Beating Inflation & February Dividend Increases

Several of our dividend growth companies increased their dividend payouts to investors during the month of February. Ideally we want to build a portfolio that averages a 10% dividend increase. Their are many great benefits to this strategy, most notably is that you increase the rate by which you compound your assets during your accumulation phase. Then once you enter your distribution phase “financial freedom” where you live off of the dividend income, you don’t have to worry about the erosion effects of inflation on your income. Your dividend growth will out pace inflation.

Whoa now… think about that for a moment!

Since our income stream is growing around 10% a year, and the 100 year historical average inflation rate is 3.22%, why would someone need to buy risky, volatile gold and silver (that does not produce income) to hedge against inflation? Well you wouldn’t. This strategy more then covers inflation risk, so don’t sweat all the fear mongering from those buy gold commercials. Just my thoughts on the matter.

Well that was a bit of a detour, now let’s get to the good news. Pay raises!

ADI
Analog Devices the analog and digital processing integrated circuits manufacturer raised its quarterly dividend 9% to 37 cents per share, payable March 11 to shareholders of record as of Feb. 28.
Dividend Yield: 2.90% (Note: all dividend yields are as of Feb 27)

KMB
Kimberly-Clark the health and hygiene manufacturer raised its quarterly dividend 3.7% to 84 cents per share, payable April 2 to shareholders of record as of March 7. The CEO stated that this amount took into account their upcoming spin-off of their health care business. Here is his full statement:

“This dividend increase reflects our ongoing commitment to allocate capital in shareholder-friendly ways and remains an important component of our plan to deliver strong returns to shareholders,” said Thomas J. Falk, chairman and chief executive officer.  “We continue to provide a top-tier dividend payout among our peer consumer packaged goods companies, and this increase will help us maintain an appropriate payout taking into account the planned spin-off of our health care business later this year.” (source Kimberly-Clark)

Dividend Yield: 3.09%

TROW
T. Rowe Price the financial services and mutual fund management company increased its quarterly dividend 16% to 44 cents per share, payable March 28 to shareholders of record as of March 14.
Dividend Yield: 2.19%

UNS
UNS Energy the Arizona natural gas and electric service company increased its quarterly dividend 10.3% to 48 cents per share from prior dividend of 43.5 cents per share, payable March 25 to shareholders of record as of March 13.
Dividend Yield: 3.17%

WMT
Walmart the discount retailer was a bit of a disappointment as it only raised its dividend 2% to 48 cents per share, payable payable April 1 to shareholders of record as of March 11. However, the increase represents Walmart’s 41st consecutive year of raising its dividend and in spite of the lackluster announcement this year the 5-year dividend growth rate stands at 12.1% (last years increase was 18.1%).
Dividend Yield: 2.58%

Filed in: Dividend Increase Announcements • Investment Principles