Tuesday, August 25, 2020

Expected Dividend Increases for September 2020

I feel like a broken record every time I write these blog posts lately, but another month is on the verge of passing us by, which will mean the year is officially 2/3 over!

With that aside, I'll be delving into the intent of this post by examining the dividend announcements during this month and previewing dividend announcements for next month. In the event that any more dividend cuts or increases come in over the next week, I will update this post to reflect such dividend announcement activity.

Dividend Announcements Since The Last Post:

Dividend Increase #1: Altria Group (MO)

Altria Group (MO) threw a curveball to shareholders a few weeks ago when it announced its dividend in late July rather than the late August that we have grown accustomed to over the years.

MO announced a 2.4% increase in its quarterly dividend from $0.84/share to $0.86/share, which was slightly below my expectations of a 3.6% increase in the quarterly dividend to $0.87/share as I predicted in my previous post of this series.

Overall, I'm pleased with MO's dividend increase this year as the increase still outpaced inflation despite an unparalleled societal response to COVID-19 that has upended the results of many businesses throughout the economy.

It goes without saying, but any dividend increase in a generational crisis such as this one is most definitely welcomed and a testament to the quality of MO as a business.

Across my 17 shares of MO, this dividend announcement boosted my annual forward dividend income by $1.36.

Dividend Increase #2: Lowe's (LOW)

Lowe's (LOW) announced last week that they were increasing their quarterly dividend 9.1% from $0.55/share to $0.60/share.

The company opted to delay its usual late May to early June dividend increase by a quarter, which was certainly a prudent move in light of the uncertainty.

While we certainly aren't out of the woods yet relating to COVID-19's potential disruptions to the economy and a widely distributed vaccine isn't a guarantee, I remain confident that the quality of Lowe's as a business will continue to deliver outsized results through this pandemic.

Across my 4 shares of LOW, this dividend announcement padded my annual forward dividend income by $0.80.

Dividend Cut #1: The GEO Group (GEO)

While GEO Group's (GEO) dividend cut came as a bit of a surprise, I understand why the company took the action that it did to reduce its quarterly dividend by 29.2% from $0.48/share to $0.34/share earlier this month.

Given that COVID-19 has resulted in lower occupancy levels at several of GEO's facilities and programs beginning in March and persisting through Q2, GEO has lowered its AFFO guidance for FY 2020 significantly from $2.57-$2.67/share in February to $2.29-$2.33 in August.

Adding to the rationale for the dividend cut, is the fact that the company will be allocating an additional $50-$100 million annually to debt repayment, which will help the company to deleverage to more sustainable leverage ratios for the long-term while also maintaining its status as a REIT.

Although the move hurts my dividend income in the short-term, I appreciate that GEO Group's management team made a decision that will be beneficial to the company in the long-term.

Across my 16 shares of GEO, my annual forward dividend income declined $8.96.

Dividend Cut #2: BP Plc (BP)

BP Plc (BP) announced earlier this month that it opted to cut its quarterly dividend by 50% from $0.63/share on its ADRs to $0.315/share.

Given the decline in global oil demand this year and fall in WTI crude's price from a 52 week high of $62 a barrel to the $40 range that it has been hovering around for a while now, it wasn't surprising to see that the company opted to cut its dividend for the near future as oil prices continue their gradual recovery.

Across my 11 shares of BP, this dividend announcement resulted in a $13.86 drop in annual forward dividend income.

Expected Dividend Increases for September:

Expected Dividend Increase #1: Realty Income (O)

Moving into the expected dividend increases section of this post, there are a number of very reliable dividend growers that I am confident will deliver dividend increases in the weeks ahead.

Starting with one of the most consistent dividend growers in my portfolio, I am expecting Realty Income (O) to increase its monthly dividend 0.2% from $0.2335/share to $0.2340/share.

As we have come to expect from a company of such high-quality, Realty Income has delivered solid results even in the midst of the COVID-19 pandemic, growing its AFFO/share by 6.7% YoY from $1.63 through H1 2019 to $1.74 through the first half of this fiscal year.

Across my 7 shares of O, I anticipate that my annual forward dividend income will be boosted $0.042.

Expected Dividend Increase #2: W.P. Carey (WPC)

Yet another consistent dividend grower in my portfolio is W.P. Carey (WPC), which has also delivered steady results.

In light of WPC's essentially flat AFFO YoY in the midst of an unparalleled operating environment fraught with challenges, I anticipate that W.P. Carey will announce a 0.2% increase in its quarterly dividend from $1.042/share to $1.044/share.

Across my 5 shares of WPC, I am forecasting my annual forward dividend income will be boosted $0.04 following WPC's expected dividend increase.

Expected Dividend Increase #3: Philip Morris International (PM)

Moving to Philip Morris International (PM), my second largest tobacco holding, I am anticipating a 2.6% increase in the quarterly dividend from $1.17/share to $1.20/share.

PM has reported relatively solid results through the first half of this fiscal year, with adjusted diluted EPS declining 2.0% YoY and increasing 8.0% on a like-for-like basis, excluding currency.

Across my 9 shares of PM, this dividend announcement would result in a $1.08 hike to my annual forward dividend income.

Expected Dividend Increase #4: Lockheed Martin (LMT)

As I outlined in a Seeking Alpha article on Lockheed Martin (LMT) earlier this month, I was quite impressed with the company's results through the first half of this year.

In short, the company grew its diluted EPS 7.9% YoY from $11.00 through H1 2019 to $11.87 through the first half of this fiscal year, while FCF surged 38.0% YoY!

Despite a difficult operating environment, LMT has shown little signs of slowing down as the company's fundamentals have improved in virtually every key area through a year fraught with uncertainty.

LMT's resiliency leads me to believe that the company will be announcing an 8.3% increase in its quarterly dividend from $2.40/share to $2.60/share.

This would result in a $0.80 increase in my annual forward dividend income given my single share of the stock.

Expected Dividend Increase #5: Visa (V)

Despite a difficult year for Visa (V) amid reduced consumer spending due to travel restrictions and the closure of many businesses across the world, I remain confident that V will deliver a dividend increase in the weeks ahead.

While I don't envision a teens or twenty percent plus dividend increase being announced in September as I believe V's management team and Board of Directors will be conservative in their dividend announcement, I am forecasting 10.0% increase in the quarterly dividend from $0.30/share to $0.33/share.

Across my 2 shares of V, I am forecasting a $0.24 boost in my annual forward dividend income.

Concluding Thoughts:

Even though my annual forward dividend income dropped by $20.66 as a result of dividend announcements during the month of August, these declines have mostly been offset by the deleveraging of my Robinhood margin (via dividend income) and fresh capital investments in my Capital Income Builder (CAIBX) mutual fund within my retirement account.

My annual forward dividend income heading into September is down about a percent compared to what it was at entering into August and is just under 3% off of the $1,252 annual forward dividend income record that was set earlier this year prior to the barrage of primarily COVID-19 related dividend cuts.

Fortunately, September appears as though it will be my first month where dividend announcements are positioned to propel my annual forward dividend income forward as I believe the bulk of the dividend cuts are finally behind the portfolio.


How was your month in terms of dividend announcements?

As always, thanks for reading and I look forward to your comments in the comment section below.

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