Another month is in the books. We are now in the final quarter of 2020, the craziest investing year of my career! Luckily, the third quarter was filled with plenty of dividend increases. For those of you that are new followers, each month we summarize the dividend increases from the previous month and predict the ones set to be announced in the next month. Now, sit down, grab a cup of coffee, and read about the dividend increases expected in October 2020.

Why Do We Care About Dividend Increases?

Dividend increases are the foundation of our financial freedom plan. We are building our dividend income, which is the easiest form of passive income, to cover our monthly expenses. A key component of this strategy is investing in companies that increase their dividend annually. Why? We want our dividend income stream to grow! After all, who doesn’t?

That is why we are constantly scouring the newswire for dividend increases. We keep a close eye on key announcements whether we own the company or not. It is a practice the two of us love and are always discussing with each other. It helps us identify potentially undervalued dividend stocks to purchase too!

Once we find a potential dividend investment, we use the Dividend Stock Screener to determine if this is a stock to buy. The stock screener uses three simple metrics. The third metric is dividend growth history. Inherently, every investment must have a history of increasing their dividend!

Dividend News and Dividend Increases in September 2020

Before looking ahead to the upcoming dividend increases, I like to discuss the actual increases from the previous month. September was an active month for dividend investors. In fact, there was a lot of great news!

To have some fun, I wanted to change the format of this section from previous monthly articles. Rather than simply list each dividend increase, I will split the dividend increases into different, self-identified categories. The categories are:

  1. Featured Dividend Increases – This section will summarize the increases for some of the companies listed in last month’s article
  2. Surprise Dividend Increases – This section will cover dividend increases that came out of left field!
  3. The Surprise “No Dividend Increase Announcement” – This section will feature any companies that did not announce a dividend increase as expected
  4. The Best of the Rest – This section will briefly list any remaining dividend increases that have not been covered.

Let me know your thoughts about the new format. I’m excited to hear what you think!

Featured Dividend Increases

In last month’s article, we featured 6 dividend increases expected in September. With the quality of names expected to announce, I was not expecting too many negative headlines from the group. The majority of the companies delivered dividend increases in line with expectations. Let’s kick this party off.

Lockheed Martin (NYSE:LMT) – Lockheed Martin is a company that has a stock price that always seems to increase. The company dominates the aerospace and defense sector. With our growing military budget, Lockheed has a consistent stream of revenue and earnings. LMT’s earnings growth over the last decade has been impressive. The earnings growth has translated to dividend investors as well. The company’s 5-year average dividend growth rate is right around 10%.

So what did Lockheed do in September? You bet they delivered a dividend increase to investors. Lockheed increased their quarterly dividend $.20 per share, to $2.60 per share from $2.40 per share. That was an 8.33% dividend increase. The dividend increase was slightly below their average; however, in my mind, it is right in line with their historical performance. Lockheed has now increased their dividend for 18 consecutive years. The company is closing in on becoming a Dividend Aristocrat (25+ years of dividend increases).

Microsoft (NASDAQ:MSFT) – Microsoft has had an eventful 2020. The company’s stock price has… exploded. Further, August and September were eventful due to the company’s pursuit of TikTok’s U.S. operations. Ultimately, the company lost the bidding war to Oracle (NYSE:ORCL). While I’m not exactly sure how Oracle and TikTok will fit (I don’t know if Oracle does either), there is definitely value in the company’s immense platform and reach. Despite the loss, I am sure Microsoft will be just fine. In fact, they are on to their next project.

Shortly after the TikTok bid was rejected, Microsoft announced a 9.8% dividend increase. Just like Lockheed, the dividend increase was in line with their average. Microsoft’s 5-year average dividend increase is 10.5%. Consistency is key for this software company!

Texas Instruments (NASDAQ:TXN) Texas Instruments was a glaring omission from my article last month. The tech giant announces their dividend increase annually in September. So readers, I apologize for the omission. I’ll make sure to include them next year! Luckily though, I can make up for this now.

Perhaps the omission was motivation for the company. Texas Instruments announced a 13.3% increase in their quarterly dividend, to $1.02 per share from $.90 per share. Prior to 2020, their 5-year dividend growth rate was above 20%. Despite the lower than average increase, a 13.3% dividend increase is impressive. Especially during a pandemic. Now I can understand why their shareholders were so excited after the announcement!

Surprise Dividend Increases and Announcements

Surprises are the best. We love them in all facets of life. Dividend surprises are no different. To be honest, nothing is better than checking on your investments and learning that they announced a surprise dividend increase! In September, there were three that I wanted to highlight. I only own one of the companies. However, even though I don’t own the others, I wanted to share the excitement with the shareholders that did.

Starbucks (NASDAQ:SBUX) Now, some may say this shouldn’t have been a surprise. However, it was to me! I was expecting Starbucks to increase their dividend last quarter. As misguided as that expectation was, the company fell off my radar after they didn’t announce an increase in June. Therefore, when the company announced a dividend increase at the end of the month, I was shocked!

The company’s 9.7% dividend increase was a nice treat. Much like drinking a nice cup of coffee from your local Starbucks. A nearly double-digit dividend increase during a pandemic that closed cafes in two of the company’s major markets (China and the US) is an impressive feat. The long lines at the drive through and the company’s quick ability to adapt to a changing landscape should have tipped me off that a dividend increase was still coming! As a shareholder, I couldn’t have been happier with the news. This marks the 10th consecutive annual dividend increase for Starbucks

starbucks dividend increase

General Mills (NYSE:GIS) – I am not a shareholder of General Mills. I owe Lanny kudos for pointing this dividend increase out to me. Otherwise, I would have missed it. This was a very noteworthy, and welcomed, 4% dividend increase for General Mills Shareholders. In fact, this dividend increase has been coming for a long time.

Prior to September 2020, the last time General Mills increased their quarterly dividend was in June 2017. That was over 3 years ago! The company has gone through some changes after hitting a rough patch in 2017/2018. The company’s goal since then has been to de-leverage and improve their balance sheet. The progress has been impressive for General Mills. The improvements have been further validated by the company’s dividend increase. If there were significant debt or cash flow concerns, the company would not have increased their dividend. Congrats shareholders! I’m pumped for you.

Marathon Oil (NYSE:MRO) Marathon shocked investors when the company reinstated their dividend. Like many oil companies, Marathon suspended their dividend as the price of oil plummeted. In September, the company announced a reinstated dividend of $.03 per share.

Marathon dividend

However, there is one issue with this dividend announcement. The company’s new quarterly dividend is $.03 per share. That is significantly lower than their pre-cut quarterly dividend of $.58 per share. Therefore, investors are still in the hole! Sure, the “surprise” announcement was great. It is important to review the headlines closely. This dividend increase was not what it seems.

The Surprise “No Dividend Increase Announcement”

Not every company from our previous month’s article increased their dividend as expected. Two of the companies on our list, McDonald’s (NYSE:MCD) and American Express (NYSE:AXP), shockingly did not increase their dividend on their schedule. I can understand the American Express situation due to the pandemic and the economic uncertainty for so many of their customers. However, McDonald’s is a different story.

In fact, I am pretty sure Lanny’s face is still bright red. The company is a Dividend Aristocrat that has a very regimented dividend announcement schedule. Lanny had thought he mastered McDonald’s dividend increase schedule. He could predict the 30-minute range that the company typically increases their dividend. This year, Lanny was there waiting, refreshing the investor relations page every minute during that 30-minute range. Sadly, the dividend increase never came.

We anxiously awaited McDonald’s dividend increase the following Thursday, hoping the announcement was simply delayed by one week. Once again, he left disappointed. Unfortunately, the calendar turned to October and we were left empty-handed. Hopefully, the company will surprise us in November or December.

The Best of the Rest

Now, finally, we have the “best of the rest” of the dividend increases from the month of September. These companies each increased their dividend as expected. The dividend increase was in line with their 5-year average. Consistency is always key for dividend investing. We love having a reliable, growing dividend income stream. Each of the increases was solid; however, none of them were spectacular. Therefore, I will briefly summarize them below.

Verizon (NYSE:VZ) – 2.0% dividend increase – This marked Verizon’s 14th consecutive dividend increase.

Philip Morris (NYSE:PM) – 2.56% dividend increase

Realty Income (NYSE:O) – .22% dividend increase – The Monthly Dividend Company delivered their traditional, small dividend increase. Nothing spectacular. However, I love every one of their increases!

Dividend Increases Expected in October 2020

Wow. September was an active month. There were a lot of predicted and surprise dividend increases. Now, let’s look ahead to the dividend increases expected in the coming month. Here are the dividend increases expected in October 2020.

Company #1: Visa (NYSE:V) Visa is one of our favorite companies. Several months ago, we compared Visa to the other three major credit card companies to determine which is the best dividend stock in the credit card sector. The company has a very low dividend yield with a high dividend growth rate. I like the company due to the fact they are a major player in an ever-growing industry. Think about it. As retail shops closed during the pandemic, consumers still made purchases online using their credit card. Other companies may have seen their sales slow. However, Visa was still a major player in this transforming economy. I am still expecting a strong dividend increase.

V Dividend Increase last year – 20%

V Five-year average DGR – 20%

Expected timing of Dividend Increase Announcement – End of the month

Company #2: V.F. Corp. (NYSE:VFC) VFC did not have the strongest earnings release at the end of July. Due to the pandemic, the company announced decreased sales. However, despite lower revenues, the company is still projecting a stable free cash flow. It will be interesting to see if VFC follows through with a dividend increase this month. While it would be great for shareholders, I could see the company delaying their dividend increase another quarter or two.

VFC Dividend Increase last year – 11.6%

VFC Five-year average DGR – 8.3%

Expected timing of Dividend Increase Announcement – End of the month

Company #3: American Electric Power (NASDAQ:AEP) AEP continues to be one of the favorite holdings in my portfolio. The company wasn’t featured in our electric utility battle (Consolidated Edison vs. Duke Energy). Still, despite that, AEP has performed well as one of my best investments over the year. Regardless of the economic environment, people will always need electricity. That is why AEP is positioned well to continue to thrive.

AEP Dividend Increase last year – 4.5%

AEP Five-year average DGR – 5.7%

Expected timing of Dividend Increase Announcement – End of the month

Company #4: Iron Mountain (NYSE:IRM) Iron Mountain has a very strong dividend yield. Currently, their dividend yield is over 9%. It is rare to find great dividend stocks with a higher dividend yield than AT&T (NYSE:T), one of our Top 5 Foundation Dividend Stocks. The company’s higher than usual dividend yield is great; however, from a dividend increase standpoint, I’ll be curious if the company follows through. Like VFC, I could see IRM skipping their quarterly dividend increase. If not, the increase will be in line with their dividend increase last year.

IRM Dividend Increase last year – 1.2%

IRM Five-year average DGR – 5.5%

Expected timing of Dividend Increase Announcement – End of the month

Company #5: Rockwell Automation (NYSE:ROK) Lastly, Rockwell Automation. This is one of the hidden gems of Lanny’s dividend stock portfolio. ROK’s 1.8% dividend yield is a hair above the broader market. Therefore, I would like to see the company deliver a strong dividend increase to their shareholders. ROK’s share price has had an impressive 2020. The table is set for a strong dividend increase. Will the company deliver? That’s the million-dollar question, right?

ROK Dividend Increase last year – 5.1%

ROK Five-year average DGR – 9.5%

Expected timing of Dividend Increase Announcement – End of the month

Summary

Buckle up, this is going to be an exciting month for dividend increases. September was definitely exciting. Let’s see if October can follow the act. Hopefully, you can see why we love dividend increases and follow them so closely. 2020 continues to be the most fascinating investing year of my career. Now, it is time to stay focused and continue investing in high quality dividend growth stocks that will increase their dividend income!

What dividend increases did you receive in September? What are you expecting in October? Do you love dividend increases as much as we do?

– Bert

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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