Two contrasting Dividend Increases

Two companies that I hold positions increased the dividends this week. The dividend increases were contrasting and in opposite sides of the spectrum.

  • Procter & Gamble Co (PG) announced a 3% increase to a quarterly dividend of $0.6629 compared to the previous quarterly dividend of $0.6436. The increase represents a projected annual dividend of $2.5744 which results in 3.12% forward yield. While this is a nice yield, PG has been struggling recently due to slowing or retracting growth and currently headwinds. While dividends have been increased each year and PG maintains its dividend champion status, the payout ratio has been increasing too due to lack of EPS growth. This is a real concern and doesn’t leave much room for future dividend growth without EPS growth coming back. The stock is also priced higher right now at a P/E of over 21. I am looking forward to seeing the quarterly results to be announced next week.
  • Kinder Morgan Inc (KMI) also announced an increase this week. The quarterly dividend increased to $0.48 compared to the previous quarterly dividend of $0.45. This results in an increase over 6%. The quarterly results were mixed, but the dividends were easily covered by the earnings. The current quarterly dividend of $0.48 results in a good 4.37% yield. But, the company also reaffirmed its target of $2.00 in annual dividends in 2015 which means more dividend increases on the way for the next two quarters.

Disclosure: Long on both stocks mentioned above.

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6 thoughts on “Two contrasting Dividend Increases

  1. That is a paltry increase in dividend from PG. I can understand why – there are way too many issues such as strong dollar, high payout ratios etc…but the company has been re-orienting itself by selling off units like the Duracell business and other parts as well. Will be interesting to see how this company performs in the future.

    Couldnt be happier with my KMI investment and the strong rise in dividends. The pipelines are going to be fairly stable and the avenue for growth in the future will come from terminals, which KMI has been focusing a lot on, lately. Would love to add more to my position if it goes on sale.

    Best wishes
    R2R

    • R2R, You are right. PG has lot of issues going on and we will have to play the waiting game to see how they address these issues.
      KMI on the other hand has been going strong and looking forward to increased dividends in the next quarter as well in order to meet the $2.00 goal.

      Cheers,
      DGJ

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