As part of my portfolio monitoring process, I evaluate the list of dividend increases every week. It is helpful to monitor how my investments are doing, and whether my investment thesis is paying out higher cash dividends over time. This monitoring is also helpful to observe other companies that raise dividends. This is another tool to uncover hidden dividend gems that few others might be focusing on.
There were six companies that managed to boost dividends last week. Of course, this is not an automatic buy – further analysis on each company needs to be done to determine if it meets the qualitative and quantitative criteria of the investor. The list includes companies that have managed to increase distributions for at least ten years in a row:
Omega Healthcare Investors, Inc. (OHI) is a real estate investment trust, which invests in healthcare facilities, primarily in long-term healthcare facilities. This REIT raised its quarterly dividend to 60 cents/share. This was the fourth consecutive quarterly increase in the past year. Omega Healthcare Investors has rewarded shareholders with a raise for 13 years in a row. The ten year average dividend growth rate is 9.90%/year. Future dividend growth will likely be around half that rate. This REIT sells at 10.90 times last years AFFO and yields 7.10%. The AFFO is projected to grow to $3.25 - $3.30/share in 2016, up from $3.08 in 2015. The stock looks attractively valued. You may like my previous analysis of Omega Healthcare, which I may refresh for your convenience. You may also enjoy this investor presentation.
Occidental Petroleum Corporation (OXY) engages in the acquisition, exploration, and development of oil and gas properties in the United States and internationally. The company operates in three segments: Oil and Gas, Chemical, and Midstream and Marketing. The company eked out a small 1.30% raise in the quarterly dividend to 76 cents/share. This dividend achiever has manager to boost dividends for 13 years in a row. The ten year average dividend growth rate is 16.80%/year. I strongly doubt that the company will be able to further boost dividends at this rate. I am also questioning the sustainability of the dividend, because the company is projected to lose 56 cents/share in 2016 and earn $1.36/share in 2017. Yields 3.90%. At this stage I would not consider initiating a position in the stock. Check my analysis of Occidental Petroleum for more information.
The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. It operates through U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Foodservice segments. The company raised its quarterly dividend by 11.90% to 75 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. The ten year average dividend growth rate is 9.50%/year. The company yields 2%. It is estimated to earn $7.70/share in 2017. At a P/E of 20, any price below $154 seems attractive. On the flip side, the company earned $5.76/share in 2016 – so the shares would have to sell below $116/share to be attractive. I do believe that this company may be able to grow dividends in the high single digits for the foreseeable future. I need to refresh my analysis of J.M. Smucker.
Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and wellbeing company. The company operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale. The company raised its quarterly dividend by 4.20% to 37.50 cents/share. This marked the 41st consecutive annual dividend increase for this dividend champion. The ten year average dividend growth rate is 19.50%/year. Unfortunately, I expect dividend growth over the next decade to be less than 9%/year. The company sells at 18.30 times expected earnings and yields 1.80%. I last added to the stock in 2014 - please check my analysis.
Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products. It operates through four segments: Engine, Distribution, Components, and Power Generation. The company raised its quarterly dividend by 5.10% to $1.025/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. The ten year average dividend growth rate is 27.90%/year. The dividend will grow at a much slower pace over the next decade, and will be limited by growth in earnings per share, rather than expansion in the dividend payout ratio. The company is selling at 15 times earnings and yields 3.50% This is a pretty attractive valuation. I will add it to my list for further research, in order to determine how sustainable the earnings are and whether there are catalysts for further growth.
Duke Energy Corporation (DUK), together with its subsidiaries, operates as an energy company in the United States and Latin America. It operates through three segments: Regulated Utilities, International Energy, and Commercial Portfolio. The company raised its quarterly dividend by 3.60% to 85.50 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. The ten year average dividend growth rate is 4.70%/year. The company yields 4.10%. While the current yield is high, I do not really like the lack of earnings growth over the past decade, and the high dividend payout ratio.
Full Disclosure: Long WBA, OHI,
- Dividend Champions - The Best List for Dividend Investors
- Five Things to Look For in a Real Estate Investment Trust
- How to read my weekly dividend increase reports
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