Monday, February 26, 2024

16 Dividend Growth Companies That Increased Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing holdings, but also potentially identify companies for further research. Plus, it helps me get the pulse of corporate boards. One of my favorite exercises in compiling this report is to look at the press releases, and noting down management verbiage related to the dividend increases. That pulse check is a good sentiment check. After all, dividends have a great deal of signaling power, which neatly summarizes corporate board expectations about near term business conditions. The output of that being the dividend increase amounts. 

TL;DR - dividend increase announcements include a lot of information that could be helpful to me as an investor.

Over the past week, there were 53 dividend increases in the US. I went ahead and isolated the 16 companies that increased dividends last week AND have a ten year track record of annual dividend increases. The list can be observed below:

Reviewing the dividend growth universe for dividend increases is part of my monitoring process. For my review, I narrow my focus to the companies with a ten year streak of annual dividend increases. I do this in order to look at companies with a sufficiently long streak of dividend growth.

The next step involves reviewing trends in earnings and dividends. I want to see earnings per share which are growing. Rising EPS can fuel future dividend growth. I also want to see dividend increases which are of decent size, and not done merely to maintain the streak of annual dividend increases.

A steep deceleration in the dividend growth rate relative to the ten year average tells me that management is not very optimistic on their business. If this is coupled with a high payout ratio and stagnant earnings per share, I can tell that the dividend streak is nearing its end.

Last but not least, I also want a decent valuation behind an investment. If I overpay dearly for an investment today, this means that the expectations for the first few years after I make the investment are already baked in the price. As a result, I want to void overpaying for an investment. Unfortunately, this is easier said than done.

Relevant Articles:

Wednesday, February 21, 2024

Yield on Cost is a fascinating metric

Yield on Cost is a fascinating metric. It calculates the dividend yield based on the original cost at the time of purchase.

Yield on cost is calculated by dividing the dividends received from an investment over the cost paid for the shares.

I view yield on cost as a forward looking metric.

It combines my yield and growth expectations into a certain amount of dividend income at a future point.

It's fascinating to see in action, anytime you buy a security. It get's me thinking about the current yield, growth in earnings per share, dividend safety, valuation.

For example, Home Depot (HD) sold for about $80/share ten years ago and had a trailing annual dividend of $1.56/share.

The dividend yield was paltry at around 2% back then.

Some investors could have ignored Home Depot, because of its "low yield", in favor of other higher yielding companies. Mostly to their own detriment.

However, they missed out on the potential for future dividend growth.

Fast forward to today, Home Depot is on track to pay $9/share in annual dividends. 

This brings the yield on cost at over 11%.

That's a better yield and dividend income that would have been achieved by investing in a company that yields say 5% or 6%, but which never raised dividends by much.

As I said above, I view Yield on Cost as a forward looking metric. 

It looks at current dividend yield and accounts for future estimated dividend growth.

There is a trade-off between dividend growth and dividend yield

Taking a look at Yield on Cost definitely puts things in perspective.

What's even more fascinating to me is that even The Oracle of Omaha, Warren Buffett himself, has discussed the concept in his letters to Berkshire Hathaway shareholders. The last mention was just last year, when he discussed his investments in Coca-Cola and American Express. Please see below: (Source)

Sunday, February 18, 2024

Eighteen Companies Rewarding Shareholders With a Raise

I review the list of dividend increases as part of my monitoring process. This process helps me review how the companies I own are doing. It also helps me identify companies for further research.

For this weekly review, I tend to focus my attention on companies with at least a ten year history of annual dividend increases, which also raised dividends last week. I provide a quick overview of each company that includes the amount of the most recent dividend increase, and compares it to its recent historical record. I also review the streak of annual dividend increases, and review earnings and valuation information.

Over the past week there were eighteen companies that raised dividends, and have a ten year history of annual dividend increases. The companies include:

You can view the company, ticker, and ten year dividend growth. I have also included P/E ratio and dividend yield, as well as dividend payout ratio. 

Each of these companies has managed to grow earnings over the past decade, which means that dividends have been well supported. If these companies can continue growing earnings per share over the next decade or two, I am confident that they would continue their streak of consecutive annual dividend increases.

However, our work here is not done. Just because we have identified a group of companies for further research, which I would love to own forever, that still doesn't mean that these companies are automatic buys today. Some of these companies seem attractively valued to me today, based on a combination of their P/E ratios and dividend growth. 

Others however seem a little pricey. Therefore, they would likely find a place in my portfolio if they become more attractively valued. This can be achieved either by earnings per share growth, by declines in the share price, or a combination of the two.

This my general framework on how I value companies. I take into consideration many inputs, such as P/E, interest rates, stability of earnings, dividend growth, in order to come up with a general idea of what to invest my money in. It is not a formula however. 

It is helpful to be prepared to act when the right opportunities present themselves. This is why I have a watchlist and general ideas on valuation, so I can act when the time is right.

Relevant Articles:

Dividend Growth Investor Newsletter

Dividend Aristocrats List for 2024

How to value dividend stocks

Rising Earnings – The Source of Future Dividend Growth

Wednesday, February 14, 2024

How to Earn a 3% IRA Match with Robinhood

The employer match is one of the best features of workplace retirement accounts such as 401 (k) plans ( Pre-tax and Roth). It’s a contribution from the employer into the employee workplace retirement account. It’s as close to as it gets to “Free Money”, albeit it is all part of total compensation.

Online broker Robinhood is having an interesting promotion, related to retirement accounts. 

They basically offer a match on retirement contributions and asset transfers of up to 3%, with no limits. The IRA match doesn't count toward your annual contribution limit, which means it’s extra money on top of your contributions. You can earn the IRA match on all new IRA contributions, IRA transfers, and 401(k) rollovers. In addition, the bonus is simply added to your retirement account, which does not generate a taxable event.

There are some hoops one needs to jump through however, in order to get that bonus.

1.      Robinhood clients need to sign up for Robinhood Gold, which costs $5/month. The bonus requirement is that the client is an active Robinhood Gold user for at least 12 months.

2.      Robinhood clients need to transfer an old Roth IRA from another broker into Robinhood in order to be eligible for the 3% match on transfers. Examples include transferring assets from a broker like Merrill Edge into Robinhood. This can all be done electronically from the Robinhood interface.


This offer also applies to regular contributions, which are subject to the annual contribution limits. For example, contributing $7,000 to a Roth IRA at Robinhood makes the customer eligible for the 3% match on said contribution. Provided of course that the customer has signed up for Robinhood Gold.


3.       The offer ends April 30 on the asset transfer bonus from another brokerage.

4.      The catch is that there is a 5 year holding period for asset transfers from another brokerage. In other words, those assets that have been transferred into Robinhood need to stay at Robinhood for 5 years. Otherwise, the client forfeits that bonus.

When the IRA transfer completes, the amount of the match is calculated based on 3% of the total of the transferred cash plus transferred securities and options, using the National Market System closing price of each position transferred into the account on the trading day before when the transfer settles.

Robinhood would also reimburse any transfer fees up to $75, assuming that at least $7,500 are transferred over from another broker.

For IRA transfers it typically takes 5-7 business days for the transfer to be completed in the Robinhood account, after they receive an account transfer request. For 401(k) rollovers, this process can typically take 2-4 weeks for deposits to complete.

A rollover is not always the best choice for old 401 (k) accounts too. In some cases it may be beneficial to keep the money in the 401 (k). Perhaps speaking to a licensed financial professional can help weigh options.

Overall, I believe it sounds like an interesting offer. This is obviously an attempt from Robinhood to get more retirement assets in their brokerage business. Retirement assets are stickier, which can potentially increase customer lifetime value and profits for Robinhood.

It is a very good offer, which may or may not be a sign of desperation on behalf of Robinhood.

The brokerage business is very competitive, and very commoditized as well. There is a risk that a broker may fail. This is why it is important for investors to be aware that they are only protected up to the first $500,000 per account type per broker through the SIPC, should that broker fail. That means it’s probably not smart to keep all assets at one brokerage to begin with as it could take time for assets to be given back to customers for example.

If Robinhood were to fail or be acquired by someone else, it is unclear if they would claw back that bonus money or let the customer keep it.

I do not have a clue if Robinhood would fail or be in business in 5 years. That’s just my opinion of thinking through the risks potentially associated with this return.

These are some of the risks I thought about in an effort to list pros and cons.  

This is not an affiliate or paid post. I am just trying to determine for myself if it makes any sense to move some assets to Robinhood and take advantage of this offer. 

This is their FAQ section on the offer.

These are screenshots from the Robinhood app, which inspired me to review this deal.


 It could take some navigating on the app to find this deal however.




Monday, February 12, 2024

25 Dividend Growth Stocks For Further Research

There were 68 dividend increases in the past week. It looks like corporate boards are flush with cash, and consumer confidence is slowly rising. There is a record low unemployment, and the consumer is spending again, which is good for corporate revenues and bottom lines.

When companies raise dividends, they signal their confidence in the near term prospects of the business. A dividend is a sacred cow in the US. This is why business leaders need to evaluate the cashflow estimates over the next couple of years against estimated cash outflows and growth plans for future investment. Only after a reasonable amount of cashflow is left over, which is more than what the business needs, can they decide what the dividend rate should be. If a business expects to grow excess cashflows over time, they will most likely return a growing amount of cashflows to its shareholders.

Our goal is to evaluate each business, its prospects, fundamentals and valuation, before considering it for our portfolios.

Out of the list of 60+ dividend increases, I focused on the companies that have increase dividends for at least ten years in a row. There were 25 companies that raised dividends last week, which also have at least a ten year streak of annual dividend increases. Two of those companies were dividend kings, having increased dividends for over 50 years in a row. Three of these companies are dividend champions, having increased dividends for over 25 years in a row. The rest were either dividend achievers, or newly minted dividend achievers.

I then consolidated the information in a tabular format, for easier review:

This list is not a recommendation to buy or sell stocks. It is simply a list of companies that raised dividends last week. The companies listed have managed to grow dividends for at least ten years in a row.

The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.

This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.

Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.

Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.

Relevant Articles:

Not all P/E ratios are created equal
My Entry Criteria for Dividend Stocks
Dividend Growth Investing Gets No Respect
Why the best investment plans never turn out as expected

Popular Posts