With the low number of quality companies raising distributions in the last week of the year, I decided to focus on the companies which have a high chance of growing distributions in 2011. The companies that manage to grow distributions for a long period of time have a very high chance of continuing their streak of consecutive dividend increases, until something unexpected happens. In order for a company to be able to grow dividends for over one decade it has to have recorded earnings growth. Consistent earnings growth is only possible if the company has a wide moat or a strong competitive advantages based on price, quality or a combination of both. Most dividend growth stocks also boast high returns on equity and generate so much in excess cash, that prudent managers allocate a portion of it back to shareholders in the form of dividends. The companies which I expect to boost dividends to shareholders in 2011 and beyond include:
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. Wal-Mart Stores last raised its quarterly dividend by 11% to 30.25 cents/share in March 2010. Wal-Mart has increased its dividend for 36 years in a row. This dividend aristocrat company boasts a ten year dividend growth rate of 18.10% annually. Yield: 2.20% (analysis)
Walgreen Co. (WAG) , together with its subsidiaries, engages in the operation of a chain of drugstores in the United States. The company’s drugstores sell prescription and non-prescription drugs, and general merchandise. Walgreen last raised its quarterly dividend by 27.30% to 17.50 cents/share in July 2010. Walgreen has raised its dividend for 35 consecutive years This dividend aristocrat boasts a ten year dividend growth rate of 14.30% annually. Yield: 1.90% (analysis)
Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. Medtronic last raised its quarterly dividend by 9.80% to 22.50 cents/share in June 2010. Medtronic has raised its dividend for 33 years in a row. This dividend champion has a ten year dividend growth rate of 18.40% annually. Yield: 2.40% (analysis)
McDonald’s Corporation (MCD), together with its subsidiaries, operates as a worldwide foodservice retailer. McDonald’s last raised its quarterly dividend by 10.90% to 61 cents/share in September 2010. McDonald’s has raised its dividend for 34 consecutive years. This dividend aristocrat boasts a ten year dividend growth rate of 26.50% annually. Yield: 3.20% (analysis)
Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets in North America. Kinder Morgan Energy Partners last raised its quarterly distributions by 1.80% to $1.11 per unit in October 2010. Kinder Morgan has raised its distributions for 14 consecutive years. This dividend achiever boasts a ten year dividend growth rate of 11.70% annually. Yield: 6.40% (analysis)
Kimberly-Clark Corporation (KMB) , together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. Kimberly-Clark last raised its quarterly dividend by 10% to 66 cents/share in March 2010. Kimberly-Clark has raised its dividend for 38 consecutive years. This dividend aristocrat boasts a ten year dividend growth rate of 8.70% annually. Yield: 4.20% (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. Coca-Cola last raised its quarterly dividend by 7.30% to 44 cents/share in February 2010. Coca-Cola has raised its dividend for 48 consecutive years. This dividend aristocrat boasts a ten year dividend growth rate of 9.90% annually. Yield: 2.70% (analysis)
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. Colgate-Palmolive last raised its quarterly dividend by 20.40% to 53 cents/share in February 2010. Colgate-Palmolive has raised its dividend for 47 consecutive years. This dividend champion boasts a ten year dividend growth rate of 11.30% annually. Yield: 2.60 % (analysis)
In dividend investing, it is important to keep a close look at the long term picture behind each company you are investing in. As a result, the stocks mentioned above should purchased only after investors analyze them and assess that the probability for future dividend growth of over one year is high. I would not purchase a stock just because it would raise a dividend for one year. I would purchase a quality dividend stock only if I see it fit to generate higher yield on cost in the future for me.
Full disclosure: Long all stocks mentioned above
- What Dividend Growth Investing is all about?
- Ten Dividend Stocks with High Returns on Equity
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