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6 Dividend Increases Expected In September 2020

By September 6, 2020 No Comments

Dividend increases are a major foundation of our financial freedom plan. We are building our dividend income, which is the EASIEST form of passive income, to eventually cover our monthly expenses. A key piece of this strategy is investing in companies that increase their dividend. Why? We want our dividend income stream to grow! Who wants their income to remain stagnant and lose purchasing power!

That is why we are constantly monitoring our dividend stocks for dividend increase announcements. It is a hobby the two of us love and are always discussing with each other. One day, we decided to share this exercise with ALL OF YOU. Therefore, each month, we publish a list of the expected dividend increases in the coming month.

We find our dividend investments using the Dividend Stock Screener. The stock screener uses three simple metrics. The third metric is dividend growth history. Inherently, every investment must have a history of increasing their dividend!

In this article, we will take a deep dive into the wonderful world of dividend increases. The remainder of the article will discuss the following:

  1. Dividend News & Analysis – We will cover major dividend news for the month of August.
  2. Actual Dividend Increases in August – We will review the companies featured in August’s dividend increase article and analyze their dividend increase announcements.
  3. Expected Dividend Increases in September – We will highlight the major dividend increases in September.

Dividend News & Analysis – August 2020

August was another exciting month for dividend increases. The past several months have been filled with dividend cuts, dividend suspensions, or with companies simply delaying their dividend announcement. However, things were different this month. In a positive way. Two of the negative trends started to reverse.

Lowe’s Corporation Announces a 9% Dividend Increase

Lowe’s delivered a nice surprise to frustrated dividend investors. Typically, Lowe’s increases its dividend in May. However, the company opted to forgo a dividend increase during the pandemic. Instead, the company waited an extra quarter and announced a 9% dividend increase (to $.60 per share from $.55 per share).

This was exciting news for dividend investors. Why? Over the last few months, we have received dividend cut after dividend cut after dividend cut. In particular, for me, it has felt like I have taken one step forward and two steps back. We purchase stock and receive a dividend increase one week. Then, the next week, a company either cuts their dividend or does not announce a dividend increase. Lowe’s was not the only company to pass on a dividend increase last quarter after all.

Now, as companies assess the true impact of the pandemic, they are starting to re-evaluate their capital allocation plans. Some companies, like Lowe’s, are finding out that their businesses are performing well during the pandemic. With a strong tailwind and earnings, Lowe’s decided the time was right to increase its dividend. Hopefully, other companies will follow suit as well!

Foot Locker Reinstates Its Dividend

The other exciting dividend news came from an unexpected source. Foot Locker suspended its dividend in the heart of the pandemic to preserve capital during the uncertain times. I cannot blame the company. Especially since it operates in the retail sector that relies heavily on in-store traffic.

The company surprised the market with strong earnings that beat expectations. The excitement was magnified when the company announced it was reinstating its dividend!

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Now, the one caveat is that the dividend was reinstated at a lower level. Before the dividend suspension, Foot Locker paid a $.40 per share quarterly dividend. Now, the company will only pay a $.15 per share quarterly dividend. However, in my mind, it is a great sign that retail companies are feeling confident enough to return some capital back to shareholders. Hopefully, over the next few months, this trend continues for other retailers. In particular, I have my eye on T.J.Maxx. My gut tells me that it will follow a similar path to Foot Locker and announce a reinstated dividend soon.

Dividend Increases in August 2020 – Actual

Now, it is time to review the performance of the companies included in last month’s article. We did not expect too many high-profile dividend stocks to announce dividend increases. Still, every dividend increase is important: large company or small. That is why I am excited to share with you the actual dividend increases in August!

Company #1: Illinois Tool Works (NYSE:ITW)The Dividend Aristocrat that I added to my portfolio in large quantities years ago. Man, it is crazy how time flies and your strategies shift over the years. In the past, I made large investment purchases. Now, I am buying stock in $100-$200 batches multiple times per week. Free trades are the best!

ITW announced large, double-digit percent dividend increases until 2019. Then, last year, the company only announced a 7% increase. Naturally, in this current environment, I was not expecting a return to double-digit growth. However, I was pleasantly surprised when the company announced a 6.5% increase this year. It was in line with the previous year, and it is higher than many of the other stocks in my portfolio. This was a nice victory to start the month off!

ITW Dividend Increase – 6.5%

Greater than Last Year? – No. It was barely smaller, as the company increased its dividend by 7% last year.

Company #2: Dover Corporation (NYSE:DOV) Dover is a Dividend King. With this dividend increase, it has now increased its dividend for 65 consecutive years. That is an impressive dividend feat in itself! With that being said, this is where the praise stops from me. The company announced a 1% dividend increase. This was 50% lower than the 2019 dividend increase of 2%. Dover is a low-dividend-yield, low-dividend-growth stock. Therefore, I will not be adding DOV to any of my upcoming watch lists.

DOV Dividend Increase – 1%

Greater than Last Year? No

Company #3: Nordson (NASDAQ:NDSN) I love when local companies find a way onto our list. Nordson is headquartered in Northeast Ohio. In fact, its headquarters is very close to me! The Dividend Aristocrat has now increased its dividend for 40 consecutive years. Last month, it announced a 2.6% increase in its quarterly dividend. Like Dover, it is a low-dividend-yield, low-dividend-growth stock.

NDSN Dividend Increase – 2.6%

Greater than Last Year? – No. Not even close.

Company #4: Federal Realty Investment Trust (NYSE:FRT) Well, not every REIT can have the dividend track record of Realty Income (NYSE:O), our favorite Monthly Dividend Company. Federal Realty Trust barely increased its dividend in 2020. However, this is expected given the pressure REITs have faced from their tenants. The prudent action was to announce a lower dividend increase this year for FRT. However, I hate seeing increases that are barely greater than the savings rate we earn at Ally Bank or Capital One Investing.

FRT Dividend Increase – .9%

Greater than Last Year? – No

Dividend Increases Expected in September 2020

In this section, we will review the dividend increases expected in September. We have covered exciting dividend news in August. Let’s see if we can keep the momentum rolling in September!

Company #1: Lockheed Martin (NYSE:LMT) Let’s start this party off with one of Lanny’s favorite dividend stocks. I think Lockheed was one of his very first investments. This company is an earnings machine. The stock price has climbed exponentially since he purchased his shares over a decade ago! The sector does not look as if it will take too large of a hit as a result of the pandemic. The defense budget is still at record levels. Therefore, I am still expecting a dividend increase in line with the company’s five-year average dividend growth rate of 9.4%.

LMT Dividend Increase last year – 9.0%

LMT Five-year average DGR – 9.4%

Expected timing of Dividend Increase Announcement – Beginning of the month

Company #2: McDonald’s Corporation (NYSE:MCD) The Golden Arches. McDonald’s. This is a company that I couldn’t be happier to own. Driving by a restaurant and seeing a line wrapped around the building ALWAYS brings a smile to my face. McDonald’s is a Dividend Aristocrat and has earned a place on our Top 5 Foundation Dividend Stock listing due to its consistency and performance over the years. McDonald’s always announces its dividend towards the end of the month. Annually, as a tradition, Lanny and I make sure to text each other within SECONDs of the announcement.

MCD Dividend Increase last year – 7.7%

MCD Five-year average DGR – 7.7%

Expected timing of Dividend Increase Announcement – End of the month

Company #3: Microsoft Corporation (NASDAQ:MSFT) Microsoft’s stock price has been on an absolute tear in 2020. The technology sector has increased substantially as a whole as a result of the pandemic (unsurprisingly). Companies continue to rely heavily on Microsoft and its services to help maintain a functioning, remote workplace. Its success during the pandemic has catapulted its market cap well over $1 Trillion dollars. That’s right. Trillion with a T.

Normally, I wouldn’t think twice about a large dividend increase. After all, I listed off several great factors for the company. However, the company is looking to acquire TikTok! With new bidders emerging in the TikTok sweepstakes daily, the price climbs higher and higher. Therefore, it will take significant capital to complete an acquisition. The size and scope of the dividend increase by management most likely will depend on the acquisition news. So let’s hang tight and see how this shakes out!

MSFT Dividend Increase last year – 10.9%

MSFT Five-year average DGR – 10.5%

Expected timing of Dividend Increase Announcement – Middle of the month

Company #4: Verizon Communications (NYSE:VZ) Personally, I am an AT&T (NYSE:T) investor at heart. Over the years, I have reviewed Verizon as a potential investment opportunity. However, I have always opted for AT&T instead. In fact, my position in AT&T is becoming large and is my largest dividend income paying stock!

Verizon is a market-leader in the wireless communication sector. It is currently holding off the newly combined T-Mobile (NASDAQ:TMUS) and Sprint for the top wireless provider position. In the end, competition in the sector is never a bad thing. Hopefully, some innovation will result that benefits the consumer. Verizon is a low-dividend-growth stock with a strong dividend yield. I would not expect its dividend increase to be significantly larger than the previous year.

VZ Dividend Increase last year – 2.0%

VZ Five-year average DGR – 2.3%

Expected timing of Dividend Increase Announcement – Beginning of the month

Company #5: Philip Morris International (NYSE:PM) Ah, Philip Morris International. One of the two major players in the tobacco industry. Recently, we compared Philip Morris to Altria Group (NYSE:MO) in a detailed stock review on YouTube. Altria Group announced its dividend increase in July. The dividend increase was only 2.4%. Nothing special. Therefore, I am not expecting Philip Morris to light up the newswire with a strong dividend increase.

PM Dividend Increase last year – 2.6%

PM Five-year average DGR – 3.2%

Expected timing of Dividend Increase Announcement – Middle of the month

Company #6: American Express Company (NYSE:AXP) – American Express is one of the Big 4 in the competitive credit card industry. In our credit card industry review, we found American Express offers an advantage due to its lower valuation and higher dividend yield. The company has a famous shareholder named Warren Buffett as well! American Express has a strong dividend growth rate, averaging nearly 10% over the last five years. It will be fascinating to see what American Express announces this month. It may tell a lot about the state of the economy and health of some of our financial institutions exposed to consumer debit.

AXP Dividend Increase last year – 10.3%

AXP Five-year average DGR – 9.9%

Expected timing of Dividend Increase Announcement – End of the month

Summary

There we have it, another exciting month of dividend increases. September has some great names on the list as well. Hopefully, by now, all of you can understand why we love dividend increases as much as we do. Whether the increase is 1% or 10%, it is truly exciting watching your income grow without lifting a finger. We appreciate every extra cent on passive income we will earn!

What dividend increases did you receive in August? What companies are you expecting to announce increases in September? Am I being too optimistic about the state of dividend increases?

Bert

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

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