We are living in interesting times. While I would normally refrain from talking about politics on this blog, some news items are just hard not to talk about. News just broke out today about Russia’s invasion of Ukraine. I sincerely hope and pray for the families in Ukraine and the other affected areas.
Towards the end of the day, I wanted to take a quick peek at what Mr. Market’s reaction to this news was like. I was surprised to see that S&P500 end up 1.5% higher than the start of the day! This just confirms that it is almost impossible to rationally predict how the market is going to react to anything. And this is exactly why I stick to dividend growth investing. I stand a chance to rationally predict the outcome of the dividends paid out by the companies I am invested in. But relying on capital appreciation is a bit of a lottery.
Lets talk about something a little more positive though. With earnings season in full swing, this was also the time for dividend increase announcements. And I had a few of them to report here:
- T. Rowe Price (ticker: TROW) : TROW stock is getting hammered since the start of the year. It has seen a drop of nearly 26% since mid January. One of TROW’s peers, BlackRock (ticker: BLK), a stock that I do NOT own, is also seeing a similar drop in the same time frame. A did a quick peek of the fundamentals of TROW and, AFAICT, nothing with the company itself has changed. When I looked through the earnings call transcript, I did see one comment from the CEO Rob Sharps: “It was a challenging year for net flows with redemptions concentrated in U.S. equity growth portfolios, partly driven by client rebalancing after a period of robust returns.” The analysts and Mr. Market seem to have hung onto that comment. From what I can tell, this is a well run company with extremely good margins and no debt. And management was not concerned with the stock price drop either. They announced a 11.1% increase to their quarterly dividend. This marks the 36th consecutive year of annual dividend increases since their IPO, quite outstanding! The stock is currently trading at a FWD price to earnings ratio of 11.54 with a dividend yield of 3.38%.
- 3M (ticker: MMM): 3M had a fairly decent quarterly earnings release. But the stock has got hammered since the start of the year like TROW, seeing a drop of nearly 20%. In this case though, there is a legitimate concern. 3M recently lost a lawsuit around defective earplugs sold to the US military. 3M also has a lot of debt on their balance sheet and management has been focusing on paying that off (as they should). In the midst of all this, the board announced a 1 cent increase to their quarterly, similar to last year. This naturally made a lot of investors grumpy. While I am not super happy about this situation, I am still reasonably confident about this company’s long-term future. But having said that, I will be keeping a close eye on the management’s actions in the coming few quarters and decide accordingly. The stock is currently trading at a FWD price to earnings ratio of 13.87 with a phenomenal starting dividend yield of 4.06%.
- NextEra Energy (ticker: NEE): NEE is another one of these stocks that has seen a significant drop of nearly 19% from its highs late last year. The only reason I could attribute to the stock drop was the leadership changes happening within the company, with the previous CEO Jim Robo stepping down expressing a desire to retire after a decade long tenure. He is now replaced by John Ketchum, who was previously CFO. While that is ongoing, I think the fundamentals of the company are still intact and they expect a double-digit earnings growth and nearly 8% profit growth for the rest of the year till 2025. The board announced a nice 10% hike to their quarterly dividend. The stock is currently trading at the FWD price to earnings ratio of 25.86 and with a decent starting dividend yield 2.35%.
- Whirlpool Corp. (ticker: WHR): Whirlpool is one of my recent entries in my portfolio after having been on the research watchlist for a long time. I finally pulled the trigger a few months back. The corporation boasts of some strong brands under its umbrella. The company has clearly been a beneficiary of the work-from-home trends introduced due to COVID. However, from what I researched, the profit margins, more specifically the ongoing EBIT margin (this is the metric that the management likes to cite in their presentations) have been improving from below 2% in 2008 after the GFC to about 6% before COVID news hit us. Since then the margins have improved to nearly 8% in 2021. I also like that the management has been very shareholder focused by aggressively buying back shares and also dividend increases. This last increase of 25% was therefore not all that surprising. The stock is trading at a FWD price to earnings ratio of 7.17 with a solid starting dividend yield of 3.54%.
- Church and Dwight (ticker: CHD): CHD is within the bond-like category in my portfolio. Good solid brands like Arm and Hammer, Oxiclean, Trojan etc. I think these are staples for any household and they are not going anywhere in the next decade. The board announced a 4% quarterly dividend increase. The company has paid a quarterly dividend for nearly 121 years! Quite staggering! While the dividend increase itself is disappointing considering the current inflation levels, I understand caution on the part of the management considering the economic environment we are in with frequent supply chain issues and pricing challenges with retailers. The stock is currently trading at a FWD price to earnings ratio of 30.03 with a lousy starting dividend yield of 1.09%.
- Intel Corp. (ticker: INTC): Another recent entry into my portfolio, INTC reported its fourth quarterly earnings recently and announced a 5% hike to their quarterly dividend. CEO Pat Gelsinger reiterated the focus towards delivering on their IDM 2.0 strategy. Mr. Market, however, decided to focus solely on the gross margin contraction of 3.2% and the stock tumbled. The stock is currently trading at a FWD price to earnings ratio of 12.85 with a solid starting dividend yield of 3.27%.
- Home Depot (ticker: HD): HD delivered a strong quarter once again and at the same time announced a 15% hike to their quarterly dividend, making this their 140th consecutive quarter where they have paid out a cash dividend. This dividend increase surprised me as I was expected a hike closer to around 9-10%. Immediately after the release, the stock dropped an astonishing 9% because management forecasted that they expect slower growth and thinner margins in the coming year. The stock is currently trading at a FWD price to earnings of 19.25 with a nice starting dividend yield of 2.4%.
- Pepsi Co. (ticker: PEP): I reserved the last spot for the newest entry into the Dividend King, PepsiCo announced a 7% dividend increase recently after a strong quarter. PEP is one my core holdings and it is a darling of the dividend investing community for a reason. The stock is currently trading a FWD price to earnings ratio of 24.87 with a decent dividend yield of 2.55%.
So there ya go. Those were the dividend increase announcements that I received since the start of the year. Some of these were along expected lines, some very surprising in a good way and some very disappointing. But I will take them which way they come!
Do you own any of these companies? What increases have you received so far this year? Let me know in the comments below!
PS: You can also connect with me on Twitter @LifeWDividends.