Dividend stocks continue to amaze. It's that plain and simple. Companies continue to solidify the fact that Dividend Increases Are Definitely Back! We love monitoring dividend increases and watching our dividend income grow, without lifting a finger. That is why we discuss the expected dividend increases here on our website. Get ready for the May 2021 installment of our monthly expected dividend increases series!
Why Dividend Increases Matter
Dividends are the foundation of our goal to reach financial freedom. We continuously invest in dividend growth stocks to grow our passive income. If you haven't figured it out by now, we eat, sleep, and breathe dividends.
If the goal is to produce a passive income stream that will one day cover our expenses, making sure that income stream grows is critical. Without growth, your dividend income stream will lose purchasing power to inflation. Inflation is typically between 2%-3% annually; therefore, if you cannot achieve average dividend growth of at least that percentage, your income stream will be able to cover less, and less, over time.
That is why dividend growth is a major deciding factor in all of our stock purchase decisions. It is the 3rd metric of our Dividend Stock Screener for a reason. For each stock, we review a company's history of increasing dividends (consecutive annual dividend increases) and a company's five-year average dividend growth rate!
Actual Dividend Increases in April 2021
We have talked multiple times about how April is the best month for dividend investors. In our article last month, we featured 9 dividend increases that were expected in the month. These were big-time companies as well, including several of our Top 5 Foundation Dividend Stocks, a tech giant, and other big-time dividend growth stocks.
The month did not disappoint. The dividend increases were so wild, in a great way, that Lanny could not wait for the end of the month to discuss them. He wrote an article mid-month declaring that dividend increases are officially back.
The article features Procter & Gamble's (PG) shocking 10% dividend increase that was double the company's 5-year average dividend growth rate. He also featured Johnson & Johnson's (JNJ) 5% dividend increase and Costco's (COST) huge 12% increase.
The dividend news did not stop with the article. Not every dividend increase we projected was great. IBM (IBM) delivered another <1% dividend increase, leaving investors like us disappointed in another sub-par dividend increase.
IBM's dividend increase put us in a bad mood. However, we didn't stay in a bad mood for long. Why? Big Oil Came Roaring Back. Chevron (CVX) announced a 4% dividend increase. That may not seem like a big deal. However, the oil sector has been crushed over the last year. It is great to see the sector leader, such as Chevron, announcing an increase. Maybe Exxon Mobil will be next!
There is one thing I forgot to mention too. Chevron wasn't the only oil company to announce dividend increases in April. KMI delivered its predicted 3% dividend increase. The real shocker came at the end when Shell (RDS.A) (RDS.B) announced a small dividend increase. This is the company's 3rd dividend increase since they cut their dividend last year.
2021 is shaping to be the year of the dividend investor. April crushed it, let's see if May can continue this trend!
Expected Dividend Increases in May 2021
With April's insane month behind us, let's now look ahead to the 6 expected dividend increases in May. Each of us own 2 of the companies on this list. Let's just say we are as excited as you to learn about all the companies on this list!
Dividend Stock #1: Chubb Limited (CB). The insurance sector has been on fire. We have covered how Chubb's competitors, such as Travelers (TRV), have crushed it and are still showing signs of undervaluation. Chubb's dividend increases are lower than I would have expected, given the company's low payout ratio. Their 5-year average DGR should be higher, in my opinion. It will be interesting to see what happens here and if their management team can deliver a surprise for us all!
Last year's dividend increase - 4%
Five-year average DGR - 3.5%
Expected timing of Dividend Increase Announcement - End of the month
Dividend Stock #2: Cardinal Health (CAH). Cardinal Health is a dividend aristocrat that is headquartered in the great state of Ohio. This company was hot on my watch list several months ago. I'm glad that we purchased shares at the time because the company's stock price has climbed since then (like everything else). CAH's dividend growth has slowed lately though. Last year's 1% increase continued their trend of increases below its 5-year average growth rate. Regardless of the percent, I don't see a reason why they won't announce an increase in May.
Last year's dividend increase - 1%
Five-year average DGR - 4.8%
Expected timing of Dividend Increase Announcement - Middle of the month
Dividend Stock #3: Clorox (CLX). - Clorox is the dividend stock that I have always wanted to own, but have never mustered up the courage to buy shares. They are always trading at a premium compared to other dividend stocks, for good reason. The company's products played a huge role in the pandemic. In fact, it was hard to find Clorox wipes on the shelves for months. Their rival PG announced a surprising 10% dividend increase last month. I wonder if Clorox has something like this up their sleeve as well.
Last year's dividend increase - 4.7%
Five-year average DGR - 7.6%
Expected timing of Dividend Increase Announcement - End of the month
Dividend Stock #4: Medtronic (MDT). - This Dividend Aristocrat is on the doorstep of becoming a dividend king (50+ consecutive annual dividend increases). MDT will achieve this coveted title within the decade. May 2021 will put them one step closer, as the company should announce a dividend increase in line with its five-year average dividend growth rate. Let's be honest though, we would all be pumped if the company found a way to announce a 10%+ dividend increase.
Last year's dividend increase - 7.4%
Five-year average DGR - 8.85%
Expected timing of Dividend Increase Announcement - End of the month
Dividend Stock #5: Northrop Grumman (NOC). - The aerospace giant has now increased its dividend for 17 consecutive years. The industry has been on fire over the last few years. NOC and its rival, Lockheed Martin (LMT), have seen their stock prices climb well about $300 per share. Now, let's see if the dividend increase is going to surprise us all and land above the company's five-year average dividend growth rate.
Last year's dividend increase - 9.8%
Five-year average DGR - 12.66%
Expected timing of Dividend Increase Announcement - End of the month
Potential Dividend Increase: Leggett & Platt (LEG). Last, but definitely not least, we will include one company on here that I am expecting, but can't guarantee an increase. Leggett & Platt typically increases its dividend during May. However, in 2020, the company did not announce an increase due to the pandemic. They have not increased their dividend since, either. With companies returning to strong dividend growth, I would not be shocked at all if LEG increases its dividend once again in 2021.
Editor's Note: Prior to release of the article, LEG's management team delivered a 5% dividend increase! We knew something exciting was going to happen!
Summary
Now comes the fun part. Let's sit around, wait, and monitor the news wire to see which dividend stocks announce their dividend income in May. We featured 6 in this article; however, we know that there are many other dividend stocks that will shock us with great dividend increases!
What dividend increases are you expecting in May? What dividend increases did you receive in April? Are you surprised that Oil is roaring back? Do you think 2021 is the year of the dividend investor!
Bert
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
