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:
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?
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