Dividend Growth Digest: November 2020

November is racing by and I’ve fallen behind in getting my monthly and quarterly updates written for the portfolio. Fortunately, that has no impact on the portfolio itself, as it is pretty much on cruise control at this point.

It’s been a busy month for me, as I’ve been putting in some overtime to meet a submittal deadline for my design project. I’ve also been busy trying to keep up on yard work as the trees dropped a seemingly endless supply of leaves this year.

But it hasn’t been all work; I’ve also been able to find time for relaxation as well. I took my son out deer hunting for the first time last weekend, joining my Dad and my Uncle for an always enjoyable trip to the great outdoors.

It was an awesome time, as my son had a great first experience hunting, I got to spend much-needed quality time with family, and I was able to bag a nice 6×6 whitetail buck for some meat for the freezer.

October Dividend Income

I’ve been harvesting plenty of dividends this fall as well, with October being another very productive month for the portfolio.

Dividend income grew by 20.4% over 2019’s October total, and collected dividends increased from $140.41 to $169.11.

Portfolio trades again muddied the waters a bit, and a shifting payout date from Broadcom kept it from being an even better quarter. However, it was a nice start to the quarter, as the 20.4% income growth puts me in great shape to reach my goal of double-digit annual income growth for the year.

Add-on purchases were made in Automatic Data Processing $ADP, EOG Resources $EOG, Altria Group $MO, Philip Morris $PM, and Watsco $WSO during the past year, which caused much higher payouts from those companies.

Dollar General $DG and Sempra Energy $SRE were new additions in 2020, while Occidental Petroleum $OXY was sold after its dividend cut earlier in the year.

Of the companies that didn’t see any trade activity, Comcast $CMCSA and McCormick $MKC both produced double-digit growth, while Xcel Energy $XEL was close behind at 8.9%.

October Dividend Increase Announcements

The three companies that I expected to announce increases last month came through with raises, although two were on the light end compared to what I was hoping for.

Date	Company	Ticker	Prev. Rate	New Rate	Seq. Inc.	LY Rate	YoY Inc.	Div. Yield	Link
10/13/20	Cummins	CMI	$1.311	$1.35	2.97%	$1.311	2.97%	2.34%	LINK
10/28/20	Visa	V	$0.300	$0.32	6.67%	$0.300	6.67%	0.63%	LINK
10/30/20	AbbVie	ABBV	$1.180	$1.30	10.17%	$1.180	10.17%	5.16%	LINK
				Average:	6.60%		6.60%	2.71%

Cummins $CMI was the first to announce, and it was conservative with the increase, as it raised the payout by just under 3%. This isn’t a surprise considering that earnings are expected to drop by 25% in 2020 before rebounding a bit next year. My guess is lower dividend growth will continue until earnings hit new highs again.

Visa $V also announced a much smaller increase than typical for the company, and for the same reasons as Cummins. Earnings are expected to drop by 7% in 2020 and grow by just 7% in 2021.

The new dividend equals a payout ratio of 25% of 2020 earnings, compared with a historical payout rate of just under 20%. It will be interesting to see if future dividend growth can match earnings growth, or if management works to get the payout ratio back down towards the 20% level over the next few years.

The final increase came from AbbVie, and I was happy to see it match my prediction of an increase to $1.30. The company has shown itself to be shareholder-friendly since it was spun off from Abbot Labs, and this increase is another great example of that behavior.

The stock has increased in price by $18 since I wrote about it last month, and it still looks like a bargain today. AbbVie yields 5%, and analysts are expecting double-digit EPS growth in both 2021 and 2022, which bodes well for continued strong dividend growth.

There aren’t many stocks in the market with that combo of growth and income, I’m glad it’s one of the higher value positions in my portfolio.

Recent Dividend Growth Articles

I haven’t had any new articles published recently, but I have come across a few interesting and helpful ones on dividend growth stocks.

The first came from Big Thunder on Seeking Alpha, who wrote a blog post sharing the quality tracking spreadsheet she uses for her portfolio. The post shares data she collected for Value Line, S&P, and Morningstar rating for 50+ companies, and is an excellent list of names for those looking for ideas to build a quality portfolio.

Another excellent article for research came from FerdiS, who provided his “Quality Score” ranking system for the 65 Dividend Aristocrats.

This is similar to Big Thunder’s work, but adds a few more metrics and produces a scoring system to rank them into different tiers based on their apparent safety.

I’m happy to own Johnson & Johnson $JNJ and Automatic Data Processing $ADP from the exceptional list, and 3M Company $MMM from the excellent list. I also own Hormel $HRL, Becton Dickinson $BDX, McDonald’s $MCD, Abbott Labs $ABT, Lowe’s $LOW, McCormick $MKC, AT&T $T from the fine list, and six more from the decent list.

The article generated a significant amount of discussion, with over 200 comments to date. Well done FerdiS!

Closing Thoughts

The market just hit 30,000 and we are now just a week away from December, which is typically my second highest income month of the year. I remain in excellent shape to reach the double-digit mark in income growth once again.

Good news has also been coming in about successful trials for COVID-19 vaccines, so maybe there is finally an end in sight to the pandemic. It’s been a difficult year for many, so it would be nice to end 2020 on a high note, with hopes of a return to “normal” in 2021.

I hope you all have a safe and enjoyable Thanksgiving and Holiday season. Despite all the chaos in the world, we still have plenty to be thankful for.

God Bless, and Happy Investing!