Monday, May 5, 2014

Twelve Predictable Dividend Growth Stocks Raising Dividends

As part of my dividend monitoring process, I review the list of dividend increases every single week. This helps me check if any of my dividend payers have hiked distributions, and also the see other potential dividend growers for further research. This definitely helps me in my quest to find companies that have predictable earnings, which translate into a predictable rising stream of dividend payments over time. By taking a long-term approach to investing, I am only focusing my attention on those companies that have above average chances of delivering dividend growth for the next 15 – 20 years.

I tried to narrow list by excluding companies that yielded less than 2%, and which have managed to grow dividends by less than 3%/year.

Chevron Corporation (CVX), through its subsidiaries, is engaged in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company raised its quarterly distributions by 7% to $1.07 /share. This dividend champion has raised distributions for 27 years in a row, and has a ten year distribution growth rate of 10.60%/year. Currently, Chevron sells for 11.20 times earnings and yields 3.40%. While I find the company attractively valued right now, I am overweight there, which is why any additions by me would be unlikely. Check my analysis of Chevron.

Exxon Mobil Corporation (XOM) explores and produces for crude oil and natural gas. The company raised its quarterly distributions by 9.50% to 63 cents/share. This dividend champion has raised distributions for 32 years in a row, and has a ten year distribution growth rate of 9.60%/year. Currently, Exxon Mobil sells for 13.80 times earnings and yields 2.70%. While I find Exxon-Mobil to be attractively valued today, I believe that other oil majors like Chevron are better values right now. Check my analysis of Exxon-Mobil.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. The company raised its quarterly distributions by 11.50% to 58 cents /share. This dividend achiever has raised distributions for 10 years in a row, and has a five year distribution growth rate of 24.90%/year. Currently, Ameriprise Financial sells for 17.40 times earnings and yields 2.10%. I would consider adding to the stock on dips below $93. Check my analysis of Ameriprise Financial.

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. The company raised its quarterly distributions by 15.80% to $1.10 /share. This dividend achiever has raised distributions for 19 years in a row, and has a ten year distribution growth rate of 19.40%/year. Currently, IBM sells for 13.10 times earnings and yields 2.20%. I would consider adding to the stock on dips below $176. Check my analysis of IBM.

Alliance Holdings GP, L.P. (AHGP), through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. This MLP raised distributions to 84.75 cents/unit, which is an 11.20% raise over the same rate from this time last year. This general partner has raised distributions for 9 years in a row, and has a five year distribution growth rate of 18.60%/year. Currently, Alliance Holdings GP yields 5.20%. I would add it to my list for further research.

Alliance Resource Partners, L.P. (ARLP) is engaged in the production and marketing of coal primarily to utilities and industrial users in the United States. This master limited partnership raised quarterly distributions to $1.2225/unit, which is an 8.20% raise over the same rate from this time last year. This dividend achiever has raised distributions for 12 years in a row, and has a ten year distribution growth rate of 15.80%/year. Currently, Alliance Resource Partners yields 5.30%. I would add it to my list for further research.

DCP Midstream Partners, LP (DPM), together with its subsidiaries, owns, operates, acquires, and develops a diversified portfolio of midstream energy assets in the United States. This MLP raised distributions to 75.50 cents/unit, which is a 7.80% raise over the same rate from this time last year. This master limited partnership has raised distributions for 8 years in a row, and has a five year distribution growth rate of 3.60%/year. Currently, DCP Midstream Partners yields 5.60%. I would add it to my list for further research.

Energy Transfer Equity, L.P. (ETE), through its subsidiaries, provides diversified energy-related services in the Unites States. This MLP raised distributions to 35.875 cents/unit, which is an 11.20% raise over the same rate from this time last year. This general partner has raised distributions for 9 years in a row, and has a five year distribution growth rate of 6%/year. Currently, Energy Transfer Equity yields just 3.10%, which is rather low for a master limited partnership. I would add it to my list for further research.

AmeriGas Partners, L.P. (APU) operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. This MLP raised distributions by 4.80% 88 cents/unit. This master limited partnership has raised distributions for 10 years in a row, and has a ten year distribution growth rate of 4.20%/year. Currently, AmeriGas Partners yields 7.60%. I would add it to my list for further research.

American Water Works Company, Inc. (AWK), through its subsidiaries, provides water and wastewater services in the United States and Canada. The company raised its quarterly distributions by 10.70% to 31 cents /share. This dividend payers has raised distributions for 7 years in a row, and has a five year distribution growth rate of 22.20%/year. Currently, American Water Works sells for 19.20 times forward earnings and yields 2.70%. I would consider adding the company to my list for further research.

UGI Corporation (UGI), through its subsidiaries, distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company raised its quarterly distributions by 4.40% to 29.50 cents /share. This dividend champion has raised distributions for 27 years in a row, and has a ten year distribution growth rate of 6.70%/year. Currently, UGI Corporation sells for 18.50 times forward earnings and yields 2.50%. I would consider adding the company to my list for further research.

Cracker Barrel Old Country Store, Inc. (CBRL) develops and operates the Cracker Barrel Old Country Store concept in the United States. The company raised its quarterly distributions by 33.30% to $1/share. This dividend achiever has raised distributions for 12 years in a row, and has a ten year distribution growth rate of 36.70%/year. Currently, Cracker Barrel Old Country Store sells for 17 times forward earnings and yields 4.20%. I would consider adding the company to my list for further research.

I ended up excluding companies like Costco (COST), which raised dividends from 31 to 35.50, which marked 11th consecutive annual dividend increase, because they yielded 1.20%.

Again, this list is not a recommendation to buy or sell, but a group of companies for further research. Running a screen on a list of securities is just the first step in your quest of identifying promising dividend companies. The next step is researching each promising idea and deciding if it has a sustainable business model that can withstand various competitive pressures over the next 20 years. After that , one only has to wait for the right price, and select those investments that provide the most bang for their investment buck at the time. The last part is the most difficult one after buying, and it is to pretty much sit on your investments and do nothing.

Full Disclosure: Long XOM,CVX, AMP, IBM

Relevant Articles:

Long Term Dividend Growth Investing
How to read my weekly dividend increase reports
Dividend Champions - The Best List for Dividend Investors
Dividend Macro trends: The Baby Boomer Retirement Investment
The importance of yield on cost

9 comments:

  1. There were quite a few great dividend increases last week. Chevron is the only one I currently own but quite a few others are on my watch list to pick up when the time is right (XOM, CBRL). As an owner of Chevron, I was pretty pleased with the 7% increase and the company is also doing share buybacks which helps grow EPS over time as well.

    ReplyDelete
    Replies
    1. Hey a 7% annual dividend increase, coupled with a 3%+ yield could translate into some really nice dividends and capital gains over time. I usually let the compounding do the heavy lifting for me, and so far I haven't been dissapointed

      Delete
  2. What is your opinion on something like Main Street Captial stock? The yield is high and seems to be a growing investment.

    ReplyDelete
    Replies
    1. I do not understand BDC's, which is why I stay away from them.

      Best Regards,

      DGI

      Delete
  3. Time to scoop up some more Target shares. They're cheaper than ever after the CEO quit today.

    ReplyDelete
    Replies
    1. That comment is factually incorrect.

      Delete
    2. But is it time though?

      Some on my list currently are: RCI, CLX, OMI and CBRL.
      (Different Anon)

      Delete
  4. What strikes me is how many of these stocks are energy stocks that will be vulnerable if and when solar power becomes a serious thing -- which appears to be happening, if you keep up with the news. Solar pricing is falling very fast and now I read that they are working on using tin instead of lead to make much cheaper and more environmentally friendly solar panels.

    If this trend continues, the old line oil and gas companies may turn into the next financials, maybe 10 or 20 years down the road. Just something to think about.

    ReplyDelete
  5. It seems we are seeing this year many companies who have historically averaged double digit increases only increasing by single digits. Do you think this is just a coincidence on the way to mean reversion - or are we entering a longer term trend of lower increases to match lower earnings?

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