Monday, August 2, 2021

Nine Companies Delivering Solid Dividend Growth

As part of my monitoring process, I review the list of dividend increases every week. I usually focus my attention on the list of companies that have managed to boost distributions for at least a decade.

I have compiled the list of companies that have raised dividends for at least a decade, which also managed to boost dividends last week. The one exception was Mondelez, which I wanted to highlight since I own it. 

The companies for this weeks report include:

Cintas Corporation (CTAS) provides corporate identity uniforms and related business services primarily in North America, Latin America, Europe, and Asia. It operates through Uniform Rental and Facility Services and First Aid and Safety Services segments.

Cintas raised its quarterly dividend by 26.70% to 95 cents/share. This marks the 38th consecutive year of annual dividend increases for this dividend aristocrat. The company switched from making annual payments in 2020 to paying dividends quarterly.

Over the past decade, Cintas has managed to grow dividends at an annualized rate of 19.30%.

Cintas has managed to grow earnings from $2.27/share in 2012 to $10.24/share in 2021.

Cintas is expected to earn $10.64/share in 2022.

The stock is selling for 36.70 times forward earnings and yields 0.97%.

Mondelez International, Inc. (MDLZ) manufactures, markets, and sells snack food and beverage products worldwide.

The company raised its quarterly dividend by 11.10% to 35 cents/share. The company has hiked its quarterly dividend every single year since it split from Kraft Foods in 2012. Mondelez has managed to grow dividends at an annualized rate of 12.80% over the past 5 years.

Mondelez has managed to grow earnings from $2.01/share in 2011 to $2.69/share in 2020.

Mondelez is expected to earn $2.92/share in 2021.

The stock is selling for 21.69 times forward earnings and yields 2.21%.

McKesson Corporation (MCK) provides healthcare supply chain management, retail pharmacy, community oncology and specialty care, and healthcare information solutions in the United States and internationally. It operates through four segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions (RxTS)

The company raised its quarterly dividend by 11.90% to 47 cents/share. This dividend achiever has managed to increase annual dividends for 14 years in a row. McKesson has managed to grow dividends at an annualized rate of 9.60% during the past decade.

McKesson is expected to earn $19.08/share in 2022. For comparison purposes, the company’s earnings per share went from $5.59 in 2012 to $4.95/share in 2020. The company lost $28.26/share in 2021.

The stock is selling for 10.70 times forward earnings and yields

UMB Financial Corporation (UMBF) operates as the bank holding company for the UMB Bank that provides various banking and other financial services.

The company raised its quarterly dividend by 15.60% to 37 cents/share. This was the 30th year of consecutive annual dividend increases for this dividend champion.

Over the past decade, the company has been able to grow dividends at an annualized rate of 5.30%.

UMB Financial managed to grow earnings from $2.64/share in 2011 to $5.93/share in 2020. The company is expected to earn $7.16/share in 2021.

The stock is selling for 13.08 times forward earnings and yields 1.58%.

Republic Services, Inc. (RSG) provides non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States.

The company raised its quarterly dividend by 8.20% to 46 cents/share. This is the seventeenth consecutive year of increasing the dividend for Republic Services. Over the past decade, the company has been able to grow dividends at an annualized rate of 7.90%.

Between 2011 and 2020, this dividend achiever has managed to grow earnings from $1.56/share to $3.02/share.

Republic Services is expected to earn $3.85/share in 2021.

The stock is selling for 29.95 times forward earnings and yields 1.47%.

The Hershey Company (HSY) manufactures and sells confectionery products and pantry items. The company operates in two segments, North America; and International and Other.

The company raised its quarterly dividend by 12% to 90.10 cents/share. This marked the 12th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has been able to grow dividends at an annualized rate of 9.40%.

Between 2011 and 2020, Hershey managed to increase earnings from $2.74/share to $6.11/share.

Hershey is expected to earn $6.89/share in 2021.

The stock is selling for 25.62 times forward earnings and yields 1.82%.

KLA Corporation (KLAC) designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide.

The company raised its quarterly dividend by 17% to $1.05/share.

This is the twelfth consecutive dividend level increase for this dividend achiever.

Between 2011 and 2020, the company managed to grow earnings from $4.66/share to $7.70/share.

The company is expected to earn $14.12/share in 2021.

The stock is selling for 22.34 times forward earnings and yields 1.14%.

American States Water Company (AWR) provides water and electric services to residential, commercial, industrial, and other customers in the United States. It operates through three segments: Water, Electric, and Contracted Services.

The company raised its quarterly dividend by 9% to 36.50 cents/share. This dividend king has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year for 67 consecutive years.

Between 2011 and 2020, the company managed to increase earnings from $1.21/share to $2.33/share.

American States Water Company is expected to earn $2.43/share in 2021.

The stock is selling for 36.35 times forward earnings and yields 1.65%.

Diageo plc (DEO) produces, markets, and sells alcoholic beverages. 

The company increased its Final Dividend by 5% to 44.59 British Pence/share. Diageo had raised its interim dividend by only 2% in the Spring. The total annual dividend in 2021 is 3.82% higher than the total annual dividend paid in 2020.

Diageo has managed to increase dividends annually since at least 1998.

The stock sells for 27.45 times forward earnings and yields 2%.

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Wednesday, July 28, 2021

How dividends protect income from inflation

Since 1960s, dividends have increased at a steady pace. Perhaps due to inflation, perhaps due to the end of the Gold Standard, perhaps due to changes in the types of industries.


As an investor, I buy shares in companies that sell goods and services to consumers, and earn a profit in the process. Many of these companies have competitive advantages, which would allow them to pass on any sustainable cost increases to the final customers by raising prices. 

This means that equities could turn out to deliver a good inflation protection. If companies grow earnings, they can distribute more to shareholders in the form of dividends. In other words, dividends tend to produce a stream of income that protects against inflation.

I looked at the data for S&P 500 dividends since 1960 in order to test this hypothesis. (Source)

I also obtained data on annual inflation in the US. (source)

It does seem that dividends have managed to exceed inflation in each decade since 1960. The exception is in the 1970s, when dividends trailed slightly behind inflation. However, stock prices lost a lot more ground to inflation.



I tried to look at it by breaking it down by years. The period of high inflation in the US was between 1966 – 1981. During that time, inflation was just slightly above dividend growth. But if you spent dividends you largely maintained standard of living.


It looks like there were a few years where dividend income was lower at an inflation adjusted rate than 10 years earlier (1975). In other words, the purchasing power decreased by 25% through 1975, compared to 1965. But then it rebounded from there.

If we looked at real stock prices between 1965 and 1981 however, the picture is much worse. The inflation adjusted stock price, as indicated by S&P 500, decreased by 50% between 1965 and 1975 and stayed there till 1981. This means that if you held stock that could purchase $100,000 worth of goods in 1965, by 1975 that same basket of stocks could buy half of what you could buy before.


I do not have the data on Bonds, but interest income definitely lost purchasing power even more rapidly.

Overall, dividends have managed to provide a good protection against inflation. That being said, while dividends provide good inflation protection over time, that may not hold true in every single year. The period from 1965 - 1975 clearly indicates this.

The question for me is how would this affect me if I were retired and living off dividends between 1965 - 1975. I would probably have to look for ways to cut expenses in some areas, but not in others. The nice thing is that my personal basket of goods and services used will be different than the basket measured using CPI. 

I can always try to adjust my spending and my budget. For example, if travel was a big expense, I may spend less time travelling to expensive destinations like Paris, France and go to cheaper locations. I may go for switching brands or I may go for stocking up on certain items earlier in the year. Of course, certain expenses like healthcare are more difficult to manage and forecast too. 

In addition, while I used S&P 500 dividends as a proxy for dividend incomes in general, this is just a proxy. The portfolio of companies I would have invested in may have generate a dividend income stream that provides a better protection against inflation ( though it could be worse too if I chose poorly). Not all S&P 500 companies are dividend growth type however. The index includes a lot of cyclical names like U.S. Steel or General Motors, which tend to cut dividends during recessions, and are not dividend growth stocks. I tend to focus my attention on the companies that grow dividends annually, and have a track record for doing so. It also helps to analyze these companies, in order to understand if they can keep growing earnings and dividends. Having a competitive advantage, a strong brand name and a leadership position are big pluses in my book.

If I focus my attention on companies that grow dividends each year, I stand a better chance of growing my dividend income and protecting it against the ravages of inflation.

I obtained the historical dividends for three dividend growth stocks I thought about at the top of my head. I would argue that these are prominent large cap companies that have been prominent large and established companies for many decades, so it is reasonable to conclude that an investor would have had a chance of selecting them 55 years ago.

For example, Johnson & Johnson (JNJ) managed to grow real dividend income by a factor of 5 during the 1965 - 1981 period


Procter & Gamble shareholders also saw a gradual increase in their inflation-adjusted dividend income, albeit at a much slower pace than Johnson & Johnson. 



Coca-Cola shareholders also saw a gradual increase in their inflation-adjusted dividend income, albeit at a much slower pace than Johnson & Johnson, but faster than Procter & Gamble.




It looks like it has paid to be selective, when looking for dividend growth stocks that can grow dividends at or above the rate of inflation.

Thank you for reading. Please let me know what you think in the comments below.

Relevant Articles:

- A Look Under the Hood For Inflation

- Dividend Growth Stocks Protect Investors from Inflation




Monday, July 26, 2021

Stanley Black & Decker: A Dividend King in Focus

Stanley Black & Decker, Inc. (SWK) engages in the tools and storage, industrial, and security businesses worldwide.

The company raised its quarterly dividend by 12.90% to 79 cents/share just last week. This marked the 54th consecutive annual dividend increase for this dividend king.

Stanley Black & Decker's CEO, James M. Loree, commented, "I am pleased to continue our trend of consecutive annual dividend increases, which reflects the continued confidence we have in the cash generation potential of the company.  A strong and growing dividend is a key element of our shareholder value proposition, and is consistent with our capital deployment philosophy to deliver approximately half of our excess capital to shareholders over the long term." (source)

Over the past decade, Stanley Black & Decker managed to grow dividends at an annualized rate of 7.60%.


Between 2011 and 2020, earnings per share grew from $3.97 to $7.77. The company is expected to generate $11.21/share in 2021.

The company has managed to grow through acquisitions, notably the merger between Stanley Works and Black & Decker in 2010. In 2017 it acquired the Craftsman brand from Sears. It actively manages its portfolio of products. Growing the businesses through M&A is central to the company’s strategy

The company is looking to increase efficiencies in the supply chain to reduce cost, and increase sales in emerging markets. About 59% of sales comes from the US, 4% in Canada, 24% Europe, 8% Asia. 

Stanley Black & Decker is also focused on growing its e-commerce sales, which account for $2 billion out of its $14 billion in sales.

The company is organized in three segments.

Tools & Storage accounts for 71% of sales and 80% of operating profits. The company is a leader in tools and storage. It has a portfolio of brands that tradespeople and DIY folks rely on. We are speaking about hand tools, power tools like DeWalt, Craftsman, Black & Decker etc.

Industrial accounts for 16% of revenues and 12% of operating profits. It builds solutions like preferred engineered fastening solutions in automotive and industrial channels to inflastructure solutions like hydraulic tools and attachments.

Security accounts for 13% of revenues and 8% of operating profits. The company delivers peace of mind with advanced electronic safety, security and monitoring solutions, automatic doors, and sophisticated patient safety, asset tracking and productivity solutions.

I believe that a picture is worth 1,000 words. Which is why I am including this slide from their annual report, which summarizes their value creation model.


Source: Company's Annual Report

The company managed to reduce the number of shares outstanding between 2011 and 2016 from 170 million to 148 million. Shares outstanding are up since then due to acquisitions.


The payout ratio has largely remained between 30% and 45%, with the exception of two spikes in 2013 and 2018. Those were triggered by one-time accounting items affecting earnings per share in each of those two years.



Currently, the stock is selling for 18.21 times forward earnings and yields 1.55%.

What is your opinion on the company? Please share in the comments below.

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Thursday, July 22, 2021

The Illusion of Choice in Consumer Goods

One of my favorite charts shows a listing of eleven consumer goods companies, and the brands that they own. It reinforces my belief that strong brands grow dividends.

You can view this chart from here:



Source: Brewminate

This illustration shows these massive companies that control large portions of a given segment of the market. While the sheer number of brands creates the illusion that there is unlimited choice, the reality is that just a few brands control what you buy on a regular basis. It looks like there is a lot of competition, when in reality just a few companies control a lot of the brands we purchase. The sheer reach of brands is fascinating. 

This is understandable, given the fact that many companies own brands that target different segments. Many of these companies have established relationships with retailers for shelf space. Many of these retailers value these brands, because consumers expect to see them, and want them. It is a mutually beneficial relationship.

This of course is a result of creating new brands from scratch, as well as decades of consolidations through mergers and acquisitions.

As an investor, I like looking at companies with solid brands that consumers buy on a recurring basis. I also like the consumer goods companies, because they sell goods that consumers would buy even during a recession. I like companies with large brands that have a dominant position, because I believe that a successful company that has been successful for a long time would likely continue being successful in the future.  Having scale is helpful in procuring the lowest per unit costs, as you have centralized marketing, purchasing and distribution. The more successful you get, the more you stack the odds in your favor.

The companies listed in this chart represent some good ideas for further research. They are not automatic buys of course. When I evaluate companies, I generally like to look for:

1) A track record of annual dividend increases

2) Growth in earnings per share over the past decade

3) Growth in dividends per share over the past decade

4) Dividend sustainability

5) Good entry valuation

I like the stability of their business models. These companies do well in a slow but steady way, and navigate near term economic turbulent nicely. While past performance is not indicative of future results, I believe that these companies would still be dominant in the next 50 years. If you are reading this in 2071, please let us know how this prediction turned out.

The companies included in the chart are:

Coca-Cola (KO) is a beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. 

The company is a dividend king with a 59 year track record of consecutive annual dividend increases. Over the past decade, Coca-Cola has managed to grow dividends at an annualized rate of 6.40%.

The stock sells for 25.53 times forward earnings and yields 3.01% today.

Unilever (UL) operates as a fast-moving consumer goods company. It operates through Beauty & Personal Care, Foods & Refreshment, and Home Care segments.

Unilever is an international dividend achiever, which has increased dividends for 25 years in a row. Unilever has managed to boost dividends at an annualized rate of 7.20% over the past decade.

The stock sells for 20.33 times forward earnings and yields 3.43% today.

PepsiCo (PEP) operates as a food and beverage company worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region. 

The company is a dividend aristocrat with a 49 year track record of consecutive annual dividend increases. PepsiCo has managed to boost dividends at an annualized rate of 7.80% over the past decade.

The stock sells for 25.04 times forward earnings and yields 2.76% today.

Kellogg's (K) manufactures and markets ready-to-eat cereal and convenience foods. The company operates through four segments: North America, Europe, Latin America, and Asia Middle East Africa.

The company is a dividend achiever with an 18 year track record of consecutive annual dividend increases. Kellogg's has managed to boost dividends at an annualized rate of 3.90% over the past decade.

The stock sells for 15.94 times forward earnings and yields 3.58% today.

Mondelez (MDLZ) manufactures, markets, and sells snack food and beverage products worldwide. 

The company was formed in 2012, when Kraft Foods split into two. Mondelez has managed to increase dividends annually since the split. Over the past five years, Mondelez has managed to increase dividends at an annualized rate of 12.80%.

The stock sells for 21.94 times forward earnings and yields 1.97% today.

Johnson & Johnson (JNJ) researches and develops, manufactures, and sells a range of products in the health care field worldwide. It operates through three segments: Consumer Health, Pharmaceutical, and Medical Devices.

The company is a dividend king with a 59 year track record of consecutive annual dividend increases. Over the past decade, Johnson & Johnson has managed to grow dividends at an annualized rate of 6.60%.

The stock sells for 17.47 times forward earnings and yields 2.54% today.

Nestle (NSRGY) operates as a food and beverage company. 

Nestle is an international dividend aristocrat, which has managed to increase dividends annually since 1995. It has managed to boost dividends over the past decade at an annualized rate of 4%. Check my analysis of Nestle for more information about the company.

The stock sells for 26.07 times forward earnings and yields 2.38% today.

Procter & Gamble (PG) provides branded consumer packaged goods to consumers worldwide. It operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care.

The company is a dividend king with a 65 year track record of consecutive annual dividend increases. Over the past decade, Procter & Gamble has managed to grow dividends at an annualized rate of 5.20%.

The stock sells for 24.96 times forward earnings and yields 2.48% today.

General Mills (GIS) manufactures and markets branded consumer foods worldwide. The company operates in five segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; Asia & Latin America; and Pet. 

General Mills has increased dividends for 1 year. The company lost its status of a dividend achiever in 2018. This ended a 15 year streak of consecutive annual dividend increases. Over the past decade however, it managed to grow annual dividends at a rate of 5.95%.

The stock sells for 16.29 times forward earnings and yields 3.36% today.

Kraft Heinz (KHC) manufactures and markets food and beverage products.

Kraft Heinz was formed from the merger of Kraft Foods and Heinz. Sadly, the company cut dividends a few years ago, and has kept them unchanged. Kraft Foods had split into two in 2012, and had managed to increase distributions for a few years before that.

The stock sells for 14.80 times forward earnings and yields 4.07% today.

Mars Inc is a privately held company. It's owned by members of the Mars family.

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Monday, July 19, 2021

Seven Dividend Growth Stocks Rewarding Shareholders With Raises

As part of my monitoring process, I review the list of dividend increases every week This activity helps me to monitor the business performance of any companies I am invested in. It also helps me to identify any hidden dividend gems, and place them on my list for further research.

My reviews are an example of the quick way I use to evaluate companies, before deciding if they are worth a second look later or not.

The companies in today’s article have managed to grow dividends for at least ten years in a row. These companies also announced a dividend increase during the past week. The companies include:

Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale. 

Walgreens Boots Alliance hiked its quarterly dividend by 2.1 percent to 47.75 cents/share. This marked the 46th consecutive annual dividend increase for this dividend aristocrat. Over the past decade, it has managed to increase dividends by 11.50%/year. Lately, the rate of dividend increases has declined to about 2%/year.

Walgreen’s earned $2.94/share in 2011 and is expected to earn $4.80/share in 2021. It looks like Walgreen’s has been unable to grow earnings per share for about 3 – 4 years now.

The stock is selling for 9.59 times forward earnings and yields 4.15%.

Marsh & McLennan Companies, Inc. (MMC) is a professional services company which provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. It operates in two segments, Risk and Insurance Services, and Consulting.  

Marsh & McLennan Companies hiked its quarterly dividend by 15.10% to 53.50 cents/share. This marked the 12th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 8.60%/year.

Earnings increased from $1.55/share in 2010 to $3.94/share in 2020.

The company is expected to generate $5.65/share in 2021.

The stock sells at 25 times forward earnings and yields 1.51%.

PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials worldwide. The company raised its quarterly dividend by 9.30% to 59 cents/share. This marked the 50th consecutive year of annual increases in the company’s dividend for this newly minted dividend king.

Between 2011 and 2020, the company managed to grow earnings from $3.44/share to $4.45/share. PPG Industries is expected to earn $8.03/share in 2021.

The stock sells for 21.21 times forward earnings and yields 1.39%.

National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long-term, net leases.

The company raised its quarterly dividend by 1.90% to 53 cents/share. The increase in the quarterly dividend marks the 32nd consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to grow annual dividends at a rate of 3.20%.

The REIT is expected to generate $2.76/share in FFO in 2021. It earned $1.70/share in FFO in 2011 and grew it to $2.51//share in 2020.

The REIT is selling for 17.50 times forward FFO and yields 4.38%.

Computer Services, Inc. (CSVI) provides core processing, digital banking, managed services, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate entities in the United States.

Computer Services, Inc. hiked its dividend by 8 percent to 27 cents/share. This marked the 50th consecutive year of increased cash dividends paid to shareholders, according to the company.  

I have been unable to verify this claim however, as the company has only been public since 1995, and old annual reports only go back to 2004.

If you go to their 2006 annual report however, and flip to page 20, it states that “The fiscal 2006 cash dividend marks the 17th consecutive year with a dividend increase”.  https://backend.otcmarkets.com/otcapi/company/financial-report/10039/content

They started claiming a 42 year history of annual dividend increases in 2014’s annual report. On the 2013s annual report the claim was for a 24th consecutive year of annual dividend increases.

Between 2012 and 2021, the company has managed to grow earnings from 87 cents/share to $2.10/share.  The company has managed to grow dividends at an annualized rate of 16.20% over the past decade.

The stock is selling for 28.18 times earnings and yields 1.90%.

Duke Energy Corporation (DUK) operates as an energy company in the United States. It operates through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.

Duke Energy Corporation hiked quarterly dividends by 2.1 percent to 98.50 cents/share. This marked the 17th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, Duke has managed to boost dividends at an annualized rate of 2.80%.

The company earned $3.83/share in 2011 and is projected to generate $5.18/share in 2021.

The stock is selling for 20.21 times forward earnings and yields 3.76%.

Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and New Power.

Cummins increased its quarterly dividend by 7.4 percent to $1.45/share.  This dividend achiever has managed to increase annual dividends for 16 years in a row. Over the past decade, Cummins has managed to grow dividends at an annualized rate of 19.70%.

The company managed to grow earnings from $9.55/share in 2011 to $12.01 in 2020.

Cummins is expected to earn $16.11/share in 2021.

The stock sells for 14.81 times forward earnings and yields 2.43%.

Ryder System, Inc. (R ) operates as a logistics and transportation company worldwide. The company operates through three segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS).

Ryder System raised its quarterly dividends by 3.60% to 58 cents/share. This marked the 17th year of consecutive annual dividends for this dividend achiever.

The company is expected to earn $5.92/share in 2021. For comparison, the company earned $3.28/share in 2011, but lost money in 2019 and 2020.

The stock is selling for 11.98 times forward  earnings and yields 3.27%.

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