Over the past week six income stocks announced plans to reward shareholders with increased dividends. I highlighted the ones that have managed to boost distributions for at least five consecutive years. I tried to further screen each company, using my entry criteria. In addition, a brief commentary behind each company is included.
Illinois Tool Works Inc. (ITW) manufactures various industrial products and equipment worldwide. The company raised its quarterly distributions by 5.60% to 38 cents/share. This marked the 49th consecutive annual dividend increase for this dividend champion. Yield: 2.70% (analysis)
The company looks attractively valued at the moment, and seems to have enough room to grow distributions. I would consider adding to my position, subject to availability of funds.
Questar Corporation (STR) operates as an integrated natural gas company in the United States. The company raised its quarterly distributions by 4.60% to 17 cents/share. This marked the 33rd consecutive annual dividend increase for this dividend aristocrat. Yield: 3.30%
Questar sounds like an attractively valued company at the moment, which I plan on adding to my list for further research. It spun-off its Exploration and Production company in 2010, which makes research slightly more challenging, since it would take some adjusting of historical financials to determine true trends in the business from before the spin-off.
National Health Investors, Inc. (NHI), a real estate investment trust (REIT), invests in health care properties, primarily in the long-term care industry in the United States. The company raised its quarterly distributions to 67 cents/share. This marked the 10th consecutive annual dividend increase for this dividend achiever. Yield: 5.10%
I like the fact that this REIT has managed to boost distributions consistently over the past decade, while also distributing excess cash to shareholders in the form of special dividends. NHI had a FFO payout ratio of 84% for first six months of 2012, which is sustainable for a REIT. However, I would like to add it to my list for further research.
Monsanto Company (MON), together with its subsidiaries, provides agricultural products for farmers in the United States and internationally. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The company raised its quarterly distributions by 25% to 37.50 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Yield: 1.70%
I like the company’s strong earnings and dividend growth over the past decade. EPS rose from 13 cent/share to $4/share, while the ten year dividend growth rate is 17.60%/year. Unfortunately, the company is overvalued at 22 times earnings and yields only 1.70%.I would consider it on dips below $60.
Broadridge Financial Solutions, Inc. (BR), together with its subsidiaries, provides technology solutions to the financial services industry in the United States, Canada, and the United Kingdom. It operates in two segments, Investor Communication Solutions and Securities Processing Solutions. The company raised its quarterly distributions by 12.50% to 18 cents/share. This marked the sixth consecutive annual dividend increase for the company. Yield: 3.30%
The company has delivered impressive dividend growth since it was spun-off from Automatic Data Products (ADP) in 2007. Unfortunately, it has been unable to grow distributions over the past five years. Without earnings growth, companies can only afford to raise dividends for a limited period of time, before they hit a logical ceiling.
Leggett & Platt, Incorporated (LEG) designs and produces various engineered components and products worldwide. The company raised its quarterly distributions by 3.60% to 29 cents/share. This marked the 41st consecutive annual dividend increase for this dividend champion. Yield: 5%
Despite the high yield, Leggett & Platt has a dividend payout ratio of 100% and almost no earnings growth over the past decade. As a result, I would rate the stock a hold at best.
Full Disclosure: Long ITW and ADP
- Illinois Tool Works (ITW) Dividend Stock Analysis
- My Entry Criteria for Dividend Stocks
- Dividend Aristocrats List for 2012
- Dividend Achievers Offer Income Growth and Capital Appreciation
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