Portfolio Update – New positions

A few companies have been on my radar/watchlist for a while now and I decided to pull the trigger recently when I saw them approach a reasonable price. I am wary about every new position that I initiate, because I very rarely sell and considering the limited bandwidth available to me to track these companies for several years to follow, I want be extremely careful. I am also mindful about the total number of companies I am invested in for this same reason. Currently, this is at a manageable number.

So, lets get right into the portfolio update and the new positions I have added recently.

  • Whirlpool Corporation (ticker: WHR): WHR falls in the Consumer discretionary sector and the Household appliances industry. The company manufactures and markets home appliances and related products and boasts of several well known brands: Whirlpool, KitchenAid, Maytag, JennAir, Affresh, Bauknecht etc. As a consumer, I have been using Whirlpool appliances around my house for several years. The company shows cyclical behavior and more recently, the stock price has seen a slump due to margin pressures. This after a solid earnings growth during most of 2020 and early 2021. The stock is currently trading at a FWD price to earnings of 8.65 (below its 5-year average of 10.25), EV/EBITDA ratio of 5.78 (5-year average of 7.46). Return on Invested Capital (ROIC) percentage of around 19% (5-year average is around the 10% mark). The five year free-cash-flow (FCF) CAGR is around 19.4%. The stock is currently yielding a dividend of around 2.45%, payout ratio of around 21%, with a 5-year Dividend CAGR of around 7%. They have a history of increasing their quarterly dividends for the last 11 years with the most recent increase being around 12% I am keeping a close eye on the current ratio and the short-term liabilities. Not something that is worrying at the moment though. I am choosing to add WHR into the bond-like category of my portfolio as I am not expecting stellar growth in the coming years, but this will give me some good steady cash flow at a reasonable yield on cost.
  • Intel Corp (ticker: INTC): This has been on my watchlist for a while now and I was mostly staying away because of the previous CEO and management. Thankfully, the old management team has gone away and we have a new CEO, Pat Gelsinger, who was previously at VMWare. My first recollection of Pat was when I read a book he co-authored regarding Programming the 80386. The original Intel 8086 was the one of the first microprocessors I studied back in my undergrad days and, frankly, it propelled me towards the career I have today. So Intel holds a special place in my heart. Anyways, I digress. Pat is exactly what Intel needs at this moment as far as leadership in concerned, after years of incompetent management at the helm. The stock got hammered after the recent earnings call and there is a lot of unwarranted pessimism around this business. As far as I am concerned, the fundamentals of the business look solid to me. This is $200 Billion market cap company with by sheer revenue numbers the largest semiconductor company in the world. The stock is trading at a 9.65 FWD price to earnings ratio (5-year average around 12.05), EV/EBITDA around 6.21, ROIC is around 18%. The stock is currently yielding a dividend of around 2.73%, payout ratio of around 26% and a 5-year Dividend CAGR of around 6%. They have a history of increasing their quarterly dividend for the last 7 years with the most recent increase being around 5%. The only concern here is if they will be able to sustain their dividend growth in the coming few years given that they are expecting some capital expenditures due to a investments in a new foundry business. I am not as much concerned about this, because I think this is what management should be doing to turnaround this business after several years of misses.
  • Snap-on Incorporated (ticker: SNA): The third addition is from the Industrial sector and another one that has been on my watchlist for a while. SNA markets and manufactures a wide category of tools, equipment, PC-based and handheld diagnostic products. They were founded in 1920 and happened to notice some of their products in use when I was checking out my car being serviced at the service station. Surprisingly, companies like this do not get talked about a whole lot in mainstream or social media. Like several of its peers, SNA is also facing supply chain constraints and these headwinds have caused the stock price to drop. The stock is currently trading at a 14.57 FWD price to earnings ratio (about in line with their 5-year average) and a EV/EBITDA of 9.9 (a shade below their 5-year average of 10.03). ROIC is at about 15%. FCF 5-year CAGR is at a stellar 14.9%. SNA is currently yielding a dividend of 2.70% with the 5-year dividend CAGR at an outstanding 15.01%, payout ratio at around 39.37%. They have a history of increasing their quarterly dividend for the last 7 years. I am relatively confident about the growth prospects of SNA given its existing portfolio and have therefore put this in the “Growth” category of my portfolio.

So there you go. Are any of these companies in your portfolio? What do you think about them?

Thanks for reading thus far..

Johnson and Johnson in the news

One of my “core” holdings, Johnson and Johnson (ticker: JNJ), has been in the news A LOT more recently. And while I typically do not reach to news especially when I consider is “noise” as far as my long-term outlook of the business, when the news item has a significant impact on my strategy, it is worth bringing-up here and laying down my thoughts on the subject.

So late last week (12th of Nov, 2021), news broke out that JNJ is planning on splitting its consumer products business from its pharma and medical devices businesses and create two independent publicly traded companies.

The press-release on JNJ’s investor page states that the “new Johnson and Johnson” i.e. the business division containing the pharma and medical devices portfolios, will be headed by Joaquin Duato, current Vice-Chairman of the Executive Committee, after Alex Gorsky, the current CEO, transitions over that role. Alex Gorsky would continue to serve as Executive Chairman. The new Consumer Products company (name TBD) will have a separate board of directors and executive leadership which will be announced in due course.

The split-up is planned to be completed by end of 2022. It is intended to be a tax-free separation.

The news release also states the following regarding shareholder dividend:

In addition, it is expected that the overall shareholder dividend will remain at least at the
same level following the completion of the transaction.

Obviously, there are not a whole lot of details in this press release and we will need to wait and see how this whole thing plays out.

Having said all that though, I am not very surprised by this decision. In my deep-analysis post for JNJ on this blog back in August this year, when I analyzed the major drivers for the revenue for the company in the last five years, I was surprised to see that the consumer health and medical device’s revenue contribution percentage was essentially flat or even slighting declining for the last 5 years.

This trend is consistent for a few more years before that as well. Most of the growth in the company has been from the pharma business segment. This changed my outlook slightly, because I was under the false impression that JNJ was like a “healthcare ETF” given the diversification within its business. At least this is the narrative that is touted all around the internet whenever you read about JNJ.

Such a split-up is not unique to JNJ. In the recent past, we have seen such split-ups in the healthcare industry with atleast two other big business houses: Pfizer (ticker: PFE) spun-off its UpJohn business segment and combined it with Mylan to form a business solely focused on biosimilars called “Viatris”. Similarly, Merck (ticker: MRK) completed its spin-off of Oragnon.

So how do I view this news then? I think it is a positive decision. In Peter Lynch’s “One Up On Wall Street“, he states that huge companies are slow movers in terms of their revenue growth. JNJ is a massive business with a market cap in excess of $430 billion. This split-up will help each individual company focus on its business and help drive revenue growth better.

Am I as excited about the consumer health business as I am about the “new JNJ”? Not so much. I never really owned JNJ for its consumer health business alone, but rather for the overall conglomerate and also the quality of its management. I think the “new JNJ” piece of the business has still a lot of value and growth left.

I have not yet made up my mind about the consumer health piece of the business. A lot will depend on how to business is structured, the quality of the management and the overall brand value. I will need to research that independently to make a decision on what I intend to do with that.

The point of this post is not a “I told you so..” moment. Rather, it is reinforce this notion that all businesses, as with life itself, are subject to change. And the value of doing your own research by reading the fine print of the businesses you own, is priceless.

Happy investing!

Disclosure: JNJ part of “core” category of my dividend portfolio. No positions in PFE or MRK at this time.

Monthly Income Update – October 2021

I have been relatively quiet on my blog for the last couple of weeks. This is for a few reasons: I had to take care of a few projects around the house that had been pending from a while. I finally got around to checking one of big projects from this list a couple of weeks back. Apart from that, work and family responsibilities have made things incredibly hectic leaving me with very little time in the day to even look at my portfolio or follow investing news.

Not that any of this is a problem. My investing strategy is catered for such situations. It is one of the primary reasons why I rely on dividend growth investing. I can focus on my life while my investments take care of themselves and generate a steady cash flow.

October was supposed to be a “slow” month for me in terms of dividend income. This is yet another aspect that does not worry me one bit. I do not invest in companies with an eye on their dividend payout dates. When a company ends up paying dividends is immaterial as long as they maintain the frequency and also keep up with their periodic increases. It all averages out eventually.

Okay, enough talk. Lets get into the update itself.

Dividend Income Received

Company/ETF (ticker)Amount
1.JP Morgan Chase (JPM)$9.00
2.Realty Income (O)$9.33
3. STAG Industrial (STAG)$3.05
4. CareTrust REIT (CTRE)$5.34
Total$26.72

So 4 companies contributing a total of $26.72 for the month. At the same time last year, I had a grand total of $1.27 for dividend income. So the YoY growth is still quite appreciable. $26 might seem very disheartening at this stage. After all, that is not going to be helpful in paying any bills. But as I have illustrated in one of my previous posts, it is not the present cash flow that I am focused on, rather it is the future cash flow.

While there was nothing much to write about in terms of dividend income, there has been plenty of action and news to follow and I have been skimming over that whenever I had a chance.

Dividend Increases

With the Q3 earnings in full flow during this month, I was keeping a track of certain companies and their expected dividend increases. The following were of interest:

  • Albertsons Companies (ticker: ACI): ACI went public around mid 2020 after several years of delay. It was a speculative bet and so appropriately placed in that category of my portfolio. That said, I was familiar with the chains covered under this company including the Albertsons, Safeway and Randalls grocery stores and a fairly good understanding of their business itself. My evaluation deemed this as a interesting value opportunity and I initiated a position late last year. I am happy that I did, I have more than doubled my investment since then. ACI announced a 20% increase to their quarterly dividend. I will be “promoting” this position from the “speculative” to the “growth” category as I think the management is steering this business in the right direction
  • AbbVie (ticker: ABBV): I wanted to pay close attention to ABBV’s debt profile and see if things were on track from their Q3 report. They were. And, as expected, ABBV announced a 8.5% increase to their quarterly dividend.
  • Visa (ticker: V): The next double-digit hike came from V. A nice 17.2% quarterly dividend hike. Nothing much to say here. Just solid quarterly results as expected.
  • ExxonMobil (ticker: XOM): And the final increase of a whopping 1% from the “Big Oil” giant, ExxonMobil. This was done to maintain its dividend aristocrat status. Am I disappointed? Nope! I understand why the management is doing it and I would be happy if they can use their cash flow to pay down debt. And the fact that management is committed to its dividend policy even after one of the worst oil markets, speaks a lot to me.

Other news

Realty Income announced the completion of its merger with VEREIT (ticker: VER). Realty income also announced the spin-off of its office-related assets into a new REIT called Orion (ticker: ONL). The arrangement is such that for every 10 shares of O held, the O stockholders would receive 1 share of ONL. At present, I plan to simply sit on these newly received shares of ONL and decide at a later point in time regarding what I would like to do with them.

Buys and Sells during this month

Big buys: VZ, LMT, CLX, JNJ

Staying in the game purchases: MMM, AFL, PG, CTRE, DLR, DGRO, O, SCHD, STAG

No sells during this period.

LMT dropped appreciably during this month after their lower guidance post their earnings call. This created a buying opportunity. VZ and JNJ also saw a dip. These are at close to reasonable value for me, so I decided to add to my positions. Similarly, CLX continued its “reversion to mean”. I was happy to buy and add more at these prices.

The “staying in the game” purchases are simply dollar-cost averaging into the stocks since the threshold for number of days since the last purchase made had expired (threshold configurable based on the category of the holding in my spreadsheet setup). The tranche size is dependent on the current valuation of the stock in question (i.e. smaller tranche size for an overvalued stock).

Summary

Another month is in the books. I plan to get back to more regular writing on the blog, time permitting of course. I am re-reading Peter Lynch’s One Up on Wall Street again. So I hope to cover that through a book review in one of my future posts.

Thank you for reading thus far and drop a comment to let me know how your month went by.

PS: You can now also connect with me on Twitter @LifeWDividends.

Dividend Increases – September 2021

September of 2021 is already here! I cannot believe how quickly time is flying by. I am incredibly busy at my regular day-job and then with family after that, leaving literally no time for even looking at my dividend portfolio. Is that a problem? No! This is precisely the reason why I have chosen an investing strategy that does not require regular baby-sitting. I do the one-time deep analysis on a business and if everything checks out and I get to buy the business at a reasonable value, I invest in it. And then I sit and wait for this seedling to grow into a plant and eventually a tree. These businesses will return cash back to me as dividends. Along the way, they will also increase that cash since they are making more money than they need, and they choose to return the excess cash back to their shareholders as a thank-you.

The following companies that I invest in, have increased their dividends in the past month:

  • Microsoft (ticker: MSFT): The board of directors at Microsoft Corp. declared a increase in their quarterly dividend, with the new dividend at $0.62 per share. That is a 11% increase in their quarterly dividend. MSFT has been increasing their dividends for the last 11 years. Their 5-year dividend CAGR is about 9.24%. In addition to the dividend increase announcement, the board also approved a share repurchase program for $60 billion.
  • Texas Instruments (ticker: TXN): TXN’s board of directors approved a quarterly dividend increase of nearly 13%, going from $1.02 to $1.15. TXN has been increasing its quarterly dividends for the last 18 years. The dividend increase is slightly lower than the stunning 5-year CAGR rate of 21.83%. But I am not at all worried because the company, its CEO and the board are committed to their shareholders.
  • Realty Income (ticker: O): O’s board of directors approved the 112th common stock dividend increase. The monthly cash dividend increased from $0.2355 to $0.236 per share. This may look like much, but considering this is a monthly payer, I will take it. The CEO and President Sumit Roy said the following, “Our Board of Directors has once again determined that we are able to increase the amount of the monthly dividend to our shareholders, marking the 112th increase since our company’s public listing in 1994. With the payment of the October dividend, we will have made 615 consecutive monthly dividend payments throughout our 52-year operating history.” Lets just digest that last part again: 615 consecutive monthly payments! Steady as they go!

Do you own any of these stocks? Did you receive dividend increases through your other holdings? Please let me know in the comments below.

M1 Finance : 1-year review

School season has begun here in the US, and as a parent, this usually means busy weekdays. But thankfully, I am going in with an investing strategy specifically catered to this very situation i.e. I can focus on my work and life while my invested capital works in the background to generate more cash.

I mentioned in one of my previous posts regarding how I have been using M1 Finance for my individual brokerage account to manage my dividend portfolio. I have now spent over an year with this firm and I thought it was a good time to sit down and start penning down my thoughts about this brokerage service, things I like about it, things that I don’t quite like as much and looking ahead.

Hopefully, this will serve as a honest review of the brokerage service for someone that is getting started in investing and looking around for a brokerage.

Why did I choose M1 Finance to begin with?

There are plenty of options available to the average retail investor in terms of brokerage services here in the US. Firstly, there are the big-name established brokerage firms that have been around for a long time such as: Vanguard, Fidelity, Charles Schwab, E-Trade etc. Then, there are the relatively newer options such as Robinhood, WeBull, Acorns, M1 Finance etc.

About an year back, I wanted to explore this space a little. I already had exposure to some of the big-name brokerage firms because of some employee-based stock plans, retirement accounts etc. And while these brokerage firms are stable and the services they offer are reliable, the overall experience of investing through them was a little inefficient. For instance, the user-interface (UI) available on the web-portal to the retail investor seems either so dated, or very confusing or just needs some improvement.

In contrast, the new kids-on-the-bloc were offering a refreshing experience in terms of the UI, including better mobile apps, zero-commission fees on trades and also the option of trading with fractional shares. The zero-commission fees on trades, in particular, was a significant game changer and, now, several of the big-name brokerages also offer the same service to the average retail investor. Given that I already had some accounts with the big-name brokerage firms, I decided to give one the newer options a try, and chose M1 Finance based on some initial research.

Another thought that was brewing in my head: While my wife generally has no interest in investments and finance-related matters in general, I did not want to scare here away by using a brokerage whose interface was too verbose, confusing and overwhelming for the first time user. Perhaps, a more beginner-friendly refreshing UI might even ease her into this work, if she wanted to dabble in it for any reason whatsoever.

M1 Finance – quick peek

M1 Finance has a unique approach in terms of how an investor can maintain his/her portfolio. The portfolio is maintained as a “pie”, wherein each pie is a collection of stocks or more pies called “slices”. M1 Finance offers a collection of example pies that the investor can choose from OR the investor is free to build his/her custom pie.

Image Source: M1 Finance

The investor can allocate percentages to each of the “slices” within the pie such that they total to a 100%. The allocations can be changed at any time during the life of the portfolio. When the investor deposits cash into the brokerage account, M1’s algorithm uses the cash to issue trades such that they conform the percentages allocations set by the investor. M1 also offers an “auto-invest” option such that this process can be automated. Whenever a specific allocation percentage goes over the target allocation set by the investor, M1 auto-trading algorithm classifies this slice weighting as overweight and instead invests any new deposited cash towards slice weightings that are underweight.

Trades on M1 can only happen during mornings when the markets open for the day. M1 plus, another tier of membership, offers afternoon trades as well. However, M1 plus membership comes at a cost of $125/year, at the time of writing this post.

M1 offers services such as regular individual brokerage account, Traditional and Roth IRA accounts, custodial accounts, trust accounts etc. They also offer other banking services such as M1 spend (debit card), M1 credit card with 2% cash back that gets automatically reinvested into your investment account, M1 borrow (loans) etc. I have not used any of the other services outside of the investment account.

Source: Reddit

The Good

  1. Excellent user-interface: The user-interface for both the website as well as the mobile APP (I have tried iPhone APP) are phenomenal and refreshingly better than some of the big-name counterparts. I have generally never had any issues with the UI and it has operated reliably during the last one year. It is extremely easy to place a trade and very easy to track portfolio performance using their time-weighted return metric. The landing page of your portfolio typically shows a graph of over portfolio’s total worth since the day it was first created. In addition, it is easy to track how much dividends have been earned during the entire lifetime of the portfolio, or simply doing the last week, month or day. It appears that M1 has eliminated a lot of clutter and kept the user-interface simple for the beginner investor.
  2. Unique approach to portfolio management: The “pie” based view does take a little while to get used to, but once you get it, it is actually a pretty simple way to manage a portfolio. For instance, your portfolio could be based on something like a lazy 3-fund portfolio i.e. three ETFs or index funds: one corresponding to the total stock market, one to the total bond market and one the international stock market with a percentage split for each of the funds. It makes complete sense to have this represented as a “pie” with each “slice” being one of these three funds. It then becomes very easy to which “slice” has grown to be overweight and where you could deposit your capital to ensure that your target allocations are maintained.
  3. Auto-invest: The auto-invest feature is pretty interesting. If I wanted to put my portfolio management into “auto-pilot” mode, I could do so with M1’s auto-invest feature. I would simply need to setup a “auto-deposit” from my banking account such that a fixed amount of cash would be withdrawn each month/week and deposited into my brokerage account. Once the cash lands here, it will be automatically used for trading per the target allocations for each of my stocks/slices. This removes emotion out of the investing and place trades at regular intervals by simply dollar-cost averaging into positions that are underweight.
  4. Fractional shares : I think this particular feature is a game-changer. If I can own a piece of Amazon (ticker: AMZN, trading at $3316 at the time of writing) or Google (ticker: GOOGL, trading at $2828 at the time of writing) with just $50, that is not at all a bad deal. There is a good possibility that I may not have enough capital at a given time to own one share of AMZN or GOOGL. A lot of the big-name counterparts still do not offer fractional shares but this is slowly changing.

The Bad

  1. Customer Service: The customer service experience with M1 has been a mixed bag. While it was pretty great when I started out with it, there were days when it would be impossible to get a real person to talk to either over the phone or via email. This is a pretty fundamental aspect of a brokerage service. I should be able to reach out and talk to a real person if I have questions about the account, my statements or any feature on the portal.
  2. Moving holding between “pies”/”slices”: This is perhaps the most frustrating aspect of M1 Finance. If you add a stock to a particular “pie”, and invest with that configuration, if you have to move the same stock over to a different “pie”, you cannot do so readily and there is a possibility that the act of doing so will cause you to sell the stock and then re-buy it for the same amount in the new pie configuration. This is not ideal for several reasons: this would change by cost-basis for the stock, and would also be classified as a taxable event. To explain this with an example, say I was interested in investing in Visa (ticker: V), but I placed in a pie called “Finance” and bought 10 shares of V. Say I now wanted to move this holding into a new pie called “Technology” (because Visa can be classified as a Technology company as a well), I would not be able to do so without first selling my shares for V from my “Finance” pie and then re-buying shares worth the same amount in my new “Technology” pie. It appears that people have been requesting this feature since the last few years now, but M1 does not really have a clear answer for this.
  3. Apex clearing house: M1 uses Apex as their clearing firm on the back-end. While this has not turned out to be a huge problem during the last year, I need to open a separate account with Apex clearing to have access to data regarding my portfolio with M1, such as stock trades placed, cost basis etc. I would rather have this data be made available through M1 itself rather than have to go through a second source of information.
  4. FINRA / SIPC: Reputable brokerage firms in the US are all registered members of SIPC and/or FINRA. Per SPIC regulations, M1 Finance can support customer claims of upto $500,000, with $250,000 is cash claims. While M1, through their Apex clearing house, claims to have additional insurance over SIPC coverage, it is not clear if it would be a safe option to maintain your assets with this firm if and when your portfolio exceeds this amount. In comparison, the big-name brokerage firms have been around for a lot more longer and are more reputable and trust-worthy for larger portfolios.
  5. Trading windows: As things stand, M1 only allows you to trade stocks at one (two if using M1 plus) time during the day. And this is early in the morning when markets open up. This clearly means that M1 is NOT suitable for day-trading. This is not such a huge deal for me, since I am a long-term investor, Having said that, I would like to have the flexibility to buy stocks when I please or when I sense an opportunity at any stage during the day when the markets are open. I would like decide for myself when to buy or sell a stock rather than have a restriction imposed on me due to my brokerage service.

Summary

I am pretty happy with trying out M1 for a year, but I think the time has come to move my investing journey over to a different brokerage due to the cons I have listed above. At present, Fidelity seems to be offering a good option for a move. They are a firm that has been around for a really long time. So I will have absolutely no concerns about insurance coverage for my assets if it grows into a large value. They have recently updated their user-interface to catch up to the modern age, offer fractional shares (atleast through their mobile app) etc.

Eventually, I would also like to begin trading options to supplement my monthly dividend income. M1 does not offer this option at present, and Fidelity does.

The transfer of assets from M1 will result in a taxable event, since the existing fractional shares will not be transferred and would have to be sold. But this is not so much of a concern for me since this move is the right thing to do from a long-term perspective.

I might return back to M1 Finance for a new account if things improve and if they have actively worked on some of my concerns listed above.

Until next time…

Disclosure: Long V, No positions in AMZN, GOOGL in my dividend portfolio.

Dividend Increase – July 2021

Quarter 2 earnings season are in full swing as I write this. However, it is time for another entry to one of my favorite categories. I love talking about dividend increases, as I treat it similar to a pay hike. In this case though, I am being paid more for doing absolutely nothing! My contribution is simply analyzing a great business and investing my capital in them. The business does its thing and eventually returns cash back to me as a thank you. I simply take that cash and reinvest it. Eventually, this compounding snowballs into a machine that generates steady cash flow. This, in summary, represents the power of dividend growth investing.

In today’s post, I am going to talk about Stanley Black and Decker Inc. (ticker: SWK). Stanley Black and Decker recently announced a quarterly dividend hike of nearly 13%. This represents the 54th consecutive year of dividend increases for this company. Per Seeking Alpha, the 5 year dividend CAGR rate is 4.94%. So this recent dividend hike is certainly well above the 5-year rate.

Their CEO, James M. Loree, said the following in the press release following the dividend hike:

I am pleased to continue our trend of consecutive annual dividend increases, which reflects the continued confidence we have in the cash generation potential of the company.  A strong and growing dividend is a key element of our shareholder value proposition, and is consistent with our capital deployment philosophy to deliver approximately half of our excess capital to shareholders over the long term.”

This is very pleasing to hear and shows that the management and board of directors at this company are committed to the interests of their long-term shareholders.

Stanley Black and Decker has been a beneficiary of the work-from-home and lockdown dynamics due to the pandemic in the last year. It is natural to expect people locked in their homes using this time to finish up some DIY projects around the house. Stanley Black and Decker boasts of several great brands such as Stanley, DeWalt and Black & Decker. I am a huge fan of the DeWalt power tools especially, I think they are best in class.

I will cover this company in a far greater detail in a future post. For now though, I will just enjoy this raise and look for next investment opportunity! A sincere and huge thank you to the hard-working employees at Stanley Black and Decker for this gift!

Do you own SWK in your portfolio? Did you receive any other dividend hikes in July? Please drop a comment below and let me know.

Until next time..

Disclaimer: Long SWK

Dividend Increases – June 2021

Perhaps the most exciting thing about dividend growth investing is receiving news about companies hiking their dividends. This is akin to receiving a pay hike, and lets face it, everybody in the world enjoys that!

The following companies in my portfolio hiked their dividends:

Clorox (Ticker: CLX)

The Clorox Company hiked its dividend by 4.5%, now paying a quarterly dividend of $1.16/share. This marks the 45th year of dividend increases for this Dividend Aristocrat. Over the last five years, this company has managed to grow its dividends at a 5-year CAGR of around 7.59%. The stock is currently trading at a FWD dividend yield of 2.66%. While the increase this time was lower than the 5-year CAGR, I am still bullish as far as long term prospects. Hence, this is one of my core stocks in my dividend portfolio.

UnitedHealth Group (Ticker: UNH)

UnitedHealth Group increased its dividend by 16% to now pay a quarterly dividend of $1.45/share. UNH has been growing its dividends pretty aggressively since the last 5 years, with a CAGR of almost 20%. Hence, this is a growth-like holding in my portfolio. It is generally accepted that healthcare system in the US is “broken”. While that is not so ideal as a consumer, this makes a great investment opportunity.

Caterpillar (Ticker: CAT)

Caterpillar hiked their quarterly dividend by 7.7% at $1.11/share. CAT is on the S&P 500 Dividend Aristocrat index and has been rewarding shareholders with increased dividends for the last 27 years. CAT finds a place in the growth-like category of my portfolio, but I am fully aware about its cyclicality and how the recent climb in stock price might be just a part of that trend.

Target (Ticker: TGT)

The biggest surprise in this list as far as dividend increases came from yet another Dividend Aristocrat. Target hiked its quarterly dividend by a whopping 32.3% at $0.90/share. This represents the 54th consecutive year of dividend increase for this company. The reason for the surprise was that Target has a rather low 5-year CAGR of 3.9% (actually their 3-year CAGR is 3.1 %). While I was expecting a larger increase especially after their stellar earnings beat during the last quarter, I was certainly not expecting such a large increase. Just goes to show that if you hold quality companies where the management’s interests align with that of the long-term shareholder, these companies will eventually reward you handsomely.

T. Rowe Price Group (Ticker: TROW)

TROW, yet another dividend aristocrat, made my day when they declared a special $3.00/share dividend. This after having hiked their quarterly dividend by ~20% earlier this year. Simply speechless! 🙂

I sincerely thank the hard-working employees at all these companies!

Disclosure: Long CLX, UNH, CAT, TGT, TROW.