New Year’s Day is quickly approaching, which means I’m far behind schedule in getting the December issue of Dividend Growth Digest written. As you’d suspect, it’s taken a backseat to shopping, wrapping presents, and getting everything in order for Christmas.
The anticipation of opening gifts, spending time with family, and Christmas Eve church service full of familiar hymns makes it my favorite holiday of the year, and having three young kids in the house makes it even more special.
My eight (soon to be nine) year-old has been asking for a puppy since he was three, and I promised him at the time that he could get one when he turned nine, since that is when I figured he’d be responsible enough to own one.
Little did I know at that time, but six years goes by in a blink of an eye when you have kids, and we are now just weeks away from his ninth birthday.
My wife wasn’t a part of that original promise, but she graciously agreed to honor my commitment, and we surprised the kids on Christmas with the news.
So…we are soon to be owners of a new puppy, which will be ready to join our family in about a month. In addition to this, my wife is expecting, and we are due to add a fourth kiddo to the family in late March.
Needless to say, this won’t be the last time that I’m late in getting a monthly report published. Wish me luck for keeping my sanity in 2021!
November Dividend Income
Dividend growth in November didn’t match last month‘s blowout growth, but it was still a productive month, with dividend income increasing by 4.1% over 2019’s total.
Multiple sales, buys, and trims made for another noisy table, but I was still able to post a small increase in income for the portfolio.
Cracker Barrel, Thor Industries, and Tanger Factory Outlets were all sold during the past year, and trims to Apple and Abbott Labs dropped their contributions to the ledger.
Meanwhile, a new position was started in Bristol-Myers Squibb and an add-on purchase was made in Kinder Morgan, which helped offset those losses.
For companies that were not traded, the biggest gains came from Mastercard, AbbVie, Hormel, Starbucks, Lowe’s, and Ameriprise Financials, which all posted double-digit income gains for the year.
November Dividend Increase Announcements
November was a mixed bag for increases, as Dominion Energy announced its expected dividend cut, while four other companies announced dividend increases.
| Date | Company | Ticker | Prev. Rate | New Rate | Seq. Inc. | LY Rate | YoY Inc. | Div. Yield | Link |
| 11/04/20 | Dominion Energy | D | $0.9400 | $0.630 | -32.98% | $0.9400 | -32.98% | 3.39% | LINK |
| 11/11/20 | Automatic Data Processing | ADP | $0.9100 | $0.930 | 2.20% | $0.9100 | 2.20% | 2.11% | LINK |
| 11/20/20 | McCormick & Co. | MKC | $0.6200 | $0.680 | 9.68% | $0.6200 | 9.68% | 2.91% | LINK |
| 11/23/20 | Hormel Foods | HRL | $0.2325 | $0.245 | 5.38% | $0.2325 | 5.38% | 2.08% | LINK |
| 11/24/20 | Becton Dickinson | BDX | $0.7900 | $0.830 | 5.06% | $0.7900 | 5.06% | 1.34% | LINK |
| Avg.: | -2.13% | -2.13% | 2.37% |
Dominion Energy $D announced back in July that it would be cutting the dividend after selling off its pipeline business to Berkshire Hathaway and announcing a push into renewable energy.
The board made it official on November 4, announcing a 33% dividend cut to $0.63. I sold about 1/3 of my shares following the initial announcement, but will continue to hold the rest to see how things turn out.
NextEra Energy, Xcel, and other utilities have shown that being green can be profitable and provide growth at the same time. If Dominion can produce the 6.5% annual growth it’s now guiding for, it should be worth holding for the long-term in the portfolio.
Automatic Data Processing’s $ADP earnings took a hit with the pandemic, dropping by 5% in FY21. The dividend payout ratio was already on the high end of its 55-60% target before the downturn, and with the earnings drop the ratio is now over 66%.
So the smaller 2.2% raise wasn’t a surprise to me, and I suspect next year may be smallish as well in order to get the payout back to more normal levels.
McCormick & Company $MKC has performed well since it joined the portfolio in early 2018, and continued to do well in 2020. It announced a 2:1 stock split in September, the 9.7% dividend increase on November 20, and then the acquisition of hot-sauce brand Cholula just four days later.
McCormick is definitely expensive at over 30X earnings, but it’s easy to see why the market continues to reward it with a premium multiple.
Hormel Foods $HRL is another consumer staple that trades at a premium multiple, although it’s getting harder to justify that premium. 2020 marked the third year in four that earnings have declined, and with analysts predicting just 4% growth going forward, I’m beginning to grow impatient with the stock.
I have no problem holding stocks with yields of 1-2% if they are providing growth on top of the low income, but mid single-digit growth with a 2% yield just isn’t that attractive.
Hormel’s payout ratio is now over 56%, compared with 35% in 2016. The company has continued raising the dividend, but at some point earnings need to grow as well or the party will eventually come to an end.
Becton Dickinson $BDX was a similar increase, but was more encouraging to me since it was the largest increase since 2017, and double what it has announced in recent years.
The company spent a few years digesting the CR Bard acquisition and then weathered COVID in 2020. Earnings are expected to grow by 20%+ in 2021, which puts a forward payout ratio at just 25%, compared with a typical pre-Bard payout ratio of around 33%.
My hope is that Becton Dickinson of 2021 is similar to the Abbott Labs of 2020, and we could get a significant dividend boost next year.
Recent Dividend Growth Articles
I’ve been pretty quiet on Seeking Alpha, but was able to get an article published recently. My third quarter portfolio update was posted last week, highlighting my quarterly dividend growth, recent transactions, and sharing my thoughts on a few stocks that look attractive at current prices.
DGI For the DIY: Q3 Dividend Portfolio Update
With just a week to go, it appears that I will just meet my goal for 10% income growth in the portfolio. It was a difficult year with COVID and some dividend cuts in the portfolio, so I’m quite happy that the portfolio hit the mark once again.
I also updated the Utility Watch List with 2021 earnings estimates, current dividend rates, and my projections for dividend growth and total returns. The page includes a link to download the spreadsheet in PDF form, which I’m hoping is useful for readers.
Another article that reader’s may be interested in was Mike Nadel’s end of year update on the Dividend Growth 50. I was a panelist for the project when it was started in 2014, and have enjoyed following it over the years. It provides a nice lesson on how investors can be successful over time with buy-and-hold dividend growth investing.
Dividend Growth 50: After 6 Years, Still The Apple (And Microsoft) Of My Eye
Like with my own portfolio, Apple and Microsoft have carried the load, with both generating returns over 400%.
My final highlight article comes from Justin Law, a Seeking Alpha contributor who has taken the torch in maintaining the US Dividend Champions List following the passing of David Fish.
He analyzed all of the Dividend Champions and Contenders to see which companies had the most accurately predicted earnings by analysts.
The Most Predictable Dividend Growth Companies
Not surprisingly, utilities, consumer staples, and health care companies dominated the rankings, as they have historically been some of the most consistent performers in the market.
Closing Thoughts
2020 will certainly be a year to remember. It was the year of COVID, remote work and school, social distancing, masking up, social unrest, and a contentious election.
However, it’s also been a year of more quality time with my kids, fewer distractions from professional sports and organized activities, the blessing of a healthy pregnancy for my wife, and a stock market at all-time highs.
This year will likely be remembered by the world in a negative light, but there’s still plenty to be thankful for, and plenty to look forward to in the year ahead.
Here’s to a safe and happy New Year, and better times in 2021!