June is here, and with it comes some return to normalcy in my family, as the boys finally get to begin their baseball seasons after a two month delay. Rather than fighting April snow, the first night of practice was accompanied by a June 1st record high temperature of 96 degrees. There were a few complaints about the heat, but you could tell that my oldest was happy to spend some in-person time with his friends once again after months of social distancing.

It was nice for me too, as it was a welcomed mental break from busy work and the seemingly never-ending cycle of depressing news stories. I still don’t have my Twins to watch, but throwing pop-flies and grounders to a group of kids is a great stress reliever. Between little league, tending my newly planted garden, and re-staining the deck, life has suddenly gotten quite busy once again.

The stock market has been busy too, as it continues marching higher despite a pandemic, high unemployment rates, shuttered businesses, and social unrest. It’s beyond my comprehension to explain how the market rises despite all this, perhaps the often-quoted “don’t fight the Fed” explains it all?

I don’t know what the answer is, but I do know that with 20+ years yet until retirement I’ll simply stick to the rules I’ve established for the portfolio, and continue my pursuit of increasing dividend income.

May Dividend Income

May was another solid month for dividend income, as the portfolio’s total of $191.82 was a 4% increase over 2019’s total.

Dividend income rose despite a suspension of dividends (and subsequent sale) from my position in Cracker Barrel. The drop in income from Apple came from my trimming of the stock late last year.

That lost income was offset by double-digit growth from AbbVie, Abbott Labs, Ameriprise Financial, Hormel Foods, Kinder Morgan, Lowe’s Companies, Mastercard, and Starbucks. Bristol-Myers was a new position that also added to income for the month.

AT&T and Omega Healthcare Investors shows the power of dividend reinvestment, as AT&T grew income by 8% with just 2% dividend growth and Omega Healthcare grew income by 8.4% despite just a 1.5% dividend increase. Dividend reinvestment is also the sole source of CVS Health’s income growth, as it has frozen its dividend to allow it to more quickly pay off debt from the Aetna acquisition.

The 4% overall growth was significantly lower than last month‘s 24.3% number, but considering the current economy, I’m happy with the numbers. Through five months my dividend income is up about 10.5% over last year’s numbers, so I’m on my way to meeting goals once again.

May Dividend Increase Announcements

As expected, May was quiet month in regards to dividend growth announcements. There were just two made during the month, coming from Ameriprise Financial and Flowers Foods.

I was correct in my prediction that Flowers would raise the dividend by a penny, but was pleasantly surprised by Ameriprise’s 7.2% increase. Both had nice earnings reports to go along with the increases, so I’m happy with how both are performing.

Expected June Dividend Increases

With me being a week late in getting this out, I wasn’t able to make my prediction for UnitedHealth Group’s raise, as it announced another healthy 15.4% increase on June 5th. What’s a bit surprising is that the 15% increase is actually the smallest for UnitedHealth since it began raising the dividend in earnest in 2010.

The $5.00 annual dividend is just over 30% of estimated 2020 EPS of $16.40, which is in line with management’s previous guidance about payout ratio. It appears that the days of 20% annual dividend growth may be over, and that dividend growth will roughly track earnings growth going forward.

The other dividend increases that are typically announced in June are from Lowe’s Company $LOW and Target Corp. $TGT.

Lowe’s actually announced its dividend in May, and did not increase the dividend with that declaration. This was surprising to me considering that the company is currently projected to increase earnings by 15% in 2020. Apparently there is enough uncertainty from COVID that the board wasn’t comfortable with an increase at this time. I would be surprised if the dividend isn’t increased by the end of the year however.

As for Target, analysts are currently predicting a 22% drop in earnings for this year, which likely means another small dividend increase. The payout ratio was already over 40% of trailing earnings, and with EPS expected to drop to $5 in 2020, that pushes the current payout ratio over 50%.

My prediction is Target either keeps the dividend the same, or perhaps announces a token penny increase simply to keep the annual dividend increase streak alive.

Recent DGI Articles

May was a quiet month for me, as I did not get anything published on this site or on Seeking Alpha. I did manage to get my health care watch list updated, and about 1/4 of an updated top ten list started, but life’s gotten busy of late, and everything has stalled with my blogging.

As for other reading material, David Crosetti will once again be highlighted, as he put together an excellent series on how “Dividend Don’t Lie”. He first talks about Geraldine Weiss and her approach to investing, and then follows up with several more posts talking about his approach and thoughts.

• Dividends Don’t Lie (Part 1): Geraldine Weiss And Valuation Metrics
• Dividend Don’t Lie (Part 2): Making Investment Decisions
• Dividends Don’t Lie (Part 3): Stocks I Own In My Portfolio
• Dividends Don’t Lie (Part 4): Recent Purchases Made During The Corona Correction
• Dividends Don’t Lie (Part 5): How Companies Lie To Investors With Their Financial Reports

The article about Geraldine Weiss that is linked above gives a nice background to her story, and it’s well worth a read. She was a dividend growth investor (DGI) before it was mainstream, and her “Seven Golden Rules” for selecting stocks are certainly still relevant today.