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Raises All Around: Dividend Increases for the Month of September (Part 2)

Every month, I do my damnedest to impress upon D&I readers the unbeatable importance of dividend increases.

After all, it’s consistent, aggressive growth – not fat, initial yields – that will grant you long-term security and wealth.

Accordingly, last week I started rounding up notable companies increasing dividends in September. Like I said then, it’s a great way to discover new stocks and revisit old ones.

Now, I’m back today to wrap it up with the second part.

So let’s get to it…

The Dividend Increase That Should’ve Been

It’s time for my humble pie, folks…

Let me explain.

Usually, this monthly column is reserved for stocks recently increasing dividends, plain and simple. But sometimes what doesn’t happen is just as significant as what does.

No, I’m not trying to be profound.

I’m simply trying to wrap my head around the astonishing, discombobulating fact that Intel (INTC), breaking a nine-year streak, failed to increase its dividend this year.

So why the humble pie? Because I’ve consistently been in Intel’s corner.

It’s true that the company has been struggling lately. The chip business has been undergoing rapid, chaotic changes over the last decade. And no one in the industry knows which way is up.

Everyone does agree that the PC industry is headed for the graveyard, so getting the lockdown on mobile is of key importance.

And between ARM (ARMH), AMD (AMD) and Intel, there’s a rat race to the finish line underway.

But none of that had me particularly worried.

Intel has been in the chip game – and, for the most part, winning it – ever since the late 1990s. It has a vast, mature R&D arsenal. In my mind, this puts it well ahead of the curve.

Was I expecting it to be anointed the mobile chip king any time in the near future? Absolutely not. But a non-dividend hike was the last thing I saw coming.

In effect, Intel has just done what every company shouldn’t do when there’s uncertainty surrounding long-term prospects. Namely, introduce even more uncertainty.

Shareholders develop expectations, especially when it comes to the treatment of dividends. When those expectations are defied, they react poorly.

A few more non-increases – or, God forbid, an actual cut – and Intel is going to have angry shareholders heading for the exits in droves.

Waiter, There’s a Fly in My…

Industry stalwart, Campbell Soup (CPB), is the largest producer of soup in the world. It commands 60% of the market, and enjoys brand recognition that most companies can only dream of.

Its long history as an American cupboard staple has provided it with excellent sales stability, even during economic downturns.

Case in point: While consumers cut costs left and right during the Great Recession, when it came to Campbell’s products, they kept on buying. In turn, the company’s revenue remained unscathed throughout the entire ordeal.

As a result, Campbell never had to send its dividend downriver because of the doldrums. In fact, from 2008 to 2010, the company raised payouts 35% overall.

Now, despite the fact that the company is a defensive, reliant dividend payer, its dividend growth leaves something to be desired.

Its latest increase of 7.6% pulls up the stock’s three-year average dividend growth to just 5.79%. That’s enough in annual raises to be noticeable, but not quite enough to be attractive.

That’s especially true in this case, considering its equally lackluster yield of 3.01%.

In short, if Campbell manages to edge up its annual dividend growth rate (DGR) by another 5%, it would be worth considering.

But as it stands, there are more suitable companies in the same industry growing dividends at a greater pace – like General Mills (GIS), whose five-year DGR clocks in at 11.25% – and claiming equal stability.

Safe investing,

Ryan Anders