Hey guys it has been a while since my last dividend increase article. In the meantime there were three stocks which increased their dividend and unfortunately one company which cut their dividend to half.
Being a dividend investor has two major advantages, first of all you do not rely that much on the changes of the share price and when the stock price is on a very low level you just collect the dividends and maybe take advantage of the low share price and buy even more stocks. Well this is normally the case, but from time to time you will also have a dividend cut in your portfolio. But let’s come back to my first dividend cut later and let’s have a look at the companies which announced their new dividend rates:
- ABBV: Yearly dividend from 2.56 to 2.84 USD 10.94% increase
- EMR: Yearly dividend from 1.92 to 1.94 USD 1.04% increase
- VFC: Yearly dividend from 1.68 to 1.84 USD 9.52% increase
- GE: Yearly dividend from 0.96 to 0.48 USD -50.00% decrease
I especially liked the increases of VFC and ABBV, they were both above my goal of 7.5% dividend increase per year. My yield on costs for ABBV is now at 3.34% which isn’t that bad at all. Luckily I could take advantage in decent drop of the share price last year. The increase of EMR is ok for me, I didn’t not expect a huge dividend hike from the as you also need to consider that EMR now managed to increase their dividend the 61st year in a row.
So now to GE at the time I bought some shares of GE I thought that the worst part is already over and that the dividend will not be cut, I was not expecting an increase either but yeah what should say shit happens :). But I am convinced that GE is still a good investment as I think they are able to go through the restructuring phase and that the dividend will be increased again, it just takes longer than expected. After all a dividend cut is not only a bad sign, it is also a sign that the company wants to fix their finances again and to be honest looking at the free cash flow, GE had no other choice. Lesson learned for me, to have an even closer look at the companies’ cash flow in the future.
Based on the numbers of shares I have of each company and the already published dividend increases it makes now an average dividend increase of 1.63%, which is way behind my goal of 7.5%, without the cut of GE the rate would be at 4.69%. But let’s see what the remaining dividend announcement will tell us, there are still some outstanding e.g. CVS, T, HRL and PFE
How much more income do I generate
In total I am generating now 22.69 EUR more dividend income before tax and based on a constant FX-Rate. This is quite a decrease from the last time as it was at 50.50 EUR. But thanks to my diversification the dividend cut of GE did not hit me that hard, although it is of course a little disappointing and I could have avoided that situation.
So after all my new projected full year dividend income is now at 1 489.34 EUR after tax, that is almost double the income I had one year ago. Of course a lot comes from additional investments, but dividend increases are also a small part of it and the more stocks I have the higher will be the effect of dividend increases in the future.
To sum up I have to say that dividend investing for me is still the right path, dividend cuts happen but through a high diversification you can easily compensate those cuts and as I said a couple of times dividend investing is for the long term and not for the short term, where patience and discipline are your best friends.
What is your current dividend increase rate or are you actually tracking it?
Disclosure: Long VFC, ABBV, EMR, GE