarterly dividend of $1.10 per share is a 15.8% increase over the old payout of $0.95 per share. I’m a big fan of IBM, and it’s my only true tech holding right now. Although it’s not one of my larger investments, this is less because of the quality of IBM and more my natural tendency to be a bit shy around tech companies. Revenue growth hasn’t been impressive, but buybacks have been strong which has held up EPS growth as IBM continues to navigate its business away from hardware sales and into higher-margin software and enterprise solutions. The yield on shares now stands at 2.24% after the raise.
BP Plc (BP) (ADR) gave shareholders a second dividend increase in the last six months. The new quarterly payout of $0.585 is a 2.6% raise over the last declared dividend of $0.57 per share. This isn’t much of a raise, but it comes earlier than expected, perhaps raising hopes of more to come later this year. In addition, this is actually a cumulative increase of 8.3% YOY factoring in both recent dividend raises. And this is now the fourth payout increase since they reinstituted their dividend back in 2011 after cutting it on the heels of the Deepwater Horizon catastrophe. BP appears extremely committed to rewarding shareholders, and I currently see value in BP shares as I recently pointed out; however, risks loom large, especially in regards to their ownership in Rosneft and rising tensions in Ukraine. BP’s stock now yields 4.62%.
Travelers Companies Inc. (TRV) has now raised its dividend for 10 consecutive years. The recent increase of 10% comes as management rewards shareholders with a new $0.55 quarterly per share payout over the old rate of $0.50 per share. Shares in TRV appear cheap here, trading for a P/E ratio of 8.72 – below their 5-year average of 10.8. However, the yield leaves a bit to be desired at just 2.43%. I may at some point pick up shares in Travelers to compliment my other insurance holding in Aflac Incorporated (AFL), but only if the company looks solid after a lengthy analysis.
Costco Wholesale Corporation (COST) boosted its quarterly per share dividend yesterday from $0.31 per share to $0.355 per share. This is a 14.5% increase for shareholders, and the 12th year in a row COST has given shareholders an increased dividend payout. While I like the business model, the yield at 1.23% (after the raise) and a P/E ratio at 26 precludes me from investing in the company right now. I prefer my retail plays in Target Corporation (TGT) and Wal-Mart Stores, Inc. (WMT) for a number of reasons.
Exxon Mobil Corporation (XOM) earlier today increased its dividend by 9.5%. The new quarterly per share payout of $0.69 is a nice boost over the old rate of $0.63. The new yield on shares is 2.7%. This marks the 32nd consecutive year in which Exxon Mobil has given shareholders a pay raise. I’m a fan of Exxon Mobil, although it’s not as large of an investment as I’d like. So many stocks, so little capital! At any rate, scale and scope is very important when taking on massive energy projects and there is no publicly traded oil company larger than XOM.
Chevron Corporation (CVX), another high-quality oil supermajor, also raised its quarterly dividend today. The new rate of $1.07 per share is a 7% increase over the old payout of $1.00. Chevron is right behind Exxon with its now 27-year streak of consecutive dividend raises. Another company I am a fan of, and I have a rather large investment (for me) in CVX. I see nothing I dislike here with Chevron and I see any significant pullback in shares as just an opportunity to add, depending on capital availability.
Royal Dutch Shell Plc (RDS.B) (ADR) follows in the footsteps of its supermajor rivals and increased their quarterly dividend by 4.4% today. The new quarterly payout of $0.94 per share is a nice bump from the old rate of $0.90. The raise, while not as impressive as what we see with the other oil companies, is pretty nice considering that Shell already offers a very high yield on shares. This is now the third consecutive year of dividend raises from Shell after holding its dividend static for a few years. Shell offers a lot to like and is betting big on natural gas; however, they’ve also had some issues with major projects around the world. The yield is now 4.44% after this increase is reflected.
Full Disclosure: Long JNJ, WFC, IBM, BP, AFL, TGT, WMT, XOM, CVX, RDS.B
What’s your opinion on these raises? Are you a satisfied shareholder in any of the above companies?
Thanks for reading.
Photo Credit: renjith krishnan/FreeDigitalPhotos.net
Edit: Added Shell raise.