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By Josh Peters, CFA | 02-24-2015 03:00 PM

The Rundown on 3 Recent Dividend Hikes

DividendInvestor editor Josh Peters sizes up dividend increases from Realty Income, Coca-Cola, and PSEG.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm here today with Josh Peters. He is the editor of Morningstar DividendInvestor newsletter and also our director of equity-income strategy. We are going to take a closer look at three recent dividend increases.

Josh, thanks for joining me today.

Josh Peters: Good to be here, Jeremy. One of my favorite topics. And not tongue-in-cheek like taxes being a favorite topic, but an actual favorite topic.

Glaser: Realty Income (O), one of your favorite companies, recently raised their dividend again. Was this expected or are you surprised at the size of it?

Peters: The timing has been a little uncertain, which is uncharacteristic for Realty Income. It's a company that has been public since 1994. They typically raise their dividend four times a year. They pay it 12 times a year on a monthly basis. And you had a pattern where, typically, in the years where they show good growth in earnings--usually because they have a lot of profitable acquisitions that they have made--that they would produce a larger dividend increase in August.

Well, after they had a new CEO come in, the question came up with the board, why August as opposed to later in the year or early the following year, once we've done our budgets and we have a better idea of where we stand? So, they decided to move it. It took a little bit of extra waiting. After a fantastic 20% total increase in the dividend during 2013, dividend growth was less than 1% in 2014. But here in January, you had a 3% increase in the dividend rate--that's up closer to 4%, year over year. And we think that that is now the kind of trajectory the dividend is likely to be on from here. I'm looking for a long-term dividend-growth rate of about 4%.

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