Monday, July 24, 2017

J.M. Smucker (SJM) Rewards Shareholders With a Raise

The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company is a member of the dividend achievers index. The company’s largest competitors include Conagra (CAG), Kraft Heinz (KHC) and Hershey (HSY).

The Board of Directors approved a 4% dividend increase last week, bringing the quarterly payment to 78 cents/share. This marked the 20th consecutive annual dividend increase for this dividend achiever.

This was the slowest dividend increase since the 4.70% dividend hike in 2015. Over the past decade, this company has managed to boost annual dividends at a rate of 9.80%/year. A small dividend hike shows that management is cautious about near term prospects for the business.

The company has managed to grow earnings per share from $3/share in 2008 to $5.10 in 2017. Analysts expect J. M. Smucker to earn an adjusted EPS of $8.35 per share in 2018. In comparison, the company earned an adjusted $7.72/share in 2017, which was down from the adjusted $7.79/share in 2016.

National Retail Properties (NNN) Dividend Stock Analysis

National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States.

Last week, National Retail Properties raised its dividend by 4.40% to 47.50 cents/share. This marked the 28th consecutive year of annual dividend increases for this dividend champion. This is an impressive track record that is a testament to the stability and defensibility of the company’s business model. National Retail Properties is one of only four publicly traded REITs and 94 publicly traded companies in America to have increased annual dividends for 28 or more consecutive years.

National Retail Properties has managed to raise dividends at a rate of 3%/year over the past decade. Unlike many other REITs that cut distributions during the Global Financial Crisis however, this blue chip REIT managed to grow the dividend no matter what.


The annual dividend rose from $1.40/share in 2007 to $1.78/share in 2016. I like the slow and steady approach to growing the distribution to shareholders over time. This is one of the guidelines I look for when evaluating real estate investment trusts.

Thursday, July 20, 2017

How to earn 5% on your savings

One of my favorite personal finance blogs is written by Jonathan Ping over at My Money Blog. Jonathan writes on a broad topic of finance items of interest to me, and has had great recommendations on products, books and services that I have benefited from. I wanted to share this resource with you, and also share that savings account that can generate 5% yields for readers. (which I learned from him)

Perhaps a couple of years ago, I read about several accounts that offered 5% yields on your cash. I was extremely skeptical at first, because the highest yields I could get on my cash was the 1% I could get at Ally Bank.

I did some research, and figured out that these are legitimate ways to earn a good yield on any spare cash I have. I found the company Insight Visa, in my research. The company Insight Visa offers a prepaid debit card, which comes with an FDIC insured savings account that yields 5% on your first $5,000. The interest is paid out quarterly. I will detail below the steps I took to earn that interest rate.

In order to earn the interest, I signed up for an Insight Visa prepaid debit card online. This step includes the usual things like address, Social Security Number etc.

The next step was to activate my card after receiving it through the mail. I set up an online profile, where I linked my checking account with the debit card. The verification only took a couple of business days.

Monday, July 17, 2017

Four Dividend Paying Companies Raising Dividends. Which ones are worth a closer look?

I review the list of weekly dividend increases as part of my monitoring process. Over the past week, there were several companies that raised dividends to investors. I am going to discuss how I came up with the list of companies that raised dividends this week. I will then also discuss the quick review process I go through.

This is a useful exercise for many reasons, but also as an educational exercise on the process I use to quickly narrow down any list of prospective dividend growth stocks down to a more manageable level.

I focused my attention to companies that have managed to increase annual dividends for at least ten years in a row. We do this in order to focus out companies which have managed to boost distributions throughout at least one or two economic cycles. In addition to that, we focused on companies whose recent dividend increases over the past year was more than a token increase.

The next step I the process involved reviewing valuation. I usually weed out companies where P/E ratios were below 20. Due to the large number of one-time accounting hits to earnings, I use forward earnings as a shortcut way to go through a lot of companies quickly.

We also weed out companies where earnings per share or funds from operations didn’t grow over the past decade.

Thursday, July 13, 2017

Should I invest in AT&T and Verizon for high dividend income?

Most readers are probably aware that it has been getting more difficult to find decent values in the current environment. When I ran my screens for valuation, I stumbled upon AT&T (T) and Verizon (VZ), which are telecom behemoths in the US.

AT&T (T) has increased dividends for 33 years in a row. In the past decade, it has managed to increase dividends by 3.70%/year. Between 1984 and 2016, the company has managed to increase dividends by 4.40%/year. The stock trades at 12.70 times forward earnings and yields 5.30%. The dividend is adequately covered with a dividend payout ratio of 67.60%, based on forward earnings. Check my previous analysis of AT&T for more information about the company.

Verizon (VZ) has increased dividends for 12 years in a row. In the past decade, dividends grew by 3.40%/year. Between 1984 and 2017, the company has managed to increase dividends by 3.30%/year. The stock trades at 11.60 times forward earnings and yields 5.30%. The dividend is adequately covered with a dividend payout ratio of 61.70%, based on forward earnings. Check my analysis of Verizon for more information about the company.

The telecom industry in the US is very competitive. Companies like AT&T (T) compete with the likes of Verizon (VZ), Sprint and T-Mobile. In the past, almost all of the profits have been made by Verizon (VZ) and AT&T, at the expense of smaller competitors. An investment in AT&T and Verizon today would presume that the status quo would remain unchallenged, and that Sprint and T-Mobile would be kept weak forever. The service that telecom companies is essentially a commodity. Telecom companies are not utilities, because there is the possibility for switching the provider. Try moving to Saint Louis, Missouri, and then switching your gas, water or electric utility – you can’t. But anywhere in the US, you can switch to another wireless carrier, plus you have other alternatives and very low customer loyalty. There is nothing to stop a customer from switching to another carrier after their contract expires.

Tuesday, July 11, 2017

Dividends Unlock Value For Shareholders

After observing companies for a decade now, I have come to the conclusion that dividends unlock value for shareholders. Let me start off with an actual example.

A few months ago, Costco (COST) announced that it would be paying a special dividend to shareholders.This event alone unlocked hidden value for shareholders.

On April 26, 2017 Costco announced special dividend of $7/share to shareholders on record from May 10, payable on May 26, 2017. The stock price rallied to 178.05/share at the opening and closed at $176.80/share on April 26, which was up from the close of $172.68/share on April 25. The stock closed at $172.64 on the ex-dividend date of May 8, and it had closed at 180.20 on May 5. In this case, the special dividend unlocked hidden value in the enterprise for shareholders.

That amount of money was locked in the business, and was not put to productive use for shareholders. This is why the company’s rational management decided to distribute the money to shareholders. This is the rational thing to do, when you are showered with cash, and you do not have a lot of high ROI projects to invest into. That $7/share were sitting in cash, but were not fully baked in the stock price, until the announcement unlocked this hidden value for shareholders.

I went back to look at the history of prior special dividends for Costco. I was stunned that every single special dividend ended up unlocking value for the shareholders. What I mean by “unlocking value” is the fact that the share price increased as a result of the special dividend announcement. So shareholders were better off as a result of the special dividend in every single case.

Wednesday, July 5, 2017

Two Dividend Growth Companies Rewarding Shareholders With a Raise

I like to check the pulse of dividend growth companies by monitoring dividend increases. This is helpful as part of my monitoring process. Two recent increases caught my eye. These are two companies I have owned for many years. These companies seem to have different expectations about the future. The first one is optimistic, and this has been fueled by rising earnings. The second company seems to be running out of space to raise dividends, due to stagnating profits. As dividend investors we are looking for the companies in the first camp. Of course, a long investing career will surely bring in some investments that show initial promise, but ultimately may turn out to be duds. Our goal is to manage our portfolios to reach our goals, despite having the occasional dud, and keep staying the course.

The companies that recently raised their dividend include:

Medtronic plc (MDT) manufactures and sells device-based medical therapies worldwide. The company raised its quarterly dividend by 7% to 46 cents/share. This marked the 40th consecutive year of an increase in the dividend payment for this dividend champion. Medtronic's dividend per share has nearly quadrupled over the past decade and has grown at a 17 percent compounded annual growth rate over the past 40 years.

Tuesday, July 4, 2017

Happy Financial Independence Day

Before I begin my message, I wanted to wish all my readers a Happy 4th of July. And I wanted to thank all of those military members for keeping us safe and able to enjoy our independence and freedom.

For the past seven and a half years, myself and my readers have been on a quest to achieve financial freedom with dividend growth stocks. So I wanted to take some time and reflect the accomplishments that we have all achieved in the past nine years.

Financial independence is the point at which the passive income exceeds expenses. People who achieve financial independence have the freedom to live their lives true to themselves. Most importantly, financially independent people have options in life. These options could include:

1) Working in a field they are passionate about
2) Caring for a child or a relative
3) Engaging in non-profit work, volunteering or charity
4) Writing a book
5) Traveling the world
6) Fill in the blanks (this is your passion so you have to decide what you want to do)

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