Tuesday, May 4, 2021

Expected Dividend Increases for May 2021

As I'm writing this blog post, we have went from ideal high temperatures in the 60s Fahrenheit here in Central Wisconsin just a few days ago to muggy highs in the low 80s. It's safe to say that although summer is officially 7 weeks away, summer has unofficially began here in Central Wisconsin.

With that aside, I'll be discussing my portfolio's dividend announcements during the month of April and looking ahead to dividend announcements that I'm expecting in May.

Actual Dividend Announcements for April 2021

Dividend Freeze #1: Exxon Mobil (XOM)

While I was anticipating that Exxon Mobil would have announced a dividend increase in April as was customary pre-COVID for more than 3 decades, XOM opted to keep its quarterly dividend in line with the previous of $0.87/share.

Although a bit disappointing, I can understand why XOM opted to freeze its dividend. It will be interesting to see whether the company will raise its dividend by the end of the year in order to maintain its status as a Dividend Aristocrat.

Distribution Freeze #1: Enterprise Products Partners (EPD)

When Enterprise Products Partners announced that it was keeping its distribution in line with the previous of $0.45/unit, it was somewhat surprising. 

Given that EPD had just resumed distribution increases with a nice 1.1% raise in January, WTI crude has since stabilized to an average price of $59.06/barrel through April of this year, and that natural gas has settled at an average price of $3.30/MMBtu, I was anticipating a 0.6% increase in the quarterly distribution to $0.4525/unit.

At any rate, EPD's distribution is well-covered and since the company is a high-yielding component of my portfolio, I don't need distribution increases every quarter to be pleased with the strong income that it throws off for my portfolio.

Dividend Increase #1: Johnson & Johnson (JNJ)

Johnson & Johnson announced a 5.0% increase in its quarterly dividend from $1.01/share to $1.06/share, which was slightly below my expectation of a 6.9% increase in the quarterly dividend to $1.08/share.

Regardless, JNJ's dividend increase once again easily beat inflation, and the only year of the 59 consecutive years of dividend increases that JNJ failed to beat inflation was in 1980 when inflation was a staggering 13.5%.

Across my 4 shares of the stock, my net annual forward dividends increased by $0.80 as a result of JNJ's dividend announcement.

Dividend Increase #2: Southern (SO) 

Southern announced a 3.1% increase in its quarterly dividend from $0.64/share to $0.66/share, which was precisely what I predicted.

My net annual forward dividends advanced by $0.40 across my 5 shares of the stock due to SO's dividend announcement.

Dividend Increase #3: International Business Machines (IBM)

Wrapping up April's dividend announcements with a disappointing dividend increase from International Business Machines, IBM did the bare minimum to extend its consecutive dividend increase streak to 26 years, announcing a 0.6% increase to the quarterly dividend from $1.63/share to $1.64/share.

Despite this disappointing dividend increase, IBM remains a cash flow machine poised to throw off $11-$12 billion in FCF in 2021 (against a dividend obligation of roughly $6 billion), which bodes well for the repayment of the company's ~$56 billion in debt in the years ahead.

Across my 4 shares of the stock, my net annual forward dividends increased by $0.16 as a result of IBM's dividend announcement.

Expected Dividend Increases for May 2021

Expected Dividend Increase #1: Lowe's (LOW)

It will be interesting to see whether Lowe's resumes its pre-COVID dividend increase schedule of late May or early June since the company just raised its dividend last August.

In light of the favorable operating environment for LOW, Yahoo Finance is forecasting that the company will grow its earnings 14.2% annually over the next 5 years. 

With this in mind, I am anticipating that whether LOW's dividend increase is in late May/early June or August again, LOW will announce a 10.0% increase in its quarterly dividend from $0.60/share to $0.66/share.

Should this dividend increase manifest itself, my net annual forward dividends would be boosted by $0.96 across my 4 shares of the stock.

Expected Dividend Increase #2: Leggett & Platt (LEG)

Since Leggett & Platt hasn't announced a dividend increase since May 2019, it will be interesting to see whether LEG makes up with a decent dividend increase this time around.

I'm anticipating that LEG will announce a 5.0% increase in its quarterly dividend from $0.40/share to $0.42/share, which takes into consideration that LEG is recovering from the impact of COVID-19.

If this dividend increase plays out as I expect, my net annual forward dividends would advance by $0.64 across my 8 shares of the stock.

Expected Dividend Increase #3: American Tower (AMT)

Rounding out my list of dividend increases that I'm forecasting for May is the hyper-dividend growth stock, American Tower.

What makes AMT interesting, is that aside from its commitment to growing its dividend by around 15% for 2021, AMT regularly increases its dividend each quarter.

Since AMT's dividend increases announced in May are typically the smallest, I am anticipating that AMT will announce a 1.6% increase in its quarterly dividend from $1.24/share to $1.26/share.

Should this dividend increase play out, my net annual forward dividends would be boosted by $0.24 across my 3 shares of the stock (since I will be purchasing another 2 shares of the stock the first week of May ahead of the dividend increase).

Concluding Thoughts:

Since XOM and EPD didn't increase their dividend/distribution, my net annual forward dividends only advanced by $1.36 during April. Regardless, this would require a $34.00 capital investment at a 4% yield to replicate.

Looking ahead to May, I am anticipating that I will receive $1.84 in dividend increases during the month, which would require $46.00 in fresh capital invested at a 4% yield to match.

Discussion:

Did you experience disappointing dividend announcements as I did with IBM's paltry dividend increase?

Are you expecting any first time dividend increases as I am with AMT?

I appreciate your readership and welcome your comments in the comment section below!