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Expected Dividend Increases In April 2020 (Hopefully)

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Via SeekingAlpha.com

My, oh my. What a difference a month makes. In last month’s article, we discussed how dividend growth slowed and there may be an economic slowdown. This month, it is a completely different story. The coronavirus, COVID-19, pandemic has spread and the economic impact has been unlike anything I have ever seen. The impact on individuals, small businesses and corporations is changing on a daily basis. For many companies, they are rethinking their 2020 strategic visions and changing their dividends and capital strategies on the fly. It will be tough to predict the expected dividend increases in 2020; however, we will highlight the companies that have historically announced dividend increases in April.

The story for dividend investors in March 2020 was unfortunately a negative one. High-profile dividends from some of the largest oil companies and other hard-hit industries were coming in what felt like daily. Here are some of the major dividend cuts that were announced at the time I wrote this article:

  • Occidental Petroleum (NYSE:OXY) slashed its dividend by 80%. Lanny was all over this one, even predicting the cut the night before it happened in this article. All eyes are focused on the other major, integrated oil companies. Currently, they are cutting capital spending, suspending buyback programs, and unfortunately, laying some individuals off in an effort to fight off the impact of low oil prices. Will this be enough to save their dividends if low oil persists? That’s the question.
  • Delta (NYSE:DAL), and nearly every other airline, suspended their dividend for the foreseeable future. This one is not very surprising.
  • Boeing (NYSE:BA) suspended its dividend. The company continues to have problems. Coronavirus wasn’t the root cause of all the company’s problems, but it dealt the final blow to the company’s dividend.
  • Retail, restaurants, and hotels have also seen many companies cut their dividend. Again, this isn’t surprising due to the stay-at-home orders. There are many of companies in this sector that were impacted, and I cannot list them all. Here are the major companies: Marriott (NASDAQ:MAR), Hilton (NYSE:HLT), Gap (NYSE:GPS), Macy’s (M), Nordstrom (NYSE:JWN), Darden Restaurants (NYSE:DRI), Cheesecake Factory (NASDAQ:CAKE), and Cracker Barrel (NASDAQ:CBRL).

The dividend cuts also caused us to do some deep reflecting. After each cut, we talked and thought about how we wanted to change our investment strategy during these troubling times. Our dividend stock screener still holds strong. These three simple metrics have served us very well over the years. However, we have felt the need to dig deeper with each investment while things are uncertain.

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First, we are taking a deeper look at debt on corporate balance sheets. Debt didn’t contribute to all the dividend cuts listed above. However, it sure was a major factor in OXY’s dividend cut (I think we all know that story pretty well by now). Even other companies that spent years funding share buybacks with debt are facing pressure now. So this month, I ran a screener to identify Dividend Aristocrats with Low Debt on their balance sheets. Debt will be considered in my investment decisions for the foreseeable future.

Second, Lanny put together a list of industries that are built for this pandemic. Knowing where to start as a dividend investor during these times may be difficult. Lanny’s guide will help you find the industries that are best positioned to NOT make it on the list of dividend cuts above. A dividend is never guaranteed, so I’m not saying their dividend wouldn’t be cut if this pandemic gets worse. Always remember that!

Actual Dividend Increases in March 2020

Before looking ahead to April, I always like to recap the dividend increases from the previous month. Let’s dive right into the companies that were expected to announce dividend increases in March.

Company #1: Colgate-Palmolive (NYSE:CL) – Colgate stuck right in line with its recent dividend increases. Over the last few years, the company has increased its quarterly dividend by $.01 per share. 2020 was no different. The consistency is very much appreciated right now.

Actual Increase? – 2.3%

Greater than Last Year? – It was right in line with last year’s 2.4% dividend increase

Company #2: General Dynamics (NYSE:GD) – Lanny has been building a position in General Dynamics over the last several months. Even though that dividend increase was lower than last year, a nearly 8% increase is awesome!

Actual Increase? – 7.8%

Greater than Last Year? – No, last year’s dividend increase was 9.7%

Company #3: Oracle (NYSE:ORCL) – Oracle was the first company on this list to not announce a dividend increase when expected. Its dividend increase streak isn’t as robust as some Dividend Aristocrats, so the increase was hardly guaranteed. But I’m sure this will be a common trend among other states.

Actual Increase? – N/A

Greater than Last Year? – N/A

Company #4: Realty Income (NYSE:O) – We all love the monthly dividend-paying company. Realty Income announced its increase by the same fractional cents as it typically does! REITs like Realty Income will face some pressure in the coming months as the negative impact on its tenants is felt.

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Actual Increase? – .22%

Greater than Last Year? – In line with all of its other dividend increases!

Expected Dividend Increases in April 2020

With the month behind us, let’s look forward to April. April will be fascinating, in my opinion. I see a few of scenarios playing out. There will be companies that stick to their regular dividend increase schedules albeit announcing lower dividend increases than their recent averages. Or, I am expecting that some companies will wait a quarter or two to announce their dividend increase. Dividend Aristocrats in particular will not want to snap their dividend increase streak unless absolutely necessary. That doesn’t mean they cannot delay their dividend announcement one quarter until 2020 forecasts can be updated. Therefore, let’s look ahead to the expected dividend increases in April 2020.

Company #1: Procter & Gamble (NYSE:PG) – A Dividend Aristocrat and Top 5 Foundation Stock leads the listing for April. I love this company and management has done an excellent job “waking the sleeping giant” over the last few years. It is included in Lanny’s listing of companies that are built for a pandemic. In my eyes, I would expect the company to continue its dividend increase streak with an announcement in April.

Last year’s dividend increase – 4.04%

Five-year average DGR – 3.00%

Expected timing of Dividend Increase Announcement – Beginning of the month

Company #2: Johnson & Johnson (NYSE:JNJ) – Like P&G, this Dividend Aristocrat is one of my favorite holdings. It is also one of our Top 5 Foundation Stocks and within Dividend Aristocrats with Low Debt. Chances are, if you are looking for a list of strong, dividend-paying companies, JNJ will find its way on that list. I am also anticipating that JNJ will announce a dividend increase this month versus possibly delaying the increase.

Last year’s dividend increase – 5.56%

Five-year average DGR – 6.30%

Expected timing of Dividend Increase Announcement – End of the month

Company #3: International Business Machines (NYSE:IBM) – IBM is not a Dividend Aristocrat. However, the company is closing in on the coveted title. The company has announced dividend increases for 19 consecutive years. I am anticipating the company will announce an increase in 2020. However, I could potentially see IBM waiting a quarter to make the announcement. Taking a step back, it was very strange to see IBM’s share price fall below the $100 per share and to see its dividend yield shoot up. I added a few shares this month as part of my nibbling investing strategy. And I may continue to do so if the markets turn south again.

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Last year’s dividend increase – 3.18%

Five-year average DGR – 8.17%

Expected timing of Dividend Increase Announcement – Beginning of the month

Company #4: Southern Company (NYSE:SO) – As a utility company, I am not expecting too much to change from a dividend increase for SO. SO has consistently announced $0.02 per share increases in its quarterly dividend over the last few years. Barring any changes in the first half of the month, I would expect to receive the dividend increase in April.

Last year’s dividend increase – 3.33%

Five-year average DGR – 3.38%

Expected timing of Dividend Increase Announcement – Middle of the month

Company #5: W.W. Grainger (NYSE:GWW) – Grainger, Grainger, Grainger. Lanny purchased shares a few years ago, and it is one of my favorite investment purchases of his. Grainger’s dividend increases have fallen between 5% and 8% on average over the last five years. Grainger is a model of consistency, so it will be very interesting to see the dividend increase it announces in 2020.

Last year’s dividend increase – 5.88%

Five-year average DGR – 5.93%

Expected timing of Dividend Increase Announcement – End of the month

Company #6: Apple Inc. (NASDAQ:AAPL) – I think this will be one of the most fascinating companies on the list. What is Apple going to do? Its dividend increases are usually at the end of April or the beginning of May. So we are going to have to wait a while to see if the company increases its dividend or maintains it at the current level. I am expecting the former scenario, but I could also see the company delaying it a quarter as the dust settles (hopefully).

Last year’s dividend increase – 5.48%

Five-year average DGR – 10.43%

Expected timing of Dividend Increase Announcement – End of the month

Summary

All I have to say is let’s wait and see what this next month brings us. If March showed us anything, it is that things can change daily, hourly, or even sometimes within minutes of each other. It is as important as ever to focus on quality investments. Taking a step back, this is also a great time to focus on your personal balance sheet. Work on saving a few extra dollars and padding your emergency fund. There are plenty of ways to save or earn a few extra dollars. If you want to save today, Lanny gave you 5 easy ways to save $500! Let’s get after it everyone!

Most importantly, stay safe & healthy.

Original post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.




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