Expected Dividend Increases for October 2021

As I'm writing this blog post, fall just started a couple days ago and September will be over in less than a week. It won't be long before we'll need to set our clocks back an hour here in Central Wisconsin and it'll be dark by 5 PM.

That means it's time to talk about the eight dividend increases that I received in September. I accidentally lumped in Visa (V) with expected September dividend increases despite the company routinely announcing its dividend increases in October (not sure how that happened!).

Even though I'm only expecting three dividend increases for October, the month should still be a nice boost to my portfolio.

Actual Dividend Increases in September

Dividend Increase #1: Realty Income (O)

The only monthly paying Dividend Aristocrat, Realty Income delivered with a 0.2% increase in its monthly dividend from $0.2355 per share to $0.2360 per share. This was once again perfectly in line with my prediction from last month in the previous post of this series.

Across my 13 shares of O, my net annual forward dividends ticked up by $0.078 due to the stock's dividend increase.

Dividend Increase #2: W.P. Carey (WPC)

Another real estate investment trust in my portfolio that managed to meet my expectations was W.P. Carey. The REIT upped its quarterly dividend 0.2% from $1.05 per share to $1.052 per share.

My net annual forward dividends edged up $0.056 across my seven shares of WPC as a result of its dividend increase.

Dividend Increase #3: Philip Morris International (PM)

Philip Morris International was the third dividend increase in my portfolio to meet my expectations, with the tobacco giant boosting its quarterly dividend 4.2% from $1.20 per share to $1.25 per share.

Across my 13 shares of PM, my net annual forward dividends were boosted by $2.60 due to the payout increase.

Dividend Increase #4: Lockheed Martin (LMT)

Lockheed Martin was the fourth dividend increase of September, which also met my expectations. LMT raised its quarterly dividend 7.7% from $2.60 per share to $2.80 per share. 

Since I added a share of LMT to my portfolio days before the dividend increase, my net annual forward dividends spiked by $3.20 across my four shares of the stock as a result of the dividend increase.

Dividend Increase #5: STORE Capital (STOR)

STORE Capital is the fifth dividend increase of September, but unlike the previous four, the stock exceeded my expectations with its dividend increase.

Whereas I was expecting a 5.6% increase in the quarterly dividend, STOR actually announced a 6.9% increase in its quarterly dividend from $0.36 per share to $0.385 per share.

Across my 19 shares of STOR, my net annual forward dividends increased by $1.90 due to the dividend increase.

Dividend Increase #6: Verizon (VZ)

Verizon was the only stock in my portfolio during the month that fell a bit short of my expectations, announcing a 2% increase in its quarterly dividend from $0.6275 per share to $0.64 per share. This was a tad less than the $0.645 per share quarterly dividend that I was expecting, but I can't complain that much as VZ continues to bring 5G to customers across the U.S. 

My net annual forward dividends advanced by $0.90 across my 18 shares of VZ as a result of the dividend increase.

Dividend Increase #7: American Tower (AMT)

The second dividend stock in my portfolio to beat my expectations was American Tower. 

While I anticipated a 2.4% increase in the quarterly dividend, AMT announced a 3.1% increase in its quarterly dividend from $1.27 per share to $1.31 per share.

This dividend increase helped my net annual forward dividends to move $0.48 higher across my three shares of AMT.

Dividend Increase #8: Microsoft (MSFT)

Microsoft was the fifth dividend stock to meet my expectations with its September dividend increase.

MSFT announced a 10.7% increase in its quarterly dividend from $0.56 per share to $0.62 per share.

Across my three shares of MSFT, this dividend increase boosted my net annual forward dividends by $0.72.

Dividend Freeze: General Mills (GIS)

General Mills announced its fifth straight quarterly dividend of $0.51 per share.

This is a bit disappointing considering that I was expecting a near 4% raise. But perhaps General Mills will make up for this at some point in the near future with a surprise dividend increase.

Expected Dividend Increases for October

Dividend Increase #1: Visa (V)

As I pointed out in my previous post of this series, I believe that Visa will be announcing a 12.5% increase in its quarterly dividend from $0.32 per share to $0.36 per share.

That's because analysts are forecasting that V's EPS will surge 15.7% to $5.83 this year.

After purchasing another share of V earlier this month, my net annual forward dividends would inch $0.48 higher across my three shares if my prediction is correct.

Dividend Increase #2: American Electric Power (AEP)

The second dividend increase that I'm expecting in October would actually be my first raise from the utility American Electric Power since opening a position earlier this year in January.

Based on the fact that analysts expect AEP's EPS will advance 5.4% to $4.68 this year, I'm expecting an identical percentage increase in the quarterly dividend from $0.74 per share to $0.78 per share.

Across my nine shares of AEP, my net annual forward dividends would be boosted by $1.44 from this dividend increase.

Dividend Increase #3: Pinnacle West Capital (PNW)

The third and final raise that I'm anticipating for October is once again from a utility, but this time from Pinnacle West Capital. Like AEP, this will be my first dividend increase from PNW since I started a position in the stock in July.

I'm expecting a 4.8% increase in PNW's quarterly dividend from $0.83 per share to $0.87 per share.

This would work out to a $1.12 increase in my net annual forward dividends across my 7 shares of the stock.

Concluding Thoughts:

My net annual forward dividends surged $9.934 as a result of the eight dividend increases that I received in September.

At a 3.5% average weighted yield, I would need to invest $283.83 to replicate this additional dividend income with fresh capital. 

And with the three dividend increases that I'm forecasting for October expected to bump up my net annual forward dividends by $3.04, this would require $86.86 in fresh capital at a 3.5% yield to replicate.

Since I also expect that I will be contributing around $2,700 between my fresh capital contributions and the dividends that I'll be reinvesting, I believe that my net annual forward dividends should advance from just under $2,030 to begin October to over $2,100 heading into November.

Discussion:

How was your September in terms of dividend increases?

Are you expecting any first-time dividend increases from new holdings next month as I am with AEP and PNW?

I appreciate your readership and welcome your comments in the comment section below!

October 2021 Dividend Stock Watch List

As I'm writing this blog post, the start date of fall is just one week away. Even more importantly, October is a couple weeks away.

Why is October so significant?

Because I will be receiving three paychecks during the month as opposed to the usual two, so I will have even more funds than normal to invest. Let's take a look at three dividend stocks not already in my portfolio that I am keeping my eyes on for October.

Image Source: Pexels

Dividend Stock #1: Omnicom (OMC)

The first stock on my watch list for October is the large-cap advertising and marketing conglomerate, Omnicom.

Omnicom's diluted EPS declined nearly 28% from $6.06 in 2019 to $4.37 last year.

While Omnicom was predictably hit somewhat hard in 2020 with COVID-19 emerging as a pandemic and the resulting drag on the economy, the company is set to rebound this year and beyond.

Omnicom's diluted EPS is set to advance slightly higher than 2019's figure of $6.06 to $6.09 this year as the economy picks back up and advertising spending recovers based on the average analyst estimate. Better yet, analysts expect that Omnicom will resume mid-single-digit earnings growth, when diluted EPS is anticipated to increase 4.4% from $6.09 this year to $6.36 next year.

Through the first six months of this year, Omnicom also maintained an interest coverage ratio just under 8 ($1.05 billion in earnings before interest and taxes/$134 million in interest costs). This implies that the balance sheet is relatively healthy and that interest expenses can easily be covered by EBIT.

Despite this news, Omnicom is trading at less than 12 times this year's forecasted diluted EPS. This is moderately lower than the company's historical P/E ratio around 15 to 16, which makes Omnicom a good value play.

With $2.75 in dividends per share scheduled to be paid out this year, Omnicom's diluted EPS payout ratio will be in the mid-40% range. I believe that this makes Omnicom's current 3.91% dividend yield (based on the current share price of $71.67 as of September 12, 2021) safe.

Dividend Stock #2: McDonald's (MCD)

The second dividend stock on my watch list for October is the massive fast-food chain McDonald's.

Similar to Omnicom, McDonald's was adversely impacted by the onset of COVID-19 last year. This resulted in McDonald's adjusted diluted EPS declining 22.8% from $7.84 in 2019 to $6.05 in 2020.

However, McDonald's is on track to fully recover and then some this year, with analysts expecting adjusted diluted EPS to surge 50.1% from $6.05 last year to $9.08 this year.

McDonald's also was able to generate an interest coverage ratio of slightly over 8 through the first half of this year ($4.93 billion in EBIT/$597 million in interest expense), which like Omnicom, indicates that McDonald's can handily service its debt.

While McDonald's isn't a bargain at 26 times this year's earnings and 24 times next year's earnings, it also isn't too expensive considering the quality of the business. I have wanted to own McDonald's for years and have never purchased it because I was always waiting for the perfect price, but I've come to learn over the years that a fair price is good enough for a world-class business. McDonald's can do the rest in the wealth creating process.

McDonald's will likely pay out $5.25 in dividends per share (assuming a 7% increase in the quarterly dividend in September to $1.38) against $9.08 in EPS this year, which would be a dividend payout ratio in the high-50% range.

McDonald's 2.16% yield at $239.18 a share (and soon to be around 2.3% yield with the upcoming dividend increase) appears to be safe based on a quick analysis of the balance sheet and dividend obligation, which are two of the main reasons I want to own the stock.

Dividend Stock #3: Raytheon Technologies (RTX)

The final stock that is on my watch list for October is the behemoth aerospace and defense contractor Raytheon Technologies.

RTX was hit hard by the COVID-19 pandemic due to the decreased revenues in its Collins Aerospace segment and aerospace engine segment known as Pratt & Whitney, which is what led its adjusted diluted EPS to plummet 44.8% from $4.95 in 2019 to $2.73 in 2020.

With commercial aviation recovering amid increasing global vaccination rates, analysts expect RTX's adjusted diluted EPS to rebound to $4.07 this year and to return to growth next year with adjusted diluted EPS of $5.04.

With an interest coverage ratio of just under 4 through the first half of this year, it may appear as though RTX's balance sheet is weak. However, this is negatively skewed only because the company's earnings power hasn't yet fully recovered to pre-pandemic levels.

When that recovery occurs next year, RTX's interest coverage ratio will be much healthier.

RTX's dividend also appears fairly secure considering that even with adjusted diluted EPS estimates of $4.07 for this year (still well below pre-pandemic levels), RTX's payout ratio will be a tad under 50%. Next year, RTX's payout ratio should be well below 50%. This is what leads me to believe that the current 2.46% yield is safe (based on the current share price of $83.00).

At 20 times this year's expected earnings and a price of $83.00 a share, RTX may not seem cheap. But again, that's only because the company is still recovering from COVID. RTX is trading at just 16 times next year's earnings, which makes it a good recovery play.

Concluding Thoughts:

My net annual forward dividends will end this month at around $2,025, which is another all-time high for my portfolio. And since I'm expecting around $2,500 available to invest for October between my capital contributions and dividends, October will be one of my heaviest months of capital deployment for this year.

I'm very much looking forward to seeing if I can reach the $2,100 mark or so for the month with my capital deployment and the dividend increases that I'm expecting for October.

Discussion:

Are any of OMC, MCD, or RTX on your watch list for October 2021?

If not, what stocks do you have your eye on for next month?

I appreciate your readership and look forward to your comments in the comment section below!

August 2021 Dividend Income

As I'm writing this blog post, Labor Day has now passed and the official start of fall is only two weeks away. Having only received 1 of my 10 expected dividend increases for this month to date, the last 3 weeks of September are going to be jam packed with dividend increases.

Now let's delve into the intent of this blog post, which is to outline the record amount (for the middle month of a quarter) of dividends that I received in August 2021.

Analysis:

During August 2021, I collected $129.94 in net dividends. This represents a 10.8% quarterly growth rate compared to the $116.98 in net dividends that I received in May 2021.

Furthermore, August 2021's dividend income is a 42.5% year-over-year growth rate against the $91.19 in net dividends that I collected in August 2020.

Digging into dividend income by account, I received $117.93 in net dividends from 20 companies in my Robinhood account, $11.66 in net dividends from 3 companies in my Webull account, and $0.35 from 15 companies in my M1 Finance account.

The net dividends that I collected from May 2021 to August 2021 increased by $12.96 as a result of the following activity within my portfolio:

I received an additional $1.07 in net dividends from British American Tobacco (BTI) within my Robinhood and Webull accounts, which is the result of my purchase of two extra shares of the stock within my Robinhood account in June.

My net dividends collected from National Retail Properties (NNN) were $0.11 higher in my Robinhood account due to the recent dividend increase.

I received $2.70 in net dividends from Abbott Laboratories (ABT) for the first time within my Robinhood account, which was because I opened a position in the stock back in May.

My net dividends collected from Clorox (CLX) were $2.32 higher in my Robinhood account from starting a position in July.

I also received an additional $0.94 in net dividends from Realty Income (O) within my Robinhood account due to the stock's recent dividend increase and my decision to add to my position in May.

My net dividends collected from General Dynamics (GD) increased by $1.19 in my Robinhood account, which was the result of my decision to add to my position in May.

I received an extra $1.60 in net dividends from Lowe's (LOW) within my Robinhood account, which was a combination of adding a share in May and the dividend increase that was announced in May.

I also received an extra $0.50 in net dividends from CVS Health (CVS) within my Robinhood account, which was also the result of my decision to add to my position in May.

My net dividends collected from Verizon (VZ) were $2.51 higher in my Robinhood account, which was due to my purchase of four additional shares in June.

I received an extra $0.02 in net dividends from my M1 Finance account, which was due to the aforementioned dividend increase from LOW (a $0.01 boost to dividends) and Norfolk Southern's (NSC) dividend increase (another $0.01 increase to dividends).

Concluding Thoughts:

I'm pleased with my capital deployment to my portfolio and dividend increases over these past few months, which led to the healthy quarterly growth rate in my net dividend income from May to August.

Based on my capital deployment, I believe that November 2021 will see a net dividend income right around $150 and that by next August, my net annual dividends will be close to $200.

Discussion:

How was your August for dividend income?

Did you receive any dividends for the first time as I did from whole shares of ABT and CLX?

As always, I thank you for your readership and look forward to your comments in the comment section below!

August 2021 Dividend Stock Purchases

As I'm writing this blog post, there are just four months remaining in this year. This gives me four months to advance my net annual forward dividends from around $1,950 heading into September to $2,200 by the end of this year.

With that aside, I'll take a look at my capital deployment for August 2021 and what stocks I decided to purchase during the month.

As I noted in my previous post of this series, July 2021 marked the last month that there would be any meaningful activity in my retirement account (aside from dividend reinvestment in March, June, September, and December). This is because I recently completed my transition from my day job at my previous employer to being self-employed as a writer for Motley Fool and Seeking Alpha.

That's why I'll be exclusively focusing on the activity within my taxable accounts (and specifically within my Robinhood account).

I started August off by initiating a new position in Medtronic (MDT), which is because I essentially believe that Medtronic is fairly valued and the company has a variety of growth catalysts in the future as I noted in my most recent Motley Fool article on the stock.

I opened a five share position in MDT at an average cost of $127.93, which equates to an average net yield of 1.97% based on the $12.60 in net annual forward dividends added from my purchase.

Next, I added 18 shares of Viatris (VTRS) to my position at an average cost of $14.23 a share, which is an average net yield of 3.09% when considering the $7.92 that was added to my net annual forward dividends due to the purchase.

As I explained in a recent Motley Fool article on VTRS, the company is cheaply valued despite a fundamentally healthy business with tons of room to grow its dividend. These were the key factors that prompted me to add to my position.

The second stock that I initiated a position in during August was Merck (MRK), which is because its blockbuster oncology drug Keytruda secured an FDA approval for advanced renal cell carcinoma. As I detailed in a recent Motley Fool article on MRK, the stock has multiple vehicles for growth in the years ahead (i.e., Keytruda, HPV vaccine Gardasil, and its animal health business) and trades at a cheap valuation considering its growth prospects.

This led me to initiate a seven share position in MRK at an average cost of $78.79 a share, which works out to a 3.3% net yield when factoring in the $18.20 in net annual forward dividends that these purchases added to my portfolio.

I also purchased an additional share of J.M. Smucker (SJM) in August at a cost of $132.74, which is a 2.98% net yield given the $3.96 in net annual forward dividends that were added from my purchase.

SJM's recent 10% dividend increase and reasonable valuation were the two main reasons why I opted to add to my position.

I added one share of Amgen (AMGN) during August at a cost of $225.49, which was due to the stock's recent pullback and decent operating results as I outlined in a recent Motley Fool article.

This works out to a 3.12% net yield when considering the $7.04 in net annual forward dividends that were added as a result of my purchase.

I also added a share to my position in National Retail Properties (NNN) at a cost of $46.80. I noted in a recent Motley Fool article that I like the stock because of its focus on single-tenant triple net lease REITS, diversified portfolio, and fair valuation.

Considering the $2.12 in net annual forward dividends that this purchase added to my portfolio, my net yield was 4.53%.

I also decided to add a couple shares to my position in KeyCorp (KEY) at an average cost of $19.65 a share. This works out to a net yield of 3.77% given the $1.48 in net annual forward dividends that were added to my portfolio from the purchase.

Finally, I added two shares of Dominion Energy (D) to my portfolio at an average cost of $79.77 a share. I was impressed by D's strong start to this year and sensible valuation as I noted in a recent Seeking Alpha article.

This equates to a net yield of 3.16% when considering the $5.04 in net annual forward dividends that this purchase added to my dividend portfolio.

Concluding Thoughts:

I invested $2,051.12 in August and added $58.36 to my portfolio's net annual forward dividends, which works out to a net yield of 2.85%.

When also considering the $10.954 in net annual forward dividends that were added from dividend increases in August, my portfolio's net annual forward dividends surged from just under $1,880 at the start of August to about $1,950 heading into September.

Discussion:

How was your August in terms of capital deployment?

Did you add any new positions during the month as I did with my purchases of MDT and MRK?

I appreciate your readership and welcome your comments in the comment section below!