Monday, June 14, 2021

Five Dividend Growth Stocks Rewarding Shareholders With Raises

As part of my monitoring process, I review the list of dividend increases evey week, focusing on the companies with at least a ten year track record of annual dividend increases. During the past week, there were several companies that raised dividends, and also have a ten year track record of annual dividend increases. The companies include:

UnitedHealth Group Incorporated (UNH) operates as a diversified health care company in the United States.

The company raised its quarterly dividend by 16% to $1.45/share. This is the 12th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 28.10%/year.

Between 2011 and 2020, the company grew earnings from $4.73/share to $16.03/share.

The company is expected to earn $18.59/share in 2021.

The stock sells for 21.60 times forward earnings and yields 1.44%.

Target Corporation (TGT) operates as a general merchandise retailer in the United States.

The company increased its quarterly dividend by 32.40% to 90 cents/share. This is the 50th consecutive year in which Target has increased its annual dividend, making it the latest addition to the dividend kings list. The company has managed to grow dividends at an annualized rate of 12.30% over the past decade. The past 5 years showed a more modest 4.40%/year however.

Between 2012 and 2021, the company grew earnings from $4.28/share to $8.64/share.

The company is expected to earn $12.23/share in 2021.

The stock is selling for 18.95 times forward earnings and yields 1.55%.

Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. 

Caterpillar raised quarterly dividends by 7.80% to $1.11/share. The company has paid higher dividends to shareholders for 27 consecutive years and is a member of the S&P 500 Dividend Aristocrat Index.

Between 2011 and 2019, the company’s earnings went from $7.40/share to $10.74/share, before dipping to $5.46/share in 2020. The company is expected to earn $9.86/share in 2021.

The stock sells for 22.89 times forward earnings and yields 1.97%.

Oil-Dri Corporation of America (ODC) develops, manufactures, and markets sorbent products in the United States and internationally.

Oil Dri increased its quarterly dividend by 3.80% to 27 cents/share. This is the 18th year in a row of annual dividend increases for this dividend achiever.

Between 2011 and 2020, earnings grew from $1.26/share to $2.65/share.

The stock sells for 14.65 times earnings and yields 3.03%.

HEICO Corporation (HEI) designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally.

Heico raised its semi-annual dividend by 12.50% to 9 cents/share. This is the 14th year of consecutive annual dividend increase for this dividend achiever.

Between 2011 and 2020, earnings per share grew from 56 cents to $2.29/share.

The company is expected to earn $2.17/share in 2021.

The stock sells for 66.78 times forward earnings and yields 0.12%.

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Thursday, June 10, 2021

Happy Microsoft Dividend Day

Microsoft (MSFT) is a dividend achiever, which has managed to increase dividends regularly since initiating a dividend in 2003.

Today, it distributed its regular quarterly dividend of 56 cents/share to qualified shareholders. If you own 100 shares, you would have received a quarterly dividend of $56, which is a nice amount of pocket change.

The company's founder is Bill Gates, who launched it in 1975 with Paul Allen. The company grew by leaps and bounds, and was eventually take public in 1986.

Bill Gates received a check for $$57,676,043.04 , given that he owned shares according to the last proxy filed in 2019.

Of course, Bill Gates is a major philanthropist, which is the reason why he has been gradually reducing his ownership stake in the Seattle-based software company. He has also been diversifying his wealth away from Microsoft for the past 35 years.

At the time Microsoft went public, Bill Gates owned 11,222,000 shares, which represented 49% ownership in the stock according to the prospectus.

If he had held on to his shares, and just spent all dividends, he would have 3,231,936,000 shares after the 9 stock splits between 1987 and 2003.

These shares would be worth close to $766 billion, and be paying a quarterly dividend of $1,809,884,160.

That's $1.8 billion in dividends every single quarter, or roughly $229.56 in dividend income every second.

These are huge numbers, and just illustrate the power of compound interest and the power of identifying a great company early on, and sticking to it. Not every company does that well. Microsoft has had its share of ups and downs throughout its history.

I just find it fascinating that Bill Gates would have been richer than most folks out there. 

But of course Bill Gates realized that building wealth is not as important as making a difference with all that wealth. At the end of the day, making a real difference in the world is much more important to his legacy, than becoming the first trillionaire.

Sadly, with Mr. Gates divorce proceedings, it may be harder to estimate future dividend income from his Microsoft stock. It is likely that it will be reduced going forward.

Monday, June 7, 2021

Clorox (CLX) Dividend Stock Analysis

 The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. It operates through four segments: Health and Wellness, Household, Lifestyle, and International.

Clorox is a dividend aristocrat with a 44-year history of annual dividend increases. Over the past decade, Clorox has managed to increase dividends at an annualized rate of 7.50%.

The last dividend increase was in June 2021, when the Board of Directors authorized a 4.50% hike in the quarterly dividend to $1.16/share.



The company managed to grow earnings from $4.24/share in 2010 to $7.36/share in 2020. Clorox is expected to earn $8.38/share in 2021 and $8.13/share in 2022. The Covid-19 pandemic increased demand for Clorox products in the near term. While it is possible that growth in the near term would decelerate because people are not stocking up, it is also possible that we are in a new normal that would permanently increase the demand for its products.



It is fascinating how earnings per share basically remained flat between 2010 and 2015, which tested the patience of most long-term shareholders.

Clorox has a portfolio of products with strong brand names, that are number one or two in their respective product lines, which helps in having pricing power. As a result, it should be able to pass on commodity price increases to customers. Future earnings growth could be driven by innovation, new product launches, cost containment initiatives, as well as international expansion.

Clorox aims to continue delivering total stockholder returns by focusing on company's long-term financial goals such as:

• Growing net sales 2-4 percent annually
• Expanding earnings before interest and income taxes (EBIT) margin 25-50 basis points annually
• Generating free cash flow of 11- 13 percent of sales annually

The three pillars of the strategy include expansion in a geographic, category and channel direction, continued reinvestment in its brands as well as cost containment initiatives. A key driver of the strategy is to accelerate sales by growing existing brands, including expanding into adjacent categories, entering new sales channels and increasing penetration within existing countries. Increased exposure to emerging market economies could further drive increase in sales. The company also anticipates using its strong cash flow to pursue growth opportunities and increase shareholder returns. In addition to that the company will be targeting sales growth through product innovation, which helps its pricing power. 
Clorox will also target margin expansion and maximizing cash flow through implementation a continued robust cost-saving program and maintaining price increases the company has taken. The strong focus on cost, has provided the company with a relative cost advantage versus competition. In addition, Clorox continuously reinvests money in its brands, which helps it maintain its market position.

One of the risks behind Clorox is that it generates a large portion of revenues from the US – over 80%. It is more exposed to the US economy than other global consumer staples companies, which could also be an opportunity as well. The other risk I see is that Wal-Mart (WMT) accounts for a quarter of sales for Clorox. Wal-Mart is notorious for trying to keep costs low, by squeezing vendors to sell at lower prices. This is bad for pricing power, and could impact profitability. This over reliance on Wal-Mart could be mitigated through continued international expansion. The other risk include competition from generic products, which could be mitigated by the ability to distinguish Clorox' brands by spending on R&D and advertising.

In 2019, the Company unveiled its “IGNITE” strategy, which works on top of its concluded 2020 strategy. Source: Clorox PR

Growth in earnings per share was aided by a gradual decrease in the number of shares outstanding. Clorox has reduced its share count from 141 million in 2010 to 128 million by 2020.


The dividend payout ratio increased from 47% in 2010 to 67.73% in 2015, before falling down to 58% in 2020.


Currently the stock is slightly overvalued at 23.23 times forward earnings. Clorox yields 2.59%.


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Thursday, June 3, 2021

How Ronald Read managed to accumulate a dividend portfolio worth $8 million

Dividend investing is as sexy as watching paint dry on the wall. Defining an entry criteria that selects quality dividend stocks with rising dividends over time and then patiently reinvesting these dividends while sitting on your hands is not exciting. While active traders have a plethora of hedge fund managers on the covers of Forbes magazine there are not many well-publicized successful dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.

I did some research and uncovered several successful dividend investors, whose stories provide reassurance that the traits of successful dividend investing I outlined in a previous post are indeed accurate.

The reason why dividend investors are not highly publicized is because dividend investing is not sexy enough to be featured in the financial mainstream media. In addition to that, it is not profitable for Wall Street to sell you into the idea that ordinary investors can invest on their own. This is why you have advisors crying wolf over the fact that you are paying 15% tax on your dividend income, while charging clients 1%/year on assets under management, and investing that money in a mutual fund that costs an additional 1%/year. Mutual funds, annuities and other products generate billions in commissions for Wall Street, despite the fact that they might not be in the best interest of small investors.

The dividend investor to profile today is Ronald Read, who left an $8 million fortune behind when he passed away in 2015. What's fascinating about him is that he never earned a high income, because he worked as a gas station worker or a janitor. 

I find this story to be very inspiring, because it showed how an ordinary person who never earned a high income was able to amass a dividend portfolio worth $8 million by the time of his death. The portfolio was generating close to $20,000 in monthly dividend income on average. This portfolio was a result of frugality, hard work, and ability to buy stocks to hold for decades, while patiently reinvesting dividends.

When Ronald Read died at the age of 92 in 2014, he left a dividend portfolio worth $8 million to charity and his children. That story shows that Ronald Read earned close to $20,000 in monthly dividend income from this diversified portfolio of 95 blue chip securities. They were spread across a variety of sectors, including railroads, utility companies, banks, health care, telecom and consumer products. He avoided technology stocks. It looked like Mr Read invested solely for dividend income, and his portfolio was well put together. Besides being a good stock picker, he displayed remarkable frugality and patience which gave him many years of compounded growth.



Ronald Read didn't have a finance degree, nor an MBA, but was an ordinary Joe who managed to save and invest for the long term. The story is appealing to me because it shows that investors who pick quality blue chip stocks to hold for decades, and reinvest those dividends patiently, can accumulate a sizeable portfolio over time. The important trait is patience. I follow the same slow and steady approach to long term dividend investing as Ronald Read.

Attached below is a list of Ronald Read's largest portfolio holdings:


Mr. Read left behind a five-inch-thick stack of stock certificates in a safe-deposit box. Owning the stock directly is old school, but it also reinforces the behavior to buy and hold equity stakes in solid blue chips. 

Among his longtime holdings were blue-chip stalwarts such as Procter & Gamble, J.P. Morgan Chase, General Electric and Dow Chemical. When he died, he also had large stakes in J.M. Smucker, CVS Health and Johnson & Johnson. He was able to stick to his securities for many years. Not all of his securities worked out, but did pretty well in the end. For example, his portfolio included shares of Lehman Brothers Holdings, the financial firm that collapsed in 2008, for example. 

One example of a long-term investment was buying 39 shares of Pacific Gas & Electric on Jan. 13, 1959 for $2,380. Adjusting for stock splits, these shares would have been worth $10,735 at te time of his death. He ended up owning 578 shares in all of PG&E, worth just over $26,500, some of which he may have purchased with the dividend payments made to shareholders.

He researched his ideas thoroughly, reading business publications such as Wall Street Journal, going to the library, and chatting about investments with close friends.

Ronald Read's success was dependent on several important factors:

1) Stay frugal and live within your means
2) Invest savings at a high rate of return for a long period of time
3) Invest in companies with durable competitive advantages with a long runway
4) Stay patiently invested for decades, without selling
5) Keep reinvesting those dividends along the way

This dividend investor managed to turn small investments into a cash machine that generated large amounts of dividends. He was able to accomplish this through identifying quality dividend growth companies at attractive valuations, patiently reinvesting distributions and mostly maintaining a diversified portfolio of stocks. These are the lessons that all investors could profit from.





Tuesday, June 1, 2021

Nine Dividend Growth Stocks Rewarding Shareholders With Raises

 As part of my monitoring process, I observe the list of dividend increases each week. I tend to focus my attention on the companies with at least a ten year history of annual dividend increases. My goal is to identify companies that can grow earnings and dividends for decades, and compound my net worth and income in the process. I am not interested in situations where I have to time my entry and exit correctly, and have to worry about the economic cycles too much.

This process helps me monitor existing holdings and to identify possible research opportunities for further investigation.

Over the past week, there were several companies that raised dividends to shareholders and had at least a ten year track record of annual dividend increases. The companies include:

Lowe's Companies, Inc. (LOW) operates as a home improvement retailer in the United States and internationally. 

The company raised its quarterly dividend by 33.30% to 80 cents/share, marking the 59th year of annual dividend increases for this dividend king. Lowe’s has managed to increase dividends at an annualized rate of 18.90% over the past decade.

Lowe’s has managed to grow earnings from $1.43/share in 2012 to $7.75/share in 2021.

The company is expected to earn $10.94/share in 2022.

The stock is selling for 17.81 times forward earnings and yields 1.64%.

American Tower (AMT), one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of approximately 181,000 communications sites.

American Tower increased its quarterly dividend by 2.40% to  $1.27/share.  The company has raised dividends every single quarter since 2012. The current dividend is 15.45% higher than the dividend paid during the same time last year. This REIT has managed to increase annual dividends for 10 years in a row. Over the past five years, it has managed to boost distributions at an annualized rate of 19.10%.

The REIT is expected to earn $9.33/share in FFO for 2021.

The stock is selling for 27.37 times forward FFO and yields 1.99%.

Sysco Corporation (SYY) markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally. It operates through three segments: U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other. 

Sysco increased its quarterly dividend by 4.40% to $0.47/share. This is the 52nd consecutive annual dividend increase for this dividend king. Over the past decade, it has managed to increase dividends at an annualized rate of 6.10%.

“Sysco’s strategy is built upon its commitment to a balanced capital allocation strategy – investing for growth, while preserving our strong balance sheet and investment grade rating and returning value to our shareholders,” said Aaron Alt, Sysco’s chief financial officer. “The combined actions we are announcing today position Sysco for long-term growth and success.”

The company is expected to earn $1.34/share in 2021. Earnings seem to have been depressed by Covid-19, as it also earned 42 cents/share in 2020. For reference, between 2011 nad 2019, the company grew earnings from $1.96/share to $3.20/share.

The stock is selling for 60.49 times forward earnings and yields 2.32%.

Medtronic plc (MDT) develops, manufactures, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. It operates through four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes Group.

Medtronic hiked its quarterly dividend by 8.60% to $0.63/share. This marked the 44th consecutive year of an increase in the dividend for this dividend aristocrat. Over the past decade, Medtronic has managed to boost dividends at an annualized rate of 10%.

"We're pleased to be able to increase our dividend by 9% during the pandemic," said Martha. "Today's dividend increase is a strong sign of our commitment to providing robust returns for our shareholders and of the confidence that our Board of Directors has in Medtronic's financial strength and future growth opportunities."

The company is expected to earn $5.68/share in 2021. Between 2011 and 2020, Medtronic’s earnings went from $2.86/share to $3.54/share. When analyzing a company like Medtronic however, you need to dig further and remove certain items, in order to gain a true understanding of its earnings power.

The stock is selling for 22.27 times forward earnings and yields 1.99%.

LyondellBasell Industries N.V. (LYB) operates as a chemical company in the United States, Germany, Mexico, Italy, Poland, France, Japan, China, the Netherlands, and internationally. The company operates in six segments: Olefins and Polyolefins—Americas; Olefins and Polyolefins—Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology.

The company increased its quarterly dividend by 7.60% to $1.13/share. This marked the tenth consecutive year of annual dividend increases for this newly minted dividend contender.  It has a five year annualized dividend growth rate of 6.70%.

The company is expected to earn $14.43/share in 2021. Between 2011 and 2020, its earnings went from $3.74/share to $4.24/share.

The stock is selling for 7.80 times forward earnings and yields 4%.

Unum Group (UNM) provides financial protection benefit solutions primarily in the United States, the United Kingdom, and Poland.

The company raised its quarterly dividend by 5.3% to $0.30/share. This is the 13th year of consecutive annual dividend increases for this dividend achiever. Over the past decade., the company managed to boost annual distributions at a rate of 12.50%.

Unum Group managed to grow earnings from 94 cents/share in 2011 to $3.89/share in 2020. The company is expected to earn $4.70/share in 2021.

The stock is selling for 6.59 times forward earnings and yields 3.68%.

Flowers Foods, Inc. (FLO) produces and markets packaged bakery products in the United States.

The company raised its quarterly dividend by 5% to 21 cents/share. This marked the 20th year of consecutive annual dividend increases for this dividend achiever. During the past decade, the company has managed to increase dividends at an annualized rate of 8.70%.

"The board is confident that the company's leading brands will drive growth in-line with our long-term financial targets," said Ryals McMullian, Flowers Foods president and CEO. "That expected growth and our strong cash flow enables the company to invest strategically and enhance our business while also continuing our long history of rewarding shareholders with a growing dividend."

Between 2011 and 2020, its earnings went from 60 cents/share to 72 cents/share. The company is expected to earn $1.15/share in 2021. 

The stock is selling for 21 times forward earnings and yields 3.49%.

Donaldson Company, Inc. (DCI) manufactures and sells filtration systems and replacement parts worldwide.

The company increased its quarterly dividend by 4.80% to $0.22/share. This marked the 35th consecutive year of annual dividend increases for this dividend champion. Over the past decade, the company has managed to raise dividends at an annualized rate of 13%.

Between 2011 and 2020, the company grew earnings from $1.43/share to $2/share. The company is expected to earn $2.22/share in 2021. 

The stock is selling for 27.73 times forward earnings and yields 1.43%.

Insperity, Inc. (NSP) provides human resources (HR) and business solutions to improve business performance for small and medium-sized businesses.

The company increased its quarterly dividend by 12.50% to 45 cents/share. This is the eleventh consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to raise dividends at an annualized rate of 19.90%.

Between 2011 and 2020, the company grew earnings from 58 cents/share to $3.54/share. The company is expected to earn $4.10/share in 2021. 

The stock is selling for 22.47 times forward earnings and yields 1.95%.

After reviewing this list, I am interested in researching more about Insperity (NSP). I have a position in Lowe’s (LOW), Medtronic (MDT), American Tower (AMT) and Sysco (SYY), so it was neat to see getting a raise. 

Ironically, I was expecting a raise from Clorox this week, but it never arrived. This is something I am monitoring on.

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