Tuesday, August 27, 2019

Expected Dividend Increases for September 2019

As this is published, the last few days of August are here and September is fast approaching. Fall is fast approaching. This means that we're in the last month of the MLB regular season as teams are gearing up for the postseason. The Bucks will be opening the season in Houston on October 24 before we know it and all the excitement that I find in watching NBA basketball will soon be here. The last few days of each month also bring with it a reflection of the past month of dividend increases and predictions of dividend increases for the next month. With that said, we'll delve into my dividend increases for August before we discuss what I'm expecting in September.

The Only Dividend Increase for August Was A Great One

Altria Group (MO) announced a 5% raise in its quarterly dividend (as was predicted by myself last month), from $0.80/share to $0.84/share. While this is well below the company's 5 year DGR of nearly 10% (due one heck of a 2018 that featured two raises!), the company managed to extend its dividend increase streak to 50 years, providing 54 raises during the past 50 years. 

When we take into consideration that Altria acquired a 35% stake in JUUL Labs for $12.8 billion and a 45% stake in Cronos Group for $1.8 billion last December, it's understandable that management is being conservative and keeping its payout ratio around the 80% long-term target payout ratio. Using the company's midpoint adjusted diluted EPS of $4.31, Altria's payout ratio is a touch below 80% at 79.8%. This allows Altria to retain the other 20.2% of its earnings to begin to deleverage to return its balance sheet to its strength prior to its acquisition spree last December aimed at reshaping the company for many more decades of dividend increases. The company will be able to reduce its net debt to EBITDA ratio of 2.7 to below 2 by both repaying debt and growing its EBITDA in the years ahead.

Although high single digit dividend increases probably won't occur for the next few years, I believe Altria has taken the right steps in making sure it stays relevant in an industry that is rapidly changing. If there is any company that I have faith in, Altria is right up there with the best of them. Without going into too much detail, there are many reasons that Altria delivered 17% annual total returns from 1925 to 2003, and a competent company culture that is skillful at navigating the litigious and highly regulated industry of tobacco is certainly one of those reasons.

With a yield on cost near 6% on my shares of Altria, I'll gladly take mid-single digit dividend growth, especially when I'm confident the company is taking the necessary steps to stay relevant as a company. Across my 7 shares, this increased my annual forward dividends by $1.12.

Having discussed my sole raise for the month of August, we'll now transition into my expected dividend increases for September.

Expected Dividend Increase #1: Philip Morris International (PM)

I'm expecting a raise from PM similar to that of Altria. I believe its likely PM will announce a 4.4% increase in its quarterly dividend from $1.14/share to $1.19/share. Across my 4 shares, this would increase my annual forward dividends by $0.80.

Expected Dividend Increase #2: Realty Income (O)

I am expecting Realty Income to continue its trend of the first first dividend increase of the year being in the 2-4% range, with the others throughout the year being $0.005/share increases in the monthly dividend. Therefore, Realty Income's likely monthly dividend will be increased 0.2% from $0.2265/share to $0.2270/share. This would increase my annual forward dividends by $0.024 across my 4 shares.

Expected Dividend Increase #3: WP Carey (WPC)

Like Realty Income, I would expect WPC to increase its dividend by the same rate as it did in its previous increase. As a result, I'm expecting WPC to increase its quarterly dividend from $1.034/share to $1.036/share. Across my 3 shares, would increase my annual forward dividends by $0.024.


August may have been a slow month in terms of the quantity of dividend increase, but when we consider that Altria is one of my largest positions, a 5% raise in its dividend was able to boost my annual forward dividends by $1.12. It would take an investment of $28.00 at a yield of 4% to replicate this completely organic increase in dividend income. This was a pretty typical month for me. The dividend increases continue to come in and along with reinvestment and fresh capital, compounding is becoming more noticeable with each passing month, quarter, and year. The joy of the DGI strategy is that the results continue to speak for themselves. There's no need for me to constantly stress out about my net worth because I know that what matters most to me is a growing dividend income.


Did you benefit from the raise from Altria as well? Was the raise from Altria satisfactory to you? Did you have receive any other dividend raises during August? As always, thanks for taking the time to read this post and I look forward to any comments you are free to leave below.


  1. I had 2 dividend raises, MO and BNS, and I think there's one more that should be announced. But August was definitely a slow month for me. I'm curious if PM and MO will end up merging as leaks of the talks have come out. That 5% increase from MO was more than enough for me since my YOC is 6.7%. If the share price stays where it closed today I'll DRIP an extra 7+ shares over the next 12 months. I expect VZ, MSFT, HON, MCD and O to announce dividend raises in September. PM I'm not so sure if the merger with MO does move forward in earnest, but I would expect a raise of some sort.

  2. PIP,

    The PM and MO merger talks are something I'm curious to know the outcome on as well. Congrats on your 6.7% YOC! I just added a couple shares of MO today and my YOC is approaching 6.3%. Thanks for the comment.

  3. I know tobacco is not loved but MO and PM continue to do their thing year in and year out. A lot of negative headwinds for both but they seem to navigate troubled waters pretty well.

  4. DivHut,

    Tobacco is definitely a tough industry fraught with regulatory risk and litigation, so I'm confident MO and PM will continue to navigate their risks quite well. Thanks for the comment.