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John Heinzl is the dividend investor for Globe Investor's Strategy Lab. Follow his contributions here. You can see his model portfolio here.
One of the reasons I like dividend investing is that it appeals to my inner sloth: It's one of the few pursuits in life where you can actually get paid to do nothing.
Not only that, but if you choose your stocks carefully – sticking with companies whose revenues, profits and dividends are growing – you can get regular pay increases.
Getting paid a rising income to sit on one's behind can be a bit of an abstract concept to people who haven't had the pleasure of owning dividend growth stocks, so today I'm going to provide some real-life examples of companies that raised their dividends recently.
Owning dividend growths stocks doesn't mean you can check out entirely. You still need to monitor your companies to make sure nothing has changed drastically in their outlook. But because dividend growth investing is largely a buy-and-hold strategy, you don't have to constantly trade in and out in an attempt to make a short-term profit.
Here are four companies that raised their dividends in the past three weeks, starting with the most recent increase and working backward. Barring a dramatic change in their businesses, I expect all will continue to raise their dividends for years to come.
Algonquin Power & Utilities Corp. (AQN-TSX)
Date of increase: May 12
Size of increase: 10 per cent
Yield: 4.8 per cent*
Tuesday close: $11.40, up 2 cents
I wrote favourably about Algonquin Power & Utilities in March when the shares – which had dropped following news of a major U.S. acquisition – were trading at $10.91. The share have rebounded since then, and this month – citing a 24-per-cent increase in adjusted earnings per share in the first quarter – the company boosted its quarterly dividend by 10 per cent to 10.59 cents (U.S.). It marked the sixth consecutive year of double-digit dividend increases, a streak Algonquin aims to continue with the help of recent U.S. utility acquisitions and growth of its renewable power operations.
Telus Corp. (T-TSX)
Date of increase: May 5
Size of increase: 4.5 per cent
Yield: 4.5 per cent
Close: $40.52, down 24 cents
It's no secret that Telus has struggled because of the economic downturn in Alberta. But even with that challenging backdrop, the company still added 31,000 net postpaid wireless, high-speed Internet and Telus TV customers in the first quarter. With EBITDA (earnings before interest, taxes, depreciation and amortization) rising 3.1 per cent excluding one-time items, Telus boosted its dividend by 4.5 per cent (or 10 per cent year-over-year) to 46 cents a quarter. It also extended its dividend growth forecast for several more years, saying it intends to continue its pattern of semi-annual increases to produce annual dividend growth of 7 per cent to 10 per cent through the end of 2019. While that's down slightly from 10.8-per-cent annual dividend growth over the past five years, it's still pretty solid.
A&W Revenue Royalties Income Fund (AW.UN-T)
Date of increase: May 4
Size of increase: 4 per cent
Yield: 5.3 per cent
Price: $29.50, down 3 cents
I like an A&W burger (or two) now and then. But here's something I like even more: a distribution increase from the fast-food chain. With same-store sales rising a solid 8.6 per cent in the first quarter, A&W raised its distribution by 4 per cent to 13 cents a month – the third increase in the past year. Given the consistent growth in A&W's sales – same-store results have been positive for 12 consecutive quarters – I'm betting there are more distribution hikes to come. The fund's steadily falling payout ratio is also a good sign: It dropped to 92.2 per cent of distributable cash on a trailing 12-month basis in the first quarter, down from 96 per cent in the first quarter of 2015 and 103.8 per cent in the first quarter of 2014.
Johnson & Johnson (JNJ-NYSE)
Date of increase: April 28
Size of increase: 6.7 per cent
Yield: 2.8 per cent
Price $113.83 (U.S.), down 61 cents
Johnson & Johnson has raised its dividend for 54 consecutive years – through multiple recessions, wars, bear markets and financial crises – including a recent 6.7-per-cent increase to 80 cents a quarter. I like J&J because it's a global, diversified play on health care, with separate divisions focused on pharmaceuticals, medical devices and consumer products. If one division is struggling, the others can pick up the slack. With people living longer and health-care spending rising around the world, J&J stands to benefit for decades to come. That's why, every April, I look forward to baseball, warm weather and a dividend hike from J&J.
Disclosure: The author personally owns shares of AQN, T, AW.UN and JNJ, and holds T and JNJ in his Strategy Lab model dividend portfolio.
Editor's note: An earlier version of this column incorrectly said Telus intends to continue its pattern of semi-annual increases to produce annual dividend growth of 7 per cent to 10 per cent through the end of 2009. The correct year is 2019.
John Heinzl