Wednesday, February 26, 2014

Dividend Raises

Hi everyone, one of my goals is to invest in high quality companies that reward shareholders. One of the ways to reward shareholders is an increase in the dividend payment. Most companies I invest in will raise their dividend sometime during the year. This can be found by looking at each company's dividend history. Today I am writing about companies I own that have raised dividends by huge amounts and will also take a look at a company with a small dividend raise. It is interesting to see how this effects the price movement of each company's stock.

Home Depot (HD)

I first noticed HD last year when it made a huge dividend raise!

2012 .29/share for a total of $1.16
2013 .39/share for a total of $1.56

The company also has bought back shares and increased revenues. I really like the management and outlook in the housing market. The company pretty much went straight up from the high $60 range to $80/share. The rise in price was well deserved and I bought shares after a small dip. I have a cost basis at $78/share. The most recent dividend was just announced and as I thought it was impressive! It was a 21% dividend raise.

2014 .47/share for a total of $1.88

I really liked the last conference call and think the companies estimates can be attained. The stock was rewarded by going back over the price of $80/share but if you feel like me this company still screams value because it is giving back to shareholders.

Occidental Petroleum Corp. (OXY)

I first noticed OXY from CNBC host Jim Cramer. It didn't get on my radar until reading Jim's new book. I took this information and dove right in and researched the stock reading everything for the last few years. I recently bought on the dip before the raise was announced with a cost basis at $90.50/share. Along with a nice track record of raising the dividend the past 3 to 4 years it planning a spin off at the end of 2014 or early 2015. The company will spin off its Nat gas properties in California and the original company will be more focus on oil. ConocoPhillips unlocked value and Cramer said OXY could do the same and it looks like it will. The dividend raise was also an impressive 12.5%.

2010 .38/share for total of $1.52
2011 .46/share for total of $1.84
2012 .54/share for total of $2.16
2013 .64/share for total of $2.56
2014 .72/share for total of $2.88

The total increase in the annual dividend rate from 2002 is 476 percent.

Wal-Mart (WMT)

I do not own WMT but I do watch the stock. It announced its 41st consecutive dividend increase a great feat. The not so great news is it was only 2%. This is the lowest in the last 30 years! The next lowest is a 4% raise in 1996 even in 2008 and the Great Recession they raised the dividend 8%. With that said WMT has had an average payout of 12.14% over the past 5 years. Shareholders have been reward the last couple of years as the stock finally broke out of the $50 range that it seemed to be stuck in for so long. The company can easily raise the dividend in the future as the payout ratio is only around 40%.

In my opinion WMT is not rewarding shareholders with this move. WMT does have a share buy back program but I would rather have a dividend.  I don't feel inclined to buy this stock knowing there is no real catalyst for it to move higher anytime soon. Over the long run this may be a great entry to accumulate shares while the price stays down. I do think next year the dividend raise will be closer to what we have seen in the last 5 years.

Exxon Mobil Corp. (XOM)

The last company I want to bring up is a company I own that will announce a raise in its dividend sometime before its next quarterly payout. The last 3 dividend raises have been:

2011 .47/share total of $1.88
2012 .57/share total of $2.28
2013 .63/share total of $2.52

My guess is we will see a similar increase to last year around 10%. XOM has a great buy back program. As a shareholder I understand the long term strategy but I would like them to maybe get some value from assets like other companies like OXY and COP. I do think there is value in XOM and when Warren Buffett took a big stake it made me more confident.

Thanks for checking out my blog. These are my thoughts let me hear yours.

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

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