Showing posts with label dividend increase. Show all posts
Showing posts with label dividend increase. Show all posts

Monday, June 15, 2015

Seven Dividend Growth Stocks to Consider for Further Research

One of my favorite aspects of dividend growth investing is the ability to receive more passive dividend income, simply because I made the right decision years ago. It is amazing that simply because I had the foresight to identify quality dividend growth stocks, I get paid more with the passing of every single year. What is even more amazing is the fact that the rate of dividend growth is usually higher than the rate of salary increases I receive at my day job. I work hard to get my work done timely, and then receive a raise that pretty much keeps up with inflation. With dividend growth companies on the other hand, my money is working hard for me, and reward me with consistent dividend increases.

There were several dividend growth stocks, which announced that they are increasing their distributions to shareholders. I included the ones I own and the ones I find interesting for further research below:

Target Corporation (TGT) operates as a general merchandise retailer in the United States. The company raised its quarterly dividend by 7.70% to 56 cents/share. This marked the 48th consecutive annual dividend increase for this dividend champion . The ten year dividend growth rate is 20.30%/year. The stock currently sells for 17.30 times expected earnings and yields 2.60%. Check my analysis of Target.

Casey’s General Stores, Inc. (CASY), together with its subsidiaries, operates convenience stores under the Casey’s General Store name in 14 Midwestern states, primarily Iowa, Missouri, and Illinois. The company raised its quarterly dividend by 10% to 22 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 17.60%/year. The stock currently sells for 20.60 times expected earnings and yields 1%. I last analyzed Casey’s a few years ago. I still like the growth story there, and would be interesting in potentially adding more to the stock when it is available below 20 times earnings. I should probably also put an analysis shortly.

Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. T raised its quarterly dividend by 10% to 77 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever . The ten year dividend growth rate is 12.80%/year. The stock currently sells for 17.70 times expected earnings and yields 3.50%. I last analyzed Caterpillar in 2012. I would put it on the list for further research.

C. R. Bard, Inc. (BCR) designs, manufactures, packages, distributes, and sells medical, surgical, diagnostic, and patient care devices worldwide. The company raised its quarterly dividend by 9.10% to 24 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 6.20%/year. The stock currently sells for 19 times expected earnings and yields 0.60%. I never analyzed C.R. Bard, due to its low yield and low dividend growth. I do like the growth in earnings per share, and should add it to my list for further research.

FedEx Corporation (FDX) provides transportation, e-commerce, and business services in the United States and internationally. The company raised its quarterly dividend by 25% to 25 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 10%/year. The stock currently sells for 20.70 times expected earnings and yields 0.60%. Despite the low yield, I like the sector and would add the stock, along with competitor UPS to my list for further research.

Alexandria Real Estate Equities, Inc. (ARE), a real estate investment trust (REIT), engages in the ownership, operation, management, development, acquisition, and redevelopment of properties for the life sciences industry. The company raised its quarterly dividend by 10% to 77 cents/share. This marked the fifth consecutive annual dividend increase for this REIT . The ten year dividend growth rate is 1.50%/year, due to a dividend cut in 2009. The stock currently sells for 19.10 times Funds from Operations (FFO) and yields 3.40%. I believe the company is an interesting one to analyze, due to the niche rental market it serves.

Flowers Foods, Inc. (FLO) produces and markets bakery products in the United States. It operates through two segments, Direct-Store-Delivery (DSD) and Warehouse Delivery. The company raised its quarterly dividend by 9.40% to 14.50 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 17.90%/year. The stock currently sells for 22.50 times expected earnings and yields 2.70%. I have not stumbled upon this company before. I would be interested in digging into much detail about Flowers Foods.

Overall, two of the companies listed above are holdings of mine, rewarding me with higher dividend income. The rest are candidates for further research. I believe it is paramount for dividend investors to spend the time and learn as much as possible about different businesses, and be prepared if the right opportunity strikes. Investment knowledge is like compound interest, as it accumulates over time.

Full Disclosure: Long TGT, CASY, short TGT puts

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Monday, June 8, 2015

Lowe’s Delivers Consistent Dividend Growth to Investors

Lowe’s Companies, Inc. (LOW) operates as a home improvement retailer. Lowe’s operates approximately 1,840 home improvement and hardware stores in North America. The company also sells its products through online sites comprising Lowes.com, Lowes.ca, and ATGstores.com, as well as through mobile applications. I last analyzed Lowe's a couple of years ago, so I decided to do a quick update on it.

Lowe’s recently announced that it was raising its quarterly dividend by 21.70% to 28 cents/share. This marked the 53rd consecutive annual dividend increase for this dividend king. As we have discussed the dividend kings before, this is an elite group of companies that have raised distributions for at least 50 years in a row. It is a rare feat when a company has managed to grow dividends every year for over half a century. It is an even rarer accomplishment when that company is firing up on all cylinders, and keep growing dividends at the rate of Lowe’s.

The ten year dividend growth rate for Lowe’s is an impressive 25%/year. The company managed to grow earnings per share by 7.10%/year. Therefore, a large reason behind the high dividend growth is due to expansion in the dividend payout ratio. However, you should not forget that the past decade also included one of the worst housing crises in the US and the recession of 2007 – 2009. One of the main reasons I picked up Lowe’s after the housing crisis is because management kept raising the dividend. When they raised the dividend, this showed me that they had confidence in the long-term sustainability of the business.

Competitor Home Depot (HD) on the other hand stopped raising dividends in 2008.

As I mentioned above, earnings per share grew at a respectable 7.10%/year over the past decade, which included a terrible housing crisis. Lowe’s earned $2.71/share in 2015. The company is expected to earn $3.29/share in 2016 and $3.95/share in 2017. Lowe’s also has had an aggressive share buyback policy over the past decade. As a result, the company has reduced its share count from 1.606 billion shares in 2006 to 990 million shares in 2015. While I would prefer special dividends to share buybacks as a stockholder, I would get what I can.

The company’s fortunes are tied to the fortunes of the housing market in North America. As the US housing market bounces back, this could translate into more traffic to home improvement stores, and to high growth in same store sales. As the housing market improves, there will be more remodeling, and more need for store trips to Lowe’s or Home Depot to accommodate for that remodeling. An up-tick in new home construction could also provide another source of growth. The company focuses on do-it-yourself, do it for me customers as well as commercial customers.

Research shows that renovations tend to accelerate for homes older than 25 years. According to latest Census, 71% of homes in the US have been built more than 25 years ago. As a result, homeowners will be much more likely to participate in do it yourself home renovation and upkeep projects, in order to try to increase the value of their home, to make it more marketable or just to make it a better place to live.

A further source of growth will be the opening of new stores. Unfortunately, the level of new store openings has slowed down to 15 – 20/year. In the long-term, the company can capture growth by expanding internationally, beyond North America. This could be an interesting development to check. Currently, it has operations in US, Canada and Mexico, as well as an Australian Joint-Venture with Woolworths where Lowe’s has a one-third share of the ownership. I like the fact that the company is only interested in expanding in international markets after intense analysis, and only if their research determines that expansion will support compelling long-term returns.

Being the second largest home improvement retailer, Lowe’s also has scale and strong purchasing power. This bargaining power translates into lower costs, and higher profits. Another important characteristic for Lowe’s and competitor Home Depot is the fact that their knowledgeable staff can deliver quality level of service, and the knowledge to address the specific customer needs. This is something that is difficult to maintain in a purely online shopping experience. The company is aiming to enhance its relevance to customers through omni-channel retailing and differentiate itself through better customer experiences.

The company is continued focus on developing its omni-channel retail capabilities. Thus it is ensuring Lowe's meets customer needs whenever and wherever they choose to engage with the company, whether in store, in home and on the job, online and through contact centers. The company is also focused on further building customer experience design capabilities that differentiate Lowe's from other home improvement providers, improving its offering for Pro customers and continuing to improve productivity and profitability.

Currently, the stock is overvalued at 21.20 times forward earnings and a current yield of 1.60%. While I do not believe that the company is a buy at present levels, it is definitely a hold. I think it is important to keep companies purchased at attractive prices, and to monitor them at least once every 12 – 18 months. I do not subscribe to the theory that I should sell a company, merely because the price is a little on the high side, and buy something “cheaper”. I believe holding on to a company like Lowe’s, which grows intrinsic value over time is a wise decision. However, wise investors will know that Lowe’s is exposed to the cyclical nature of the housing market, which is why its results are not going to look pretty during the next recession. This would be the time to scoop up more shares of the retailer, provided the fundamentals are still intact.

Full Disclosure: Long LOW

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Monday, May 18, 2015

Four Companies Growing Future Yields With Increased Dividends

I try to assemble my dividend portfolio by mixing three distinct types of dividend growth stocks. The first group consists of higher yielding companies which have lower dividend growth expectations. The second group includes companies in the sweet spot, which have average yields anywhere around 2.50% - 4% and average to above average dividend growth. The third group includes companies which have lower current yields, but offer the possibility of high dividend growth. When combining expected dividend growth with current yields, I determine the type of company I am reviewing, and also decide whether it is worth pursuing at some point in the future. I uncover those companies by screening the list of dividend champions or by reviewing the list of dividend increases for the week. I also use my process of reviewing recent dividend increases to monitor the performance of any companies I already own.

There were five companies last week I decided to review briefly in this blog post. I focused on the companies with at least a ten year streak of dividend growth and the right mix between dividend yield and dividend growth:

The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. The company operates in four segments: Cleaning, Household, Lifestyle, and International. The company raised its quarterly dividend by 4% to 77 cents/share. This marked the 38th consecutive annual dividend increase for this dividend champion. The current rate of dividend increase is lower than the ten year average raise of 10.40%/year.  The company had a disappointing dividend raise in 2014 as well. The last time it had two years of dividend growth below 4%/year was in 2005 and 2006. Subsequently, the dividend is up by 165% since 2005. The stock is overvalued at 24.20 times forward earnings and yields 2.90%. Given the low recent growth, and overvaluation, I would not consider adding to my position in the company. I last analyzed Clorox in early 2014. I would refresh it after full year earnings are released in the latter part of 2015.

The Southern Company (SO), together with its subsidiaries, operates as a public electric utility company. It is involved in the generation, transmission, and distribution of electricity through coal, nuclear, oil and gas, and hydro resources in the states of Alabama, Georgia, Florida, and Mississippi. The company raised its quarterly dividend by 3.30% to 54.25 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. The latest dividend increase was slightly lower than the ten year average dividend growth of 3.90%/year. The high current yield compensates for the slow rate of dividend growth however. The stock is attractively valued at 15.40 times forward earnings and yields 5%. I will add the stock to my list for further research.

FactSet Research Systems Inc. (FDS) provides integrated financial information and analytical applications to investment community in the United States, Europe, and the Asia Pacific. The company raised its quarterly dividend by 12.80% to 44 cents/share.This marked the 17th consecutive annual dividend increase for this dividend achiever. The latest dividend increase was slightly lower than the ten year average dividend growth of 23.80%/year. The stock is overvalued at 29.50 times earnings and yields 1.10%. This is the type of company in the initial stage of dividend growth that can deliver high future yields on cost for patient dividend investors. I will monitor the situation, but would like to acquire the stock at 20 times earnings or less. It is on my list to post an analysis on in the foreseeable future.

Franklin Electric Co., Inc. (FELE), together with its subsidiaries, designs, manufactures, and distributes water and fuel pumping systems worldwide. It operates in two segments, Water Systems and Fueling Systems. The company raised its quarterly dividend by 8.30 to 9.75 cents/share. This marked the 23rd consecutive annual dividend increase for this dividend achiever. The latest dividend increase was in line with the ten year average dividend growth rate of 8.40%/year. The stock is fully valued at 19.80 times earnings and yields a low 1.10%. I have heard interesting things about the company, which is why I am adding it to my list for further research.

Full Disclosure: Long CLX

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Monday, May 11, 2015

Dividend Stocks Rewarding Patient Investors With a Raise

My goal is generate a sufficient stream of dividends that exceeds my expenses. In order to achieve that, I try to identify companies that have a track record of consistent dividend increases for further analysis. My analysis tries to determine if there is a margin of safety in the dividend and that this dividend is supported by earnings. I generally want a company where earnings and dividends grow hand in hand, though I am also aware that this is dependent on the stage the company is in. It is also helpful to determine if earnings can continue growing over time. When earnings are growing, a company can afford to grow dividends easily, and will get more valuable to investors in the process. The next important step in the process is purchasing that right quality company at the right price. Even the best dividend stock is not worth overpaying for. This process has helped me since I started my dividend investing journey in 2008.

The best positive confirmation that my analysis is working is when a company I own keeps increasing dividends years after I have purchased it. I monitor those dividend increases weekly for companies I own and companies I monitor. A few companies to note include:

PepsiCo, Inc. (PEP) operates as a food and beverage company worldwide. The company raised its quarterly dividend by 7.30% to 70.25 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. In the past decade, PepsiCo has managed to boost its dividends by 12.50%/year. The stock is overvalued at 21.40 times earnings and yields 2.90%. Check my analysis of PepsiCo.

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, Marketing and Other. The company raised its quarterly dividend by 4.20% to 75 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever . In the past decade, Occidental Petroleum has managed to boost its dividends by 17.70%/year. The stock is overvalued at 70 times forward 2015 earnings of $1.11/share and yields 3.80%. Check my analysis of Occidental Petroleum.

Cardinal Health, Inc. (CAH), a healthcare services company, provides pharmaceutical and medical products and services in the United States and internationally. The company operates in two segments, Pharmaceutical and Medical. The company raised its quarterly dividend by 13% to 38.70 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. In the past decade, Cardinal Health has managed to boost its dividends by 31.10%/year. The stock is fully valued at 19.80 times earnings and yields 1.80%. When I analyzed the company in 2010, I didn’t like what I saw, because earnings per share had been flat for several years. It is good to evaluate mistakes of omission, in order to improve method for stock selection.

Buckeye Partners, L.P. (BPL) owns and operates liquid petroleum products pipeline systems in the United States. The master limited partnership operates through four segments: Pipelines & Terminals, Global Marine Terminals, Merchant Services, and Development & Logistics. The partnership raised its quarterly distribution to $1.15/unit. Buckeye Partners has raised distributions for 20 consecutive years. The MLP is selling for 18.10 times 2014 distributable cash flow per unit and yields 5.60%. I will add it to my list for further research, though the distribution coverage seems thin.

Spectra Energy Partners, LP, (SEP) through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. The partnership raised its quarterly distribution to 60.125 cents/unit. Spectra Energy Partners has raised distributions for 8 consecutive years. The MLP is selling for 14.50 times 2014 distributable cash flow per unit and yields 4.50%. I would add this MLP to my list for further research.

Full Disclosure: Long PEP

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Monday, May 4, 2015

Five Companies Showering Investors With More Cash

I expect that sometime around 2018, my forward dividend income will exceed my monthly expenses. I find dividends to be a more stable and dependable source of income, than capital gains. If I choose to live off dividends, and not have a job or other sources of income by the end of this decade, I want to make sure that I do not outlive my nest egg.

I purchase shares in companies that pay me to hold them and will increase those payments over time. When a company I hold rewards me with more cash, this shows me that my strategy works in achieving its expected goals and objectives. The news that a company I own raised dividends serves as a positive reinforcement tool.

In the past week, there were several companies that raised dividends. I have highlighted several which have managed to boost distributions for at least five years in a row. I have also focused only on those I already own, or find interesting for further research. The companies include:

Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. The company boosted its quarterly dividend by 5.80% to 73 cents/share. This marked the 33th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 9.80%/year. Shares are slightly overvalued at 22.30 times forward earnings and a yield of 3.30%. I would consider the stock on dips below $80/share. Check my analysis of Exxon Mobil.

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. The company boosted its quarterly dividend by 18.20% to $1.30/share. This marked the 20th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 19.80%/year. Shares are attractively valued at 10.90 times forward earnings and a yield of 3%. I find the stock attractively valued, and might consider adding shares to my position there. Check my analysis of IBM.

W.W. Grainger, Inc. (GWW) operates as a distributor of maintenance, repair, and operating (MRO) supplies; and other related products and services that are used by businesses and institutions primarily in the United States and Canada. The company boosted its quarterly dividend by 8.30% to $1.17/share. This marked the 44th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 18.20%/year. Shares are attractively valued at 19.80 times forward earnings and a yield of 1.90%. I would be interested in adding to my position in the stock on weakness. Check my analysis of W.W. Grainger.

Wells Fargo & Company (WFC) provides retail, commercial, and corporate banking services to individuals, businesses, and institutions. The company raised its quarterly dividend from 35 to 37.50 cents/share. This marked the fifth consecutive annual dividend increase. The stock is attractively valued at 13.30 times forward earnings and yields 2.70%. Check my analysis of Wells Fargo for more details. Wells Fargo is an example of a situation where my assessment was wrong in May 2013, but I changed my mind after reviewing my analysis a couple of months later. I should refresh my analysis on the company.

American Water Works Company, Inc. (AWK), through its subsidiaries, provides water and wastewater services in the United States and Canada. The company operates through two segments, Regulated Businesses and Market-Based Operations. The company boosted its quarterly dividend by 9.70% to 34 cents/share. This marked the 8th consecutive annual dividend increase for American Water Works. The five year dividend growth rate is 8.10%/year. Currently, the stock is selling at 20.90 times forward earnings and yield 2.50%. The stock seems overvalued at present, and I need to add it to my list for further research.

Full Disclosure: Long XOM, IBM, GWW, WFC

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Monday, April 27, 2015

Four Quality Dividend Machines Hiking Distributions

Over the past week, there were four quality dividend paying companies, which announced that they are raising dividends for their shareholders. As a long-term shareholder, I like it when I am essentially paid to hold companies. I like it even better when that company I own regularly increases the amount of cash they send my way. I also view the near term rate of change in dividend hikes as a management indication about their expectations for earnings growth. One of the easiest ways for a time-starved investor like myself to monitor those dividend hikes on companies I own is my broker Interactive Brokers. I receive notifications about dividend payments that were just approved, and quarterly results that are about to be released.

In the past week, there were four companies that raised dividends, which also attracted my attention. I have shares in the first three. The last one is a company I have been monitoring.

Unilever (UL) increased its quarterly dividend by 6% to 30.20 eurocents/share. This marked the 20th consecutive annual dividend increase for this international dividend achiever. The ten year dividend growth rate is 6.20% /year. The stock slightly overvalued at 21.80 times forward earnings and yields 2.90%. Check my analysis of Unilever.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides various financial products and services to individual and institutional clients in the United States and internationally. The company raised its quarterly dividends by 15.50% to 67 cents/share. This marked the tenth consecutive dividend increase for this dividend achiever. The five year annual dividend growth is 27.20%/year, which is normal for companies in the initial phases of dividend growth. The shares are selling for 13.10 times forward earnings and yield 2.10%. Check my analysis of Ameriprise Financial. I decided to make a small addition to my position last week.

Johnson & Johnson (JNJ), together with its subsidiaries, researches and develops, manufactures, and sells various products in the health care field worldwide. It operates in three segments: Consumer, Pharmaceutical, and Medical Devices. The company raised its quarterly dividend by 7.10% to 75 cents/share. This marked the 53rd consecutive annual dividend increase for this dividend king. The ten year dividend growth is 9.70%/year. The shares are selling for 16.50 times forward earnings and yield 3%. Unfortunately, Johnson & Johnson is one of my largest positions, which is why I may refrain from putting more capital there. Check my analysis of Johnson & Johnson.

Costco Wholesale Corporation (COST), together with its subsidiaries, operates membership warehouses. The company raised its quarterly dividend by 12.70% to 40 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate for Costco is 16.40%/year. The stock is over valued at 28.30 times forward earnings and yield 1.10%. I have been following Costco for several years and really like the business, but I never really saw a good valuation to initiate a position in it.

Full Disclosure: Long AMP, JNJ, UL

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Monday, April 20, 2015

Five Dividend Paying Companies Rewarding Shareholders With Higher Dividends

One of the ways to monitor my portfolio and the list of dividend growth companies is by checking for dividend increases each week. I achieve that in my process of reviewing press releases. In addition, my broker is really good at notifying me about upcoming earnings releases or recent dividend announcements for the companies I own.

There were a few companies I find interesting, which I have highlighted below:

Kinder Morgan, Inc. (KMI) operates as an energy infrastructure and energy company in North America. The company operates through Natural Gas Pipelines, CO2, Terminals, Products Pipelines, Kinder Morgan Canada, and Other segments. The company raised its quarterly dividend to 48 cents/share, which represented a 14.30% increase over the distribution paid at the same time last year. The yield based on the new distribution is a very respectable 4.40%. Kinder Morgan has raised dividends since going public in 2011. However, the Kinder Morgan Pipeline that it absorbed in 2014 and to which KMI was a general partner to, had managed to increase distributions for 18 years in a row.

Kinder Morgan is my largest position at close to 6%. When the merger of the partnerships into the General Partner was announced, there were some very optimistic projections shared with shareholders. For example, dividends per share were expected to reach $2 in 2015, followed by annual growth of 10%/year. I believe that with the slowdown in oil prices, there could be a corresponding decline in production of oil and possibly natural gas. This could impact volumes on pipelines, and could reduce demand for building new pipeline projects out there. This slowdown will likely be a good opportunity for someone like Kinder Morgan to further strengthen its grip on fee generating assets in the US, as it could use its stock as currency to acquire companies or assets directly at bargain prices. In addition, Kinder Morgan does not have to spend all of its cashflows on dividends, and could accumulate cash on balance sheet. This could be a very good competitive advantage relative to any other major US pipeline, which constantly sell shares to fund major new projects.

That being said, even if dividend growth and cash flows only grow by 5%/year for the next decade, current shareholders will do pretty well. That’s because a stock that has a 4.40% - 4.50% yield today, which also grows at 5%/year will likely be worth at least 50% - 60% more within a decade. Add in reinvested distributions, and it is quite possible that money and income will more than double after a decade under this pessimistic forecast.

CSX Corporation (CSX), together with its subsidiaries, provides rail-based transportation services in the United States and Canada. It offers traditional rail services, and transports intermodal containers and trailers. The company raised its quarterly distributions by 12.50% to 18 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate as 25.20%/year, while the 5 year dividend growth rate is 16.50%/year. The stock sells for 16 times forward earnings and yields 2.20%. I would add the stock to my list for further research. I have meant to put more railroads on my list, but valuations have not been very attractive. Hopefully sentiment turns gloomy in the short-run, so that more attractive opportunities are present for those like me in the accumulation phase.

The Procter & Gamble Company (PG), together with its subsidiaries, manufactures and sells branded consumer packaged goods. The company operates through five segments: Beauty; Grooming; Health Care; Fabric Care and Home Care; and Baby, Feminine and Family Care. The company raised dividends by 3% to 66.29 cents/share. This marked the 59th consecutive annual dividend increase for this dividend king. This is also the slowest rate of dividend increases by P&G since the 3.70% increase in dividends in 1988. Back in 1986, the company also raised quarterly dividends by a paltry 3.80%. What makes those two dates stick out is the fact that the company had maintained dividends steady for 7 quarters in a row prior to the increases. Therefore the annual increases were likely smaller than 3%. However, the company was committed to rewarding its investors with an annual dividend raise and maintain its status of a dividend growth stock. Its business turned around and it managed to continue its streak of consistent dividend growth. If someone got scared from the slowdown in dividend growth and sold in the 1980s, they would have missed out since dividends rose over 16 times over the next 30 years. The shares are overvalued at 20.70 times forward earnings and yield 3.20%. While I would not add to P&G at present levels, I think the company is still a good hold for long-term investors. Check my last analysis of P&G. I will be posting an updated analysis shortly.

Discover Financial Services (DFS) operates as a direct banking and payment services company in the United States. It operates in two segments, Direct Banking and Payment Services. The company raised its quarterly dividends by 16.70% to 28 cents/share. This marked the 5th consecutive dividend increase for the company. The shares are attractively valued at times earnings and yield 1.90%. I like the valuation on this company relative to its rivals, and would add it to my list for further research.

PPG Industries, Inc. (PPG) manufactures and distributes coatings, specialty materials, and glass products. The company raised its quarterly dividends by 7.50% to 72 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. The ten year dividend growth is 3.90%/year. The shares are selling for 19.80 times forward earnings and yield 1.30%. I have taken a pass on PPG Industries before, mostly because I did not feel comfortable with the wild fluctuations in earnings for this cyclical company. I would still put it on my list for further analysis, in order to understand how it managed to grow earnings so quickly in the past three years. Sometimes, it is helpful to look back  at ideas I have passed on and determine whether something could be learned from this mistake of omission.

Full Disclosure: Long KMI, PG

Relevant Articles:

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Monday, April 13, 2015

Six Companies Showering Shareholders with Higher Dividends

Checking for dividend increases is one of the tools I use to monitor my portfolio holdings and companies I am interested in. I have found that the rate of growth in company dividends shows the near term management sentiment in profitability for the enterprise. If management expects business as usual, they are much more likely to stay the course and maintain the rate of dividend increases from prior years. However, if tougher business environment is expected on the horizon, wise management will curtail dividend growth or might halt further increases in distributions.

In the past week, there were several companies that announced increases in dividends, which I am interested in. In addition, a company I have been monitoring initiated a dividend for the first time.

QUALCOMM Incorporated (QCOM) designs, develops, manufactures, and markets digital communications products and services in China, South Korea, Taiwan, and the United States. The company operates through three segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). The company raised its quarterly dividend by 14.30% to 48 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 21.70%/year. This is typical for companies in the initial stage of dividend growth. Currently, Qualcomm is selling for 13.80 times forward earnings and yields 2.80%. While I have been familiar with the company since the days of the dot-com boom, I would add it on my list for further more detailed research.

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products in the United States and internationally. This master limited partnership increased its quarterly distribution to 37.50 cents/unit. This represents an increase of 5.60% over the distribution paid at the same time last year. This master limited partnership has managed to increase distributions to unitholders for 16 years in a row. In the past decade, distributions have increased at a rate of 6.60%/year. I first initiated a position in 2010, but sold in 2013 to pursue Kinder Morgan and ONEOK Partners ( and later ONEOK). I would be interested in initiating a position back in Enterprise Products Partners at current yields above 5%. The current yield is close to 4.50% now. I should probably post an updated analysis of the partnership as well.

Plains All American Pipeline, L.P. (PAA), through with its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company operates in three segments: Transportation, Facilities, and Supply and Logistics. Plains All American Pipeline raised its quarterly distributions to 68.50 cents/unit, which represents an increase of 8.70% over the distribution paid at the same time last year. This master limited partnership has raised distributions to unitholders for 14 years in a row. In the past decade, distributions have increased at a rate of 8.30%/year. Currently, this MLP yields 5.50%. I will add it on my list for further research. As a side note, the General Partner Plains GP Holdings, L.P. (PAGP) raised distributions as well. However, unlike other General Partners this one has a lower yield at 3.20%

Genesis Energy, L.P. (GEL) operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. This MLP raised its quarterly distribution to cents/unit, which represents an increase of 10.90% over the distribution paid at the same time last year. This master limited partnership has raised distributions to unitholders for 12 years in a row. In the past decade, distributions have increased at a rate of 14%/year. Currently, this MLP yields 5.50%. I will add it on my list for further research.

Airgas, Inc. (ARG) supplies industrial, medical and specialty gases, and hard goods. The company operates through two segments, Distribution and All Other Operations. Airgas increased its quarterly dividend by % to cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 28.40%/year, which again is typical for companies in the initial phase of dividend growth. The shares are currently overvalued at 22 times forward earnings and yield 2.25%. I would add the company to my list for further research. On a side note, I own shares of competitor Air Products & Chemicals (APD) so I am familiar with the industry. However, the industry as a whole does not offer an attractive entry price today.

Constellation Brands, Inc. (STZ), together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The company initiated its first dividend payment in 45 years of 31 cents/share for it’s a shares (STZ) and 28 cents/share for its B shares (STZB). The company is overvalued at 25.10 times forward earnings and yields 1%. The forward earnings of $4.85 for 2015 are a nice increase from the $1.19/share earned in 2005. I would add the company on my list for further research. However, I prefer Diageo (DEO), since it offers a better value today.

In general, I am looking for quality companies that are attractively valued, which have a track record of raising dividends, and which could grow earnings in the future. It is helpful to own a company with a decent initial yield, which has sustainable dividend and can grow that dividend in lockstep with growth in earnings.

Full Disclosure: Long KMI, APD, OKE, DEO

Relevant Articles:

Buying Quality Companies at a Reasonable Price is Very Important
How to read my weekly dividend increase reports
Dividend Stocks Provide Protection in Any Market
Why Dividend Growth Stocks Rock?
Buy and Hold means Buy and Monitor

Monday, March 16, 2015

General Mills Delivers another Year of Consistent Dividend Growth

One of the ways I monitor dividend portfolio holdings includes checking on press releases about earnings, dividend increases and major changes. Once I have made an investment in a company, I like to check whether fundamentals are still solid, and whether earnings and dividends keep increasing.

One of the companies I own, General Mills (GIS), increased quarterly dividends over the past week. The company General Mills, Inc. manufactures and markets branded consumer foods in the United States and internationally. The company raised its quarterly dividends by 7.30% to 44 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends by 10.70%/year. Please check my most recent analysis of the company for more details.

Between 2004 and 2014, the company has managed to increase earnings per share from $1.38 to $2.83. This comes out to an average annual increase of 7.40%/year. Earnings are expected to be at $2.82 in 2015 and $3.01 in 2016. The company is experiencing near term headwinds in profitability, as consumers are getting more health conscious. Without further gains in earnings per share, future dividend growth will be limited and will be running on fumes (increases in the dividend payout ratio).

That being said, I still believe the company has what it takes to kick start growing earnings. Some of the things being done include cost containment initiatives, new products being introduced to target health conscious consumers and acquisitions of other brands or companies. The recent acquisition of Annie’s, Annie’s, Inc. is a natural and organic food company, could expand the company’s presence in the fast growing natural and organic food category. Savings from the company’s ongoing Holistic Margin Management (HMM) program are targeted to exceed $400 million in fiscal 2015, and several incremental cost-reduction actions launched in 2015 are expected to contribute to margin improvement in the second half. General Mills has a few initiatives to streamline its North American supply chain network and reduce overhead costs are on track to generate $40 million in cost savings in the second half of fiscal 2015. Cumulative annual savings from these efforts are expected to total between $260 and $280 million in fiscal 2016, and exceed $350 million in fiscal 2017.The company has also used share repurchases in order to reduce the number of shares outstanding from 818 million in 2005 to 632 million in 2014.

The international segment could also provide some long-term growth in earnings. It currently accounts to close to one third of sales. The thing about international sales is that their growth will be lumpy, since it will be heavily affected by currency fluctuations in the short-run.

Currently, the shares are meeting my entry criteria as they are selling at 18.70 times earnings, and yield 3.34%. The dividend payout is at 62%, which is slightly higher than what I want it to be. I may add to my position in the stock in January 2016, if shares are selling below $52.50/share. I have sold some puts on the stock. If exercised, my effective cost will be close to $48/share. If exercised, I would have reached a position size in my portfolio that would prevent me from adding more funds to this company. Given that information and given the slowdown in earnings growth, I view the company as a hold.

Full Disclosure: Long GIS

Relevant Articles:

How to read my weekly dividend increase reports
General Mills (GIS) Dividend Stock Analysis
Rising Earnings – The Source of Future Dividend Growth
- I purchased this dividend machine last week
Dividends versus Share Buybacks/Stock repurchases

Monday, March 2, 2015

Dividend Growth Stocks Rewarding Shareholders with a Raise

One of the ways for me to monitor my portfolio as well as my watchlist is by checking the list of dividend increases every week. This also helps me identify emerging dividend growth stocks that nobody is focusing on yet. Dividend increases show confidence of the corporate boards about their company near term earnings. Because US companies do not like to lower dividends, they tend to raise distributions only when they see high likelihood of gains in near term earnings. I enjoy reading press releases that describe the dividend increases as well, since they provide a good insight about the sentiment of those boards as well.

From the list of dividend increases, I isolated those where the company had raised dividends for at least 5 years. A few companies had disappointing increases, but I included them in case anyone else is owning them.

Digital Realty Trust, Inc. (DLR), a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company boosted its quarterly dividend by 2.40% to 85 cents/share. This was a rather disappointing rate of growth for this REIT. It nevertheless marked the 11th consecutive year of dividend increases for this dividend achiever. The ten year dividend growth was 14.40%/year, which is much higher than the current increase. Currently, the stock sells for 13.20 times FFO and yields 5.10%. Given the disappointing raise for this year, I am going to view this REIT as a hold at best. Check my previous analysis of Digital Realty for more details.

The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. This dividend champion has raised distributions for 33 years in a row. The company has managed to boost annual dividends by 9.80%/year over the past decade. Currently, the stock sells for 13.10 times forward earnings and yields 2.30%. I added some shares to my small position in Chubb. I would be more excited about this company if it sells for less than $91/share. Check my analysis of Chubb for more details.

Ross Stores, Inc. (ROST), together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dds DISCOUNTS brand names in the United States.  The company boosted its quarterly dividend by 17.50% to 23.50 cents/share. This marked the 21st consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to raise dividends by 25%/year. Currently, the stock sells for 21.90 times forward earnings and yields 0.90%. I will need to add the company on my list for further research.

Comcast Corporation (CMCSA) operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks segments. The company boosted its quarterly dividend by 11.10% to 0.25 cents/share. This marked the 8th consecutive year of dividend increases for Comcast. The 5 year dividend growth is 26.80%/year. Currently, the stock sells for 18.30 times forward earnings and yields 1.70%. I need to add this company to my list for further research.

Essex Property Trust, Inc. (ESS) operates as a self-administered and self-managed real estate investment trust in the United States. The company boosted its quarterly dividend by 10.80% to $1.44/share. This dividend achiever has increased dividends for 21 years in a row. The company has managed to boost annual dividends by 4.80%/year over the past decade. Currently, the stock sells for 28 times FFO and yields 2.60%. This is a very low yield for a REIT and a high FFO ratio, and shows that this REIT is a little pricey today. Either way, I will add it to my list for further research, since I like learning about business, and I like to be prepared for different opportunities. But I would not touch that unless I can see it under $180/share, which is equivalent to the low range estimate of 20 times forward FFO for 2015.

Southwest Gas Corporation (SWX) is engaged in the purchase, distribution, and transportation of natural gas in Arizona, Nevada, and California. The company boosted its quarterly dividend by 11% to 40.5 cents/share. The company has raised dividends for 9 years in a row. Southwest Gas Corporation has managed to boost annual dividends by 5.70%/year over the past decade. Currently, the stock sells for 17.70 times forward earnings and yields 2.80%. Given the slowdown in dividend growth as of the past few years, I am not going to look further into this company.

Westar Energy, Inc. (WR), an electric utility, generates, transmits, and distributes electricity in Kansas. The company boosted its quarterly dividend by 2.90% to 36 cents/share. This marked the 11th consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase dividends by 6.20%/year. Currently, the stock sells for 16.20 times forward earnings and yields 3.70%. Given the slowdown in dividend growth as of the past few years, I am not going to look further into this company.

Waste Management, Inc. (WM), through its subsidiaries, provides various waste management environmental services to residential, commercial, industrial, and municipal customers in North America. I The company boosted its quarterly dividend by 2.70% to 38.50 cents/share. This marked the 12th consecutive year of dividend increases for this dividend achiever . Over the past decade, the company has managed to increase dividends by 7.20%/year. The rate of dividend growth has slowed down over the past five years however. Currently, the stock sells for 21.80 times forward earnings and yields 2.80%. Given the slow growth in distributions, the high P/E ratio, and the low yield, I would not consider this stock a buy at the moment.

Retail Opportunity Investments Corp. (ROIC), a real estate investment trust (REIT), engages in the acquisition, ownership, and management of necessity-based community and neighborhood shopping centers in the eastern and western regions of the United States. The company boosted its quarterly dividend by 6.30% to 17 cents/share. This will mark the 5th consecutive year of dividend increases for this company. Currently, the stock sells for times 19.70 times FFO and yields 4%.

National Interstate Corporation (NATL), together with its subsidiaries, operates as a specialty property and casualty insurance company in the United States. The company boosted its quarterly dividend by 8.30% to 13 cents/share. This marked the 11th consecutive year of dividend increases for this dividend achiever. Over the past five years, the company has managed to increase dividends by 11.40%/year. Currently, the stock sells for 16.40 times forward earnings and yields 1.90%. The dividend growth makes this an interesting play to put on my list for further analysis.

Infinity Property and Casualty Corporation (IPCC), through its subsidiaries, provides personal automobile insurance with a focus on nonstandard auto insurance in the United States. The company boosted its quarterly dividend by 19.40% to 43 cents/share. This marked the 11th consecutive year of dividend increases for this dividend achiever. In the past decade, the company has managed to increase dividends by 20.70%/year. Currently, the stock sells for 16.80 times forward earnings and yields 2.30%. This looks like an interesting opportunity that I would need to add to my list for further research.

The Home Depot, Inc. (HD) operates as a home improvement retailer. The Home Depot stores sell various building materials, home improvement products, and lawn and garden products as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me, and professional customers. The company boosted its quarterly dividend by 25.50% to 59 cents/share. This marked the 6th consecutive year of dividend increases for this former dividend achiever . Over the past decade, the company has managed to increase dividends by 19.20%/year. Currently, the stock sells for 21.80 times forward earnings and yields 2%. I would need to add the company on my list for further research.

Albemarle Corporation (ALB) develops, manufactures, and markets engineered specialty chemicals. The company boosted its quarterly dividend by 5.50% to 29 cents/share. This marked the 21st consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase dividends by 13.80%/year. Currently, the stock sells for 16.10 times forward earnings and yields 2.10%. I would need to add the company on my list for further research.

Sempra Energy (SRE), an energy-services holding company, develops energy infrastructure, operates utilities, and provides related services. The company boosted its quarterly dividend by 6.10% to 70cents/share This marked the 12th consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase dividends by 10.10%/year. Currently, the stock sells for 22.40 times forward earnings and yields 2.50% I would need to add the company on my list for further research.

Full Disclosure: Long CB, DLR

Relevant Articles:

Five Things to Look For in a Real Estate Investment Trust
S&P Dividend Aristocrats Index – An Incomplete List for Dividend Investors
Three stages of dividend growth
How to read my weekly dividend increase reports
Rising Earnings – The Source of Future Dividend Growth

Monday, February 23, 2015

Twelve Companies Providing Investors with Dividend Raises

One of the ways I monitor my portfolio is to check press releases from dividend growth companies I have on my watchlist or which I own. Over the past week, there were several widely-held dividend growth companies, which raised dividends. I have summarized important information about each company, including rate of increase relative to historical data, current valuation as well as link to my most recent analysis of the company. The companies include:

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company operates in two segments: Oral, Personal and Home Care; and Pet Nutrition. The company raised its quarterly dividend by 5.60% to 38 cents/share. This marked the 52nd consecutive annual dividend increase for this dividend king. In addition, the company approved a $5 billion stock buyback to last for the next 3 – 4 years. The ten year dividend growth rate is 11.50%/year. Currently, the stock is selling for 23.30 times forward earnings and yields 2.20%. Check my analysis of Colgate-Palmolive.

Wal-Mart Stores Inc. (WMT) operates retail stores in various formats worldwide. The company operates through three segments: Wal-Mart U.S., Wal-Mart International, and Sam’s Club. The company delivered a disappointing dividend raise to its quarterly dividend of 2.10% to 49 cents/share. This marked the 42nd consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 14.80%/year. However, this is the second year in a row where Wal-Mart raises its dividend by a disappointing 2%. Given this new fact, I will not be adding any new funds to my position in the company. However, I will keep my shares and allocate dividends elsewhere. Patience and low turnover are some of the surprising lessons behind my analysis of historical stock returns. Currently, the stock is selling for 16.90 times forward earnings and yields 2.30%. Check my analysis of Wal-Mart Stores.

The Coca-Cola Company (KO), a beverage company, manufactures and distributes coke, diet coke, and other soft drinks worldwide. The board of directors hiked Coca-Cola’s quarterly dividend by 8.20% to 33 cents/share. This marked the 53rd consecutive annual dividend increase for this dividend king. The ten year dividend growth rate is 9.30%/year. Currently, the stock is selling for 21.10 times forward earnings and yields 3.10%. Check my analysis of Coca-Cola.

T. Rowe Price Group, Inc. (TROW) is a publicly owned asset management holding company. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions. The board of directors hiked the company’s quarterly dividend by 18.20% to 52 cents/share. In addition, a $2/share special stock dividend will be distributed to shareholders. This marked the 28th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 16.60%/year. Currently, the stock is selling for 17.20 times forward earnings and yields 2.50%. I analyzed T. Rowe Price Group and should be posting an updated analysis soon. Please stay tuned.

Kimberly-Clark Corporation (KMB), together with its subsidiaries, manufactures and markets personal care, consumer tissue, and health care products worldwide. It operates through four segments: Personal Care, Consumer Tissue, K-C Professional, and Health Care. The company raised its quarterly dividend by 4.80% to 88 cents/share. This is the 44th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 8.20%/year. Currently, the stock is selling for 19.40 times forward earnings and yields 3.20%. Check my analysis of Kimberly-Clark Corporation.

Nestlé S.A. (NSRGY), together with its subsidiaries, provides nutrition, health, and wellness products worldwide. The company delivered a disappointing dividend raise to its quarterly dividend of 2.10% to 49 cents/share. This marked the 19th consecutive annual dividend increase for this international dividend achiever. The ten year dividend growth rate is 10.60%/year. Currently, the stock is overvalued at 15.80 times expected and yields 3.05%. At this stage I would see the stock as a hold at best, with dividends going to be reinvested elsewhere. Check my last review Nestle. I will need to refresh it with current data. Please stay tuned.

Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, the Dominican Republic, Mexico, and Canada. The company increased its quarterly dividend by 7% to 61.50 cents/share. This marked the 59th consecutive annual dividend increase for this dividend king. The ten year dividend growth rate is 6.80%/year. Currently, the stock is selling for 19.90 times forward earnings and yields 2.60%. The company has been on my watchlist for a long time and I should consider initiating a position on dips below 20 times earnings. Check my analysis of Genuine Parts Company.

AbbVie Inc. (ABBV) discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company raised its quarterly dividend from 49 to 51 cents/share. This is the second dividend increase in less than an year – the previous one was from 42 to 49 cents/share. Abbvie was a spin-off from Abbott (ABT), formed in early 2013. The dividend has been increased for 2 years in a row now. The stock is selling for 13.90 times forward earnings and yields 3.30%. When I last analyzed the spin-off in early 2013, I concluded that the stock is a hold. I think I will keep holding on to it for as long as possible.

NextEra Energy, Inc. (NEE), through its subsidiaries, generates, transmits, distributes, and sells electric energy in the United States and Canada. The board of directors hiked Nextera Energy’s quarterly dividend by 6.20% to 77 cents/share. This marked the 21st consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 8.40%/year. Currently, the stock is selling for 18.80 times forward earnings and yields 2.90%. Check my previous analysis of NextEra.

The Sherwin-Williams Company (SHW) is engaged in the development, manufacture, distribution, and sale of paints, coatings, and related products to professional, industrial, commercial, and retail customers worldwide. The company operates in four segments: Paint Stores Group, Consumer Group, Global Finishes Group, and Latin America Coatings Group. The board of directors hiked the company’s quarterly dividend by 21.80% to 67 cents/share. This marked the 37th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 12.50%/year. Currently, the stock is overvalued at 25.90 times forward earnings and yields 0.90%.

Questar Corporation (STR) operates as an integrated natural gas company in the United States. The company raised its quarterly dividend by 10.50% to 21 cents/share. This marked the 36th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 6.10%/year. Currently, the stock is selling for 18.50 times forward earnings and yields 3.50%

Lorillard, Inc. (LO), through its subsidiaries, manufactures and sells cigarettes in the United States. It operates through two segments, Cigarettes and Electronic Cigarettes. The company increased its quarterly dividend by 7.30% to 66 cents/share. Lorillard has been increasing dividends every year since going public in 2008. The stock currently sells for 18.70 times forward earnings and yields 3.90%. I should probably put this stock on my list for further analysis.

I managed to initiate a position in T.Rowe Price (TROW) last week, and will likely add to it some more next week. I also added to Baxter (BAX), and will likely add some more next week as well. The other stock I added to was Kimberly-Clark, mostly to round off my odd-lot at one brokerage.

Full Disclosure: Long CL, WMT, KO, TROW, KMB, NSRGY, ABT, ABBV,

Relevant Articles:

- How to read my weekly dividend increase reports
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The predictive value of rising dividends
Dividend Investing – Science versus Intuition

Tuesday, January 20, 2015

Seven Dividend Stocks Boosting Distributions this week

I check the list of dividend increases every single week, in order to monitor companies I own, as well as uncover hidden dividend gems. There were several companies which announced increases to their quarterly dividends in the past week:

Omega Healthcare Investors, Inc. (OHI) is a real estate investment firm which invests in healthcare facilities, primarily in long-term healthcare facilities. The REIT raised its quarterly dividend to 53 cents/share, which is an increase of 8.20% over the same distribution paid in the same time last year. This marked the 13th consecutive dividend increase for this dividend achiever. In the past decade, the company has manage to raise dividends by 10.90%/year. Currently, the stock is selling for times 15.40 FFO and yields 4.90%. Check my analysis of Omega Healthcare Investors.

ONEOK, Inc. (OKE) operates as the general partner of ONEOK Partners, L.P. (OKS) which does the gathering, processing, storage and transportation of natural gas in the U.S. and owns one of the nation's premier natural gas liquids (NGL) systems. ONEOK Inc raised its quarterly dividend to 60.50 cents/share, while the partnership raised its quarterly distributions to 79 cents/unit. The increase over the same time last year is 51% for the general partner and 8.20% for the limited partner. The ten year dividend growth is 18.70%/year for ONEOK Inc and 6.50%/year for ONEOK Partners. ONEOK Inc yields 5.70% while ONEOK Partners yields 8%. Check my analysis of ONEOK Partners. I recently sold my limited partner interest for those of the general partner. I had a small remaining position in ONEOK Partners which I converted to Williams companies (WMB) last week.

Consolidated Edison, Inc. (ED) is engaged in regulated electric, gas, and steam delivery businesses in the United States. This dividend champion raised its quarterly distribution by 3.20% to 65 cents/share. This marked the 41st consecutive dividend increase for Con Edison, which is the oldest continuously listed stock on the NYSE – been listed since 1824.The ten year dividend growth rate is 1.10%/year. Currently, the stock is selling at 17.90 times earnings and yields 3.80%. I used to own Con Edison, but grew dissatisfied by the low growth and ended up disposing my position there. Check my analysis of Con Edison I posted on Seeking Alpha.

Fastenal Company (FAST), together with its subsidiaries, operates as a wholesaler and retailer of industrial and construction supplies in the United States, Canada, and internationally. The company raised its quarterly dividend by 12% to 28 cents/share. This marked the 16th consecutive dividend increase for this dividend achiever. In the past decade, the company has manage to raise dividends by 25.90%/year. Currently, the stock is selling for 26.50 times earnings and yields 2.60%. I plan on adding this company on my list for further research.

Linear Technology Corporation (LLTC), together with its subsidiaries, designs, manufactures, and markets a line of analog integrated circuits (ICs) worldwide. The company raised its quarterly dividend by 11.10% to 30 cents/share. This marked the 23rd consecutive dividend increase for this dividend achiever. In the past decade, the company has manage to raise dividends by 12.90%/year. Currently, the stock is selling for 21.40 times earnings and yields 2.70%. I plan on adding this company on my list for further research.

BlackRock, Inc. (BLK) is a publicly owned investment manager. The company raised its quarterly dividend by 13% to $2.18/share. This marked the sixth consecutive annual dividend increase for Blackrock. While this dividend contender kept dividends unchanged in 2009, it nevertheless has managed to achieve a ten year dividend growth rate of 22.70%/year. The stock currently sells for 17 times earnings and yields 2.50%. I am going to add Blackrock on my list for further research.

Full Disclosure: Long OKE, WMB and OHI

Relevant Articles:

Dividend Yield or Dividend Growth:My Experience With both
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Monday, December 15, 2014

Four Dividend Increases for Further Review

As part of my portfolio monitoring process, I look at dividend increases. Over the weekend, I looked at companies that increased distributions last week, and look like decent candidates for further research. Those companies pass preliminary attractiveness screens because of their attractive current yield, rate of dividend growth, or dividend growth streak. Those companies include:

W. P. Carey Inc. (WPC) is an independent equity real estate investment trust which primarily invests in commercial properties that are generally triple-net leased to single corporate tenants including office, warehouse, industrial, logistics, retail, hotel, R&D, and self-storage properties. This REIT raised its quarterly dividends to 95 cents/share, which is and increase of 9.20% over distribution paid at the same time last year. Over the past decade, this REIT has managed to increase dividends by 6.30%/year. W.P. Carey is a dividend achiever which has rewarded shareholders with a dividend raise for 17 years in a row. I recently initiated a position in this REIT and plan on further building out my exposure there slowly over the next few years. Currently, W.P. Carey sells at 14.80 times FFO and yields 5.50%.

General Electric Company (GE) operates as an infrastructure and financial services company worldwide. The company raised its quarterly dividend by 4.50% to 23 cents/share. This was a pretty low increase for this global corporation, but marked the fifth consecutive one since dividends were cut in 2009. I initiated a small position in General Electric this year, and might add to it sometime in 2015. The stock sells for 14.90 times forward earnings yields 3.70% today. Check my analysis of General Electric.

WD-40 Company (WDFC) is a global consumer products company dedicated to delivering solutions for a range of maintenance needs of doer and on-the-job users. The Company’s products included WD-40 Smart Straw, WD-40 Trigger Pro, 3-IN-ONE Professional Garage Door Lube, Spot Shot Pet Clean which is a non-aerosol Spot Shot trigger product, Blue Works product line, and a mildew stain remover under the X-14 brand. The company boosted its quarterly dividends by 11.80% to 38 cents/share. This marked the sixth consecutive dividend increase for this dividend challenger. The company has paid dividends for over 40 years in a row, although it did cut them in the years 2001 and 2002. I plan on reviewing this company in more detail despite those factors, because it looks like the type of franchise that is dominant in a market niche, which is boring, and could ultimately be a buy and hold type business that Buffett likes to hold “forever”. Currently the stock is overvalued at 24.70 times forward earnings and yields 2%. If it ever drops below 20 times earnings, I would be very interested in this company.

Ventas, Inc. (VTR) is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. This Real Estate Investment Trust boosted its quarterly dividends by 9% to 79 cents/share. Ventas has raised dividends for 5 years in a row, since it kept them unchanged in 2009. However, it has consistently boosted them from 2001 – 2008. This REIT sells for 16.70 times FFO and yields 4.30%. I will add it to my list for further research.

The thing that is appealing about those companies is that their revenues and cash flows are relatively stable and recurring. This translates into easier distribution coverage, and better visibility and sustainability of dividend payments to shareholders with a long-term mindset. Purchasing an asset at a low price is important; It is equally important however that this asset can generate stable distributable cashflows or earnings, which grow over time.

Full Disclosure: Long GE, WPC

Relevant Articles:

Six Dividend Investments I Made Last Week
Should income investors give General Electric a second chance?
Five Things to Look For in a Real Estate Investment Trust
Three Dividend Raises I am Thankful For
How to turbocharge dividend growth

Tuesday, December 2, 2014

Brown Forman is a consistent dividend growth company

Brown-Forman Corporation (BF.A)(BF.B) is engaged in the manufacture, bottling, import, export, marketing, and sale of alcoholic beverages. It provides whiskey, ready-to-drink cocktails, vodka, tequilas, champagnes, wines, liqueur, and other distilled spirits.

Right before Thanksgiving Week, the company raised its quarterly dividend by 8.60% to 31.50 cents/share. This dividend champion has increased dividends for 31 years in a row, and paid them for 69 consecutive years.

Paul Varga, the chief executive officer of Brown-Forman shared the following information in the press release:, “This dividend increase marks the 31st consecutive year of increases at the company, and reflects our commitment to delivering top-tier returns for our shareholders. In addition to returning cash to shareholders through our dividend program, the company also implemented a new buyback program in October, and is aggressively investing behind the long-term global growth of our American whiskey brands.”

Brown Forman is the type of dividend growth stock which has a portfolio of strong brands, which generate stable and recurring sales and profits, around the globe. Over time, I would expect that earnings per share will increase, that dividends increase, and that it maintains pricing power that allows it to sell more of its unique products. This is the type of business which will be around in 20 years, and which will still be able to generate high returns on investment, that will translate into more dollars flowing into shareholders pockets. In other words, after I last analyzed the company, I have decided that this is the type of buy and forget, sleep well at night company to hold for the next 20 -30 years.

The problem that I have had with Brown Forman over the past 30 points is its current valuation. The stock is selling for somewhere between 27.20 to 29 times expected fiscal year 2015 earnings per share. The earnings per share are expected to come somewhere between $3.25 to $3.45. The yield based on the new dividend payment is 1.35%. Despite the fact that annual earnings per share growth could likely be around 8% - 10% over the decade, it is evident that the valuation today is rich. As a result, it is very likely that investors who own Brown-Forman today or those who somehow buy at todays valuations are very likely to generate poor returns over the next five – six years.

In the case of Brown-Forman, I accumulated the shares in 2010, with an average cost of $39.98/share. At this time, the stock accounted for approximately 1.50% of my dividend portfolio. Given the contributions I have made in the past 4-5 years, Brown-Forman's share of my portfolio is approximately 0.50% today. Because it takes me years to build a sizeable position in my portfolio, this is no surprise of course. In the case of Johnson & Johnson (JNJ), where the stock has always been attractively valued in each year between 2008 and 2014, I have been able to put money to work regularly. If Brown-Forman is ever available at 20 times earnings, I would most probably double my exposure to the stock.

Companies like Brown-Forman confirm my belief that automatic dividend reinvestment could be a very poor capital allocation strategy. While your dividend income compounds faster when you reinvest it automatically, and you do not pay a commission to buy more stock, you are doing your capital a bad service by putting it to work in a stock that sells for over 27 times expected earnings. This is why I accumulate dividends in cash every month, and use them to buy shares in some of the most attractive ideas at the moment. Plus, I view dividends received as a rebate on my purchase price, which effectively reduces the amount of capital I have at risk in that particular company. I could then redeploy those funds elsewhere, thus effectively lowering my risk and increasing my portfolio diversification. In the past year, I have redeployed those dividends into shares of Diageo (DEO), which sell at better valuations.

The reason why I will still hold on to the stock however is my belief that the company can keep growing earnings per share in the high single digits for a considerable amount of time. Therefore, while the next 5-6 years could provide for lousy returns, I think that the next 20 years will provide for some good returns to the long-term investor. I have no problem “underperforming” some benchmark such as S&P 500 over a five year period with a company like Brown-Forman, because I know that this is the type of business that is built to last and could provide exceptional returns to my portfolio over the long-run. For example, let's assume earnings per share of $3.25 for FY 2015, and annual dividends of $1.26/share, with annual growth of 8% in both. This could translate into earnings per share of $14 and dividends per share of $5.40 in 20 years. At a P/E of 15, this translates into a price of $210/share and a total of dividends collected of approximately $58 over those 20 years, for a total return of 182%. This of course assumes contraction in P/E multiple, and no dividend reinvestment, as well as no taxes.

I also believe that selling outright is risky, due to taxes, opportunity cost and reinvestment risk. If I sold today, I would have to pay at least a 15% tax on capital gains of $54/share, which would leave me with $86/share ( assuming stock price of $94/share and cost of $40). I could potentially purchase shares of Diageo with the proceeds. However, I am not certain whether the dividend and earnings will grow as fast as those of Brown-Forman over the next 20 years. Plus, I always prefer to have some diversification, rather than be concentrated exclusively in one company. Thus I have reinvestment risk, which is the risk that the stock you sold could have done much better than the stock you purchased with the after-tax proceeds from the sale in the first place.

It is tough to make forecasts spanning 15 – 20 years down the road. However, the thing that provides confidence about making forecasts is the nature of the products and business of consumer staple companies such as Brown Forman. I know that in 15 – 20 years more people will be drinking quality alcoholic beverages, particularly those with highly recognizable brands such as Jack Daniels. There is brand loyalty, which translates into repetitive sales for years down the road.

I also like the fact that the company’s management is very shareholder friendly, and that they are able to raise the dividend for so many years. Long-term dividend investors might remember how in 2010 and 2012 Brown-Forman distributed special dividends to shareholders, which was right before the taxes on qualified dividends were expected to rise significantly. This is the type of management that looks out for shareholders, that I like. There are of course things that I do not like however, such as the program to repurchase shares at current valuations. I also do not like the dual-class shareholding structure, which gives the controlling family overwhelming voting power. If the stock price is ever depressed, they could take the company private at that low price, thus triggering losses for long-term shareholders. This is not as much of a risk with companies like Diageo. The other thing that makes Brown-Forman less valuable in my eyes is that there is a lower chance of it being acquired by someone, given the control of the Brown family. We saw how Beam was acquired for 30 times earnings, by Japanese company Suntory. Hence, the value of Brown Forman to a private buyer is approximately 30 times earnings under current conditions. However, given the control of the family, it is highly unlikely that such transaction would ever be consummated. However, one never knows too.

Overall, I think that Brown-Forman is the type of quality dividend champion to buy and hold for the long-term. If it ever falls to 20 times earnings, I would add to my stock position in the company. In the meantime, even up to 30 times expected earnings, it makes sense to own this company, due to its quality of earnings, and valuable portfolio of brands which are very likely to sell higher volumes to customers in the future. Selling this company stock would likely be a mistake, unless of course we get massive overvaluation.

Full Disclosure: Long BF/B and DEO

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