Wednesday, October 3, 2012

Dividend Growth Portfolio, September 2012 Update

With the conclusion of September, is the end of Q3
Off in the distance, end of year I see
Summer has departed, winter not yet here.
Dividends keep growing, a few left in the year.

If you recall, in the August update, I mentioned that there were a few companies for which I was expecting dividend hikes by end of the year. Indeed in September, two of them were realized. Both Microsoft and McDonald's raised their dividend by double digit percentages mid month. That just leaves Boeing, Becton, and Emerson to raise in Q4. I believe all three will raise with or shortly after their Q3 earnings reports.

Boeing reports Oct 24, and has in the past typically raised the dividend in mid December. I think BA has the highest chance out of my 3 remaining companies for a big dividend raise. The aerospace cycle is really beginning to take off, and we can see it in various suppliers, from basic materials supplier Alcoa to aircraft components maker Honeywell. As production  of the 787 ramps up, earnings will accelerate, and Boeing has plenty of room to hike the dividend from its current low/mid 30% payout ratio.

Emerson reports Nov 7, and typically declares the dividend the same day. I'm expecting mid to high single digits (5-8%) from 40 to 42-43 cents. Emerson is very economically sensitive, and CEO David Farr is very conservative. The Chinese slowdown and US economic uncertainty will affect Emerson and outspoken & direct Mr Farr will definitely let us hear it. That being said, I believe the impact is already more than priced into the shares, which yield 3.3%. I would be satisfied with a 5% hike of the dividend to 42 cents, and buy it on dips into the mid 40s, as Emerson is truly a wonderful business with great management.

Becton Dickinson also reports Nov 7, and typically hikes the dividend in late November. I am expecting a high single digit increase, as even though Becton's payout ratio is similar to Boeing, their earnings are not as explosive. Being a health care name, Becton is a true grinder, and will slowly trudge higher without too much regard to macroeconomics.  This is a stock that falls less than the market during bad times (only fell 30% during the 08/09 crash), and is my replacement for Abbott Labs. A dividend increase from 45 cents to 48-50 cents would be satisfactory.

New Purchases
There were no equities purchases this month.

There were no equities divestitures this month.

Intrinsic Dividend Changes
Microsoft - $24.00 (quarterly dividend increase of 15% from 20 cents to 23 cents)
McDonald's - $28.00 (quarterly dividend increase 10% of from 70 cents to 77 cents)

August 2012 Annualized Dividend: $4284.62

+ $00.00 (from new purchases)
-  $00.00 (from sales)
+ $52.00 (from intrinsic changes)

September 2012 Annualized Dividend: $4336.62
End of 2012 Goal: $3800 to $4000
Whisper Goal: $4400

I did say last month that I may sell some things, and I haven't back tracked on that. I've just been observing for the most part. I am still looking to sell some names but have been waiting while I investigate potential replacements.


  1. Nice little poem you got there!

    It's nice how companies increase their dividends on a yearly basis. Only the big and strong will strive for that.

  2. thanks! :)
    yes, what my portfolio lacks in raw yield, i think it makes up for in decent annual dividend growth rate.