Deere Doesn't Raise

[Kerim]

Looks like DE declared a dividend of 51 cents per share for the fifth straight quarter. I haven't had time to glance back through its dividend history, so I'm not sure if there is any reason to expect clockwork from this cyclical, but worth noting in any case.

[fiveoh]

Looking at the history, it seemed they go by the fiscal year for increases, so they still have some time to raise it. They are cyclical so I don't expect a raise every 5th quarter like PG or KO.

Although this could be a bad sign of things to come....

[EricL]

As a holder of the stock I'd rather they'd raise than not, but in looking at their history it shouldn't be too much of a surprise. They've had several instances of longer 4 quarters between increases and have also had a few times with multiple raises in the same year during the good times.

I guess it goes with the territory of investing in a cyclical company. I'll be watching it more closely now but have no plans to sell.

Dec 27, 2013 0.51 Dividend
Sep 26, 2013 0.51 Dividend
Jun 26, 2013 0.51 Dividend
Mar 26, 2013 0.51 Dividend
Dec 27, 2012 0.46 Dividend
Sep 26, 2012 0.46 Dividend
Jun 27, 2012 0.46 Dividend
Mar 28, 2012 0.46 Dividend
Dec 28, 2011 0.41 Dividend
Sep 28, 2011 0.41 Dividend
Jun 28, 2011 0.41 Dividend
Mar 29, 2011 0.35 Dividend
Dec 29, 2010 0.35 Dividend
Sep 28, 2010 0.30 Dividend
Jun 28, 2010 0.30 Dividend
Mar 29, 2010 0.28 Dividend
Dec 29, 2009 0.28 Dividend
Sep 28, 2009 0.28 Dividend
Jun 26, 2009 0.28 Dividend
Mar 27, 2009 0.28 Dividend
Dec 29, 2008 0.28 Dividend
Sep 26, 2008 0.28 Dividend
Jun 26, 2008 0.28 Dividend
Mar 27, 2008 0.25 Dividend
Dec 27, 2007 0.25 Dividend
Dec 4, 2007 2: 1 Stock Split
Sep 26, 2007 0.25 Dividend
Jun 27, 2007 0.22 Dividend
Mar 28, 2007 0.22 Dividend
Dec 27, 2006 0.22 Dividend
Sep 27, 2006 0.195 Dividend
Jun 28, 2006 0.195 Dividend
Mar 29, 2006 0.195 Dividend
Dec 28, 2005 0.195 Dividend
Sep 28, 2005 0.155 Dividend
Jun 28, 2005 0.155 Dividend
Mar 29, 2005 0.155 Dividend
Dec 29, 2004 0.14 Dividend
Sep 28, 2004 0.14 Dividend
Jun 28, 2004 0.14 Dividend
Mar 29, 2004 0.14 Dividend
Dec 29, 2003 0.11 Dividend
Sep 26, 2003 0.11 Dividend
Jun 26, 2003 0.11 Dividend
Mar 27, 2003 0.11 Dividend

[Dividend Watcher]

Eric, I noticed that when I was first looking at DE. There was a freeze in the early 00's also.

I was "guestimating" at the time that earning would drop 50-60% and the div would be frozen for a couple years if the farm economy went into a tailspin. At that magnitude, the div would still be covered but it wouldn't be pretty. Also have to take into account that with the advances in the emerging markets, China & India specifically, the demand for higher quantity/quality food that agribusiness can produce will limit the downside. That's just a guess on my part. I do know the Chinese market has really screwed up pricing when trying to buy Bordeaux "en primeur" so why not food?!?

[ChadR]

Was a little surprised they didn't have at least a token raise with their payout ratio as low as it is. Though they have the history of going extended periods of time without any raises. I'm expecting a 3rd Q raise. Don't see them raising their dividend next quarter.

[Kerim]

I hadn't taken a close look at DE in a while, but it looks to me like they've officially given up the 11-year streak of year-over-year dividend increases -- at least the way I track them. Dividend has been 60 cents per share since Q3 of 2014, which was a raise from 51 cents. So 2014 saw an increase to $2.22 from the $1.99 paid in 2013. Four quarters of 60 cents in 2015 meant a total of $2.40 for the year, an improvement over 2014. But in 2016, we're getting another four quarters of 60 cents, for another $2.40. So the streak is over.

Anyone looking at this differently?

[EricL]

That's how I see it too Kerim, the streak appears to be dead.

I sold my DE a couple weeks ago, here were my thoughts.

Management has guided for a payout ratio of 35% of mid-cycle EPS, and the payout ratio on 2017 analyst estimates is currently 64%.

It may be a while yet before there is an increase.

[Kerim]

Nice article, Eric -- thanks. I missed it when it first went up.

[Dividend Watcher]

I gave up on a raise for a while now. Nice article, BTW, Eric. I missed it too.

However, I stepped back and looked at my portfolio as a whole. My dividend income in both portfolios are up about 5%ish for the year so far and just below my goal of 6% annual increases. DE is a cyclical and I knew that when I bought it a few years ago. At the time, I expected the boom times the ag sector was experiencing would not last forever. I think I said here at the time that buyers should expect earnings and share price would probably be cut in half. Surprisingly, the share price is still hanging in mid-air. Over the very long term, we still need food to support a rapidly growing world-wide population and, around here in my new hometown, if you're not a Deere owner, you're a wannabe farmer.

So the question was, where was a I going to put my money if I sold out? I want to add more utes and REITs but both had been bid up lately and I'm not satisfied they've dropped enough yet to take a bigger stake. Staples are still in an airy price range. The oil patch is still blowing in the wind. Add to that the "odd" economic conditions we've experienced since the start of the Great Recession and I've decided to stand pat for now unless they cut the dividend.

I don't blame others for cashing out. I've turned off the DRIP a while ago but that's it for now.

[ronn38]

I'm currently holding my DE, but am wieghting weather to continue simply BECAUSE the price has held. To me there is vaule in cash. If say EMR or CMI comes into my buy zone, I would valuehaving the funds to move into those opportunites. Granted, a bird in the hand and all... but my short expereince is, given time, even PH, BTI, T and O come into our buy zone.

Just my 2 cents,

Ronn

[DividendGarden]

I will continue to hold DE for a few reasons. I like their low payout ratio and balance sheet. I would have expected even a token dividend increase from DE, so I am surprised that didn't happen.