Monday, December 3, 2012

Seven Dividend Growth Stocks to Review

Every week I scan the list of dividend increases, and focus on the consistent dividend growers in a little bit of extra detail. I define consistent dividend grower as companies which have managed to boost distributions for over five consecutive years. Over the past week and a half, the following consistent income stocks raised distributions:

Becton, Dickinson and Company (BDX), a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company raised its quarterly dividend by 10% to 49.50 cents/share. This marked the 42nd consecutive annual dividend increase for this dividend champion. Over the past decade Becton Dickinson has managed to boost distributions by 15.70%/year. Yield: 2.60%. Check my analysis of the stock for a more comprehensive view of the company.

I really like Becton Dickinson at current valuation levels of 13.70 times earnings. The company has grown earnings per share from $2.07 in 2003 to $5.30 in 2012. Analysts estimate EPS to grow to $5.63 in 2013 and $6.14 by 2014. I would consider initiating a position in the stock subject to availability of funds.

McCormick & Company (MKC), Incorporated engages in the manufacture, marketing, and distribution of spices, seasoning mixes, condiments, and other flavorful products to retail outlets, food manufacturers, and foodservice businesses. The company raised its quarterly dividend by 9.70% to 34 cents/share. This marked the 27th consecutive annual dividend increase for this dividend champion. Over the past decade McCormick & Company has managed to boost distributions by 10.80%/year. Yield: 2.10%. Check my analysis of the stock for a more comprehensive view of the company.

The company has grown earnings per share from $1.29 in 2002 to $2.82 in 2011. Analysts estimate EPS to grow to $3.07 in 2012 and $3.36 by 2013. However, find McCormick to be overvalued at 22.20 times earnings. I would consider adding to my position on dips below $55.

Hormel Foods Corporation (HRL) engages in the production and marketing of various meat and food products. The company raised its quarterly dividend by 13.33% to 17 cents/share. This marked the 48th consecutive annual dividend increase for this dividend champion. Over the past decade Hormel Foods has managed to boost distributions by 10.70%/year. Yield: 2.20%

The company is trading at 16.30 times earnings, and has managed to grow EPS from $0.67 in 2003 to $1.90 in 2012. Analysts estimate EPS to grow to $1.94 in 2013 and $2.11 by 2014. Unfortunately, the yield is lower than my 2.50% entry criteria. I would consider initiating a position in the stock on dips below $27/share.

The York Water Company (YORW) engages in impounding, purifying, and distributing drinking water in Pennsylvania. The company raised its quarterly dividend by 3.50% to 13.83 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Over the past decade York Water Company has managed to boost distributions by 4.60%/year. Yield: 3.20%

The company has managed to boost earnings from 40 cents/share in 2002 to 71 cents/share in 2011. Analysts estimate EPS to grow to $0.72 in 2012 and $0.77 by 2013. Given the high dividend payout ratio, low dividend growth and relatively low yield for a utility of 3.20%, I view this stock as more of a hold than buy.

RGC Resources, Inc. (RGCO), through its subsidiaries, engages in the distribution of natural gas in Virginia. The company raised its quarterly dividend by 2.90% to 18 cents/share. This marked the tenth consecutive annual dividend increase for the company. Over the past decade RGC Resources has managed to boost distributions by 2%/year. Yield: 3.90%

Given the low growth in distributions over the past decade, and the high payout of 72%, I would rate the stock a hold. Despite the high current yield, the slow distributions growth would be unable to compensate against inflation. In addition, the current P/E ratio of 19.30 is rather high for a slow grower.

OGE Energy Corp. (OGE), together with its subsidiaries, operates as an energy and energy services provider that offers physical delivery and related services for electricity and natural gas primarily in the south central United States. The company raised its quarterly dividend by 6.40% to 41.75 cents/share. This marked the seventh consecutive annual dividend increase for the company. Over the past decade OGE Energy has managed to boost distributions by 1.20%/year. Yield: 2.90%

I like the low P/E ratio of 16.10, but the slow growth in distributions over the past decade is troubling. Earnings per share increased from $1.16 in 2002 to $3.50 by 2011. Analysts estimate EPS to grow to $3.55 in 2012 and $3.76 by 2013. I like the company’s low dividend payout ratio of 47.70%. I believe that there is room for distributions growth that is above average that for typical utility companies. I would add the company to my list for further research.

J&J Snack Foods Corp. (JJSF) manufactures nutritional snack foods; and distributes frozen beverages to the food service and retail supermarket industries in the United States, Mexico, and Canada. The company raised its quarterly dividend by 23.10% to 16cents/share. This marked the ninth consecutive annual dividend increase for the company. Over the past five years J&J Snack Foods has managed to boost distributions by 8.90%/year. Yield: 1%

The company is currently overvalued at 22 times earnings and a low yield of 1%. However, it has managed to boost earnings from $1.10/share in 2003 to $2.87/share in 2012. Analysts estimate EPS to grow to $3.10 in 2013 and $3.30 by 2014. I would continue monitoring the stock and the company, but at this stage the price is too high to warrant further investigation.

Full Disclosure: Long MKC

Relevant Articles:

Becton, Dickinson and Company (BDX) Dividend Stock Analysis
McCormick & Company (MKC) Dividend Stock Analysis 
Dividend Champions - The Best List for Dividend Investors
How to select dividend stocks?

4 comments:

  1. Great post DGI. BDX has been on my radar screen for a while now. The low payout and high growth make it a very interesting stock. I will dig a bit more to see it fits my price entry point. Like your blog a lot! Cheers!

    ReplyDelete
  2. I also really like the looks of BDX. I am thinking about adding them to my portolio as soon as I get enough funds.

    ReplyDelete
  3. Recently my wife had some medical issues and we had a box of medical supplies she needed shipped to our house. As I was going through it I noticed a majority of the stuff was made by BDX. Since then it has been on my radar and glad to see it is a dividend growth company with a very long history of dividend increases.

    ReplyDelete
  4. At the beginning of the article you say, "Every week I scan the list of dividend increases..." Where can I find the list of dividend increases? Thanks!

    ReplyDelete

Questions or comments? You can reach out to me at my website address name at gmail dot com.

Popular Posts