Expected Dividend Increases in April 2020…Hopefully

My oh my.  What a difference a month makes.  In last month’s article, we were discuss how dividend growth was slowing 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 business, corporations, is changing on a daily basis.  For many companies, they are looking at their dividends and capital allocation strategies and rethinking their 2020 strategic visions 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 hardest 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 (OXY) slashed their 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 (DAL), and nearly every other airline, suspended their dividend for the foreseeable future.  This one is not very surprising.
• Boeing (BA) suspended their dividend.  The company continues to have problems.  Coronavirus wasn’t the root cause of all the company’s problems, but it sure helped deal the final blow to the company’s dividend.
• Retail, restaurants, and hotels have also seen many companies cut their dividend too.  Again, this isn’t surprising given the stay at home orders.  There are alot of companies in this sector that were impact and I can’t list them all.  But the major companies include:  Marriott (MAR), Hilton (HLT), Gap (GPS) , Macys (M), Nordstrom (JWN), Darden Restaurants (DRI), Cheesecake Factory (CAKE), and Cracker-Barrel (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.

READ:  The 3 Simple Metrics of the Dividend Diplomats’ Dividend Stock Screener

First, we are taking a deeper look at debt on corporate balance sheets.  Debt didn’t contribute to all the dividend cuts listed above.  But 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 in the foreseeable future.

Second, Lanny put together a listing 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 position 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.  Just always remember that!

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

Company #1:  Colgate-Palmolive (CL) – Colgate stuck right in line with their recent dividend increases.  Over the last few years, they have increased their 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 (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 dividendi increase was 9.7%

Company #3: Oracle (ORCL) –  Oracle was the first company on this list to not announce a dividend increase when expected.  Their 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 (O) – We all love the monthly dividend paying company.  Realty Increase announced their increase by the same fractional cents as they typically do! REITs like Realty Income will face some pressure in the coming months as the negative impact on their tenants is felt.

Actual Increase? –  .22%

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

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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, they will announce 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.  But that doesn’t mean that cannot delay their dividend announcement one quarter until 2020 forecasts can be updated.  With that in mind, let’s look ahead to the expected dividend increases in April 2020.

Company #1: Procter & Gamble (PG) –  A Dividend Aristocrat and Top 5 Foundation Stock lead the listing for April.  I love this company and management has done an excellent job “waking the sleeping giant” over the last few years.  They are included in Lanny’s listing of companies that are built for a pandemic.  In my eyes, I would expect the company to continue their 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 (JNJ)  – Like P&G, this Dividend Aristocrat is one of my favorite holdings.  It is also one of our Top 5 Foundation Stocks, Dividend Aristocrats with Low Debt.  Chances are, if you are looking searching 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 (IBM)  –  IBM is not a Dividend Aristocrat.  However, they are 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 their dividend yield shoot up.  I added a few shares this month, as a part of my nibbling investing strategy.  And I may continue to do so if the markets turn south again.

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 (SO) –  As a utility company, I am not expecting too much to change from a dividend increase for SO.  SO has consistently announced $.02 per share increases in their quarterly dividend over the last few years.  Barring things changing in the first half of the month, investors, I would expect to receive your 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 (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%-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 they announce 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. (AAPL) – I think this will be one of the most fascinating companies on the list.  What is Apple going to do? Their 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 their dividend or maintains it at their currently level.  I am expecting the former scenario, but I could also see them delaying it a quarter as well 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

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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.  But 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 (via our Financial Freedom products).  And if you want to save today, Lanny gave you 5 EASY ways to save today!  Let’s get after it everyone!

Most importantly, stay healthy everyone.

Bert

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