I believe in a bottom up method of evaluating each individual holding separately, and then if it holds up, not worrying about the portfolio as whole. Each week I monitor the list of dividend growth stocks that raise dividends. I use this as one of the procedures for monitoring my dividend portfolio holdings. Other ways to monitor your dividend growth holdings includes reviewing trends in earnings per share, dividend payout ratios, returns on equity and checking the story for major news such as acquisitions, mergers, divestments etc. In general, if you purchase a security at attractive valuations, you avoid overpaying for it, and that security grows earnings per share over time, it will deliver dividend growth and it will likely increase in intrinsic value. This is how a business owner evaluates a business by the way.
There were two companies that managed to raise dividends over the past week, which had at least a ten year track record of annual dividend increases. The companies include:
Eaton Vance Corp. (EV), through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. It also provides investment management and counseling services to institutions and individuals.
The company raised its quarterly dividend by 5.70% to 28 cents/share. This marked the 36th consecutive annual dividend increase for this dividend champion. Over the past decade, Eaton Vance has managed to boost dividends at a rate of 11.60%/year.
Eaton Vance is a player that targets tax-sensitive investors in fixed income and securities. They are also a leader in closed-end funds. These assets are stickier, and account for roughly half of assets under management. A company like Eaton Vance is worth a second look, since it has managed to attract and retain assets under management throughout different market cycles. Overall I am bullish on asset managers in the long run.
The stock is attractively valued at 17.50 times forward earnings and yields 3%. Check my analysis of Eaton Vance for more information.
Omega Healthcare Investors, Inc. (OHI) is a real estate investment trust that invests in the real estate markets of United States. It invests in healthcare facilities, primarily in long-term healthcare facilities in order to create its portfolio. The REIT’s strategy is focused on pursuing selective investments in senior care facilities.
This real estate investment trust raised its quarterly dividend to 61 cents/share. This was the fourth increase over the past year, bringing the annual increase to 8.90% over the same distribution paid in the same time last year. This marked the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, Omega Healthcare Investors has managed to boost dividends at a rate of 9.90%/year.
Skilled Nursing Facilities will be a growth industry for the next three – four decades, as the population ages. For example, the proportion population aged over 85 years is estimated to increase from six million in 2010 to 10 million by 2030 and 15 million by 2040. Around 87% of the portfolio is skilled nursing and around 13% is senior housing.
The shares are selling at 10.20 times expected 2016 FFO and yields 7.30%. In general, a large yield is telling us that the market participants are not trusting this dividend’s sustainability. Based on my review of FFO/share, it looks like the dividend is sustainable at 72% FFO payout ratio. Plus, FFO has grown in the past several years, and is expected to keep growing, albeit more modestly. At a 7% yield, assuming it is sustainable, you do not really need growth – you can simply double your money by merely reinvesting that dividend.
Full Disclosure: Long OHI and EV
- Five Things to Look For in a Real Estate Investment Trust
- How to read my weekly dividend increase reports
- Living off dividends in retirement
- Dividend Champions - The Best List for Dividend Investors
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