Wednesday, April 24, 2019

Ten Dividend Growth Stocks For April 2019

I launched my premium Dividend Growth Investor newsletter in July 2018 with the main goal of educating individual investors and empowering them to learn how to achieve their goals. I use the experience accumulated in my own investing over the past decade and a half, as a guideline for my newsletter.

I discuss the process to identify and research individual companies, in order to come up with ten investments that I am considering every single month. I go through the process of analyzing quantitative and qualitative factors behind each investment I make.

I go a step further, because I put $1,000 of my own money every month behind each one of these investments. This is a real money portfolio, that generates real dividends.

My goal is to educate investors, as I keep investing and building that future income through new contributions, organic dividend increases and strategic dividend reinvestment. The ultimate goal of this portfolio is to generate $1,000 in monthly dividend income.

By investing money every month, readers are able to see companies that I find attractively valued today. It is of little value to you as a reader that I purchased Visa in 2011 at a cost of $34/share. It is much more educational to learn which companies are selling at attractive valuations today. I believe that great companies should be accumulated at attractive valuations, and then held on for the long term.

Of course, I do more than just provide a list of ten attractively valued companies. I discuss the steps I take to build a dividend portfolio whose goal is to generate safe long-term dividend income. I also share the process of managing this portfolio, and important steps on wealth accumulation. I am a buy and hold investor at heart, who believes in diversification and the idea of developing and following a common sense investment process to reach my investment objectives. I rarely sell, and believe that time in the market beats timing the market. This is why I am investing in ten attractively valued dividend stocks every single month.

For a limited time, you can subscribe the newsletter at a low annual price of $65/year. This is an exclusive low price that will be available by the end of April.

You can sign up through Paypal by clicking on the link below:










As part of this promotion, I offer a 7 day free trial. Once you sign up, I will add you to the list and send you the April 2019 newsletter on Sunday, April 28. I will purchase these companies on Monday, April 29.  I will then send a list of dividend portfolio holdings by May 5.

Monday, April 22, 2019

Ten Dividend Geese Laying Golden Eggs for Investors

As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to review dividend increases for companies I own. I also use this exercise to observe dividend companies in action, and potentially uncover dividend gems for further research. I usually focus my attention on companies that have managed to boost distributions for at least a decade. I then take each company through my analysis checklist. The end result is a quick overview of several dividend growth stocks for your review.

The companies that raised dividends last week for this review include:

AptarGroup, Inc. (ATR) provides a range of packaging, dispensing, and sealing solutions primarily for the beauty, personal care, home care, prescription drug, consumer health care, injectable, and food and beverage markets. The company operates through three segments: Beauty + Home, Pharma, and Food + Beverage.

The company raised its quarterly dividends by 5.90% to 36 cents/share. This was the company’s 26th consecutive year of paying an increased dividend. The latest increase was slower than the ten year growth in dividends of 9%/year.

Annual earnings grew from $1.79/share in 2009 to $3/share in 2018. AptarGroup is expected to generate $4.28/share in 2019.

This dividend champion is overvalued at 25.30 times forward earnings. The stock yields 1.30%.

American Water Works Company, Inc. (AWK) provides water and wastewater services in the United States and Canada.

The company raised its quarterly dividend by 9.90% to 50 cents/share. This marked the eleventh year of annual dividend increases for this dividend achiever. Over the past decade, it has managed to boost dividends at an annual rate of 16.10%/year.

Between 2009 and 2018, American Water Works managed to grow earnings from a negative $1.39/share to a positive $3.15/share. The company is expected to generate $3.59/share in 2019.

The stock is overvalued today at 29.20 times forward earnings and yields 1.90%.

Bar Harbor Bankshares (BHB) operates as the holding company for Bar Harbor Bank & Trust that provides commercial, retail, and wealth management banking products and services.

The company raised its quarterly dividend by 10% to 22 cents/share. This marked the 16th year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annual rate of 5.70%/year.

The bank grew earnings from $1.39/share in 2009 to $2.12/share in 2018.

The stock looks attractively valued at 12.40 times earnings and yields 3.30%. It is a good company to place on the list for further research.

Celanese Corporation (CE) is a technology and specialty materials company which manufactures and sells high performance engineered polymers in the United States and internationally. The company operates through Engineered Materials, Acetate Tow, and Acetyl Chain segments.

The company announced a 14.80% increase in its quarterly dividend to 62 cents/share. This event marked the tenth consecutive year of dividend increases for this newly minted dividend achiever. Over the past decade, Celanese has managed to boost dividends at a rate of 29.20%/year.

Between 2009 and 2018, the company has managed to grow earnings from $3.17/share to $8.91/share. Celanese is expected to generate $10.37/share in 2019.

The stock is attractively valued at 10.10 times forward earnings and yields 2.35%. This is a company that I would add to my list for further research.

Donegal Group Inc. (DGICA) (DGICB), is an insurance holding company, which provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. It operates through four segments: Investment Function, Personal Lines of Insurance, Commercial Lines of Insurance, and Investment in DFSC.
The company raised its dividend on A shares by 1.75% to 14.50 cents/share and the dividend on B shares by 2% to 12.75 cents/share. This marked the 17th year of annual dividend increases for this dividend achiever. The ten year dividend growth rate comes out to a 3.40% annualized.

Earnings per share went from 68 cents/share in 2009 to a loss of $1.18/share in 2018. The company is expected to earn 0.68/share in 2019.

The stock is selling at 18.60 times forward earnings and yields 4.60%. The forward payout ratio is at 85.30%. The yield is high, but the growth is low. The payout ratio looks like it is high as well. I will take a pass on Donegal for now.

ONEOK, Inc. (OKE) engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments.

ONEOK raised its quarterly dividend to 86.50 cents/share. This is an 8.80% increase over the dividend paid during the same time last year. Over the past decade, this dividend achiever has managed to boost dividends at an annualized rate of 16.90%. It has a 17 year track record of annual dividend increases.

Between 2009 and 2018, the company’s earnings grew from $1.44/share to $2.78/share. ONEOK is expected to earn $2.98/share in 2019.

The stock is overvalued at 23.20 times forward earnings but offers a nice yield of 5%.

People's United Financial, Inc. (PBCT) operates as the bank holding company for People's United Bank, National Association that provides commercial banking, retail banking, and wealth management services to individual, corporate, and municipal customers. The company operates in two segments, Commercial Banking and Retail Banking.

The bank raised its quarterly dividend by 1.40% to 17.75 cents/share. This marked the 27th consecutive annual dividend increase for this dividend champion. Over the past decade, this dividend champion has managed to grow distributions at an annual rate of 1.80%/year.

Between 2008 and 2018, the bank grew earnings from 41 cents/share to $1.29/share. The company is expected to generate $1.41/share in 2019.

The stock is attractively priced at 12.10 times forward earnings and offers a forward dividend yield of 4.10%. Given the lack of dividend growth over the past decade, I am taking a pass on the company for the time being.

Sonoco Products Company (SON) manufactures and sells industrial and consumer packaging products in North and South America, Europe, Australia, and Asia. The company operates through four segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions.

The company raised its quarterly dividend by 4.90% to 43 cents/share. This marked the 37th year of annual dividend increases for this dividend champion. Over the past decade, Sonoco has been able to grow its dividends at an annual rate of 4.20%.

Sonoco managed to grow earnings from $1.50/share in 2009 to $3.10/share in 2018. The company is expected to earn $3.52/share in 2019.

The stock is fairly valued at 17.20 times forward earnings and offers a forward dividend yield of 2.80%.

The Southern Company (SO) engages in the generation, transmission, and distribution of electricity. It operates in four segments: Gas Distribution Operations, Gas Pipeline Investments, Wholesale Gas Services, and Gas Marketing Services.

Last week, this utility managed to boost its quarterly dividend by 3.30% to 62 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. During the past decade, it has managed to boost distributions at an annualized rate of 3.65%.

Between 2009 and 2018, the company’s earnings went from $2.06/share to $2.17/share. Southern Company is expected to earn $3.03/share in 2019.

The stock seems fairly valued at 17.10 times forward earnings and offers a dividend yield of 4.80%. Given the lack of earnings growth over the past decade, I would mark the stock as a hold.

The Travelers Companies, Inc. (TRV) provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance.

The company boosted its quarterly dividend by 6.50% to 82 cents/share. This marked the 15th year of annual dividend increases for this dividend achiever. Over the past decade, this dividend achiever has managed to compound dividends at an annual rate of 9.80%.

Travelers has managed to boost earnings per share from $6.33 in 2009 to $9.28 in 2018. The company is expected to generate $11.07/share in 2019.

The stock is attractively valued at 12.60 times forward earnings and spots a dividend yield of 2.40%. Check my analysis of Travelers Companies for more information about the company.

Relevant Articles:

How to improve your investing over time
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- Price is what you pay, value is what you get
How to read my stock analysis reports



Thursday, April 18, 2019

How to improve your investing over time

As dividend investors, we focus on identifying and selecting the companies to include in our divided portfolios. The ultimate goal is achieving our stated dividend income objectives. As a result, a lot of effort is put into the company research department. I believe that this is all great. In my investing, I have found that this is very helpful. I have found however that I want to improve over time as well.

The thing that helps in this department is objectively evaluating my investments, studying mistakes and successes. This is a somewhat labor intensive process, which is a reason why few investors evaluate their investments.

This review should identify potential improvement points related to companies you are investing in, and potentially common success factors prior to investing in a stocks. It could also help identify common denominator problems that could be avoided in the future. This process could also show improvement opportunities for your process.

When I reviewed my investments, I noticed a few interesting patterns. As my review is an ongoing process, I have corrected some of those items. For others, despite my best efforts, I am still making those mistakes.

One of the biggest lessons I learned is that I do not know which of all the companies I have invested in will do the best. I have found that, the whole concept of identifying just 20 companies and sticking to that list is not a good idea for me. I have found out that the best performers I had were after my twentieth idea. The lesson learned is to strive to maintain equal weighting in my portfolio holdings, and to keep an open mind about new investments that fit the qualitative factors. This means that the best way to succeed is to plug away every month, screening the list of dividend champions and contenders, analyzing companies one at a time while trying to be as objective as possible, and then acquiring all of those companies that seem attractively priced, regardless of my opinion as to which one is better than the other.

The second lesson I learned is to avoid selling companies, as much as possible. I have previously made the mistake of selling a stock whose yield fell below a certain arbitrary number and the P/E was either close to 20 or slightly above 20. I would then reinvest the proceeds into a company that looked cheaper and was yielding more. It is possible that I was chasing yield in the process as well. Very often the outcome was that the original company kept doing well, and kept delivering higher profits, dividends to justify the temporary high prices, while the new company didn’t do as well. Therefore, it made little sense to sell a perfectly good company that merely looked pricey, and pay all the taxes, commissions and hassle factor, in order to get into a mediocre investment. The lesson learned is to avoid selling as much as possible. The biggest sin in investing is the desire to act on tips, rumors, things you read, your beliefs that a stock is too high etc. If you are a long-term investor, the important lesson is to stick patiently to your investments, and just collect those dividends. Very few can outsmart the market and correctly sell a stock at the highest price, only to reinvest the proceeds at another stock at the lowest price, and still come out ahead despite taxes and commissions. Instead, I mostly sell stocks now only after a dividend cut – this is a move where the goal is capital preservation.

The third lesson I have learned from observing my losers is that they had a few common denominators. My dividend cutters are concentrated in pass-through entities such as REITS, BDCs and MLPs. The problem with pass through entities is that they send the majority of free cash flow to shareholders in the form of distributions. This leaves them with a low margin of safety in distribution coverage when things temporarily get tougher.

The fourth lesson I have learned is to develop my personal methodology to follow in identifying companies for further research. In my case I go through my normal screening process regularly. There are reasons why I have a screen to begin with – to only focus on companies that have stood the test of time, and have weathered a few recessions without much damage to their financials. A record exceeding ten consecutive years of dividend increases is an important first threshold that only 300 or so companies in the US have. That being said, it may be helpful to listen to others for feedback, in order to identify blind spots. However, that doesn't mean to follow anyone blindly, but to determine if you are learning anything new from them.

If I purchased blindly any investment that someone has told me about, I am at an immediate disadvantage. That's because chances are that I have not done much research on it. If an authority figure has approved this investment, then chances are that I may ignore red flags and initiate a position in the stock, while hoping for the best, rather than crossing my T’s and I’s.  I would not know when things are going poorly, and what to do if things do not work out as expected. However, if I learn of a company from someone else, and it fits my criteria for valuation, quality and fundamentals after I run it through my process, I will consider investing in the stock.

If you do not develop your own methodology, you are at a disadvantage because you do not learn about investing. If you develop your methodology, but do not follow it, you are also at a disadvantage.  However, it does pay to follow different strategies and investors, in order to learn from them and identify tools that you can implement in your investment arsenal.

I have personally learned a lot about investing by reading academics, index investors, active day-traders, and other dividend investors to name a few. By synthesizing information from a variety of sources, I can develop and improve my investing over time. I believe that you can learn from everyone you meet, even if you learn what not to do. I have learned by studying the success of others, but I have also learned by studying failures as well.

Thank you for reading. I hope this article serves as an inspiration to look into ways to improve your investing over time.

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Monday, April 15, 2019

Four Dividend Stocks Rewarding Investors With Raises

As part of my monitoring process, I review the list of dividend increases every week. I usually focus my attention on the companies that have managed to grow dividends for at least a decade. This filter reduces the number of companies to review weekly.

The next step involves reviewing trends in fundamentals, in order to determine the likelihood of future dividend increases. Growth in earnings per share can provide the fuel behind future dividend increases and increases in intrinsic values.

However, it is also important to select companies when the valuation makes sense. A company that doesn’t grow can be a good investment, provided that the price is sufficiently low. A company that grows by leaps and bounds may turn out to be a poor investment, if the entry price is prohibitively high. To make things even more interesting, the valuation and availability of investments is also relative. It is dependent on the opportunities we have at the moment, and how they stack against each other.

The monitoring process I described is the way I use to keep tabs of many companies I own or am considering owning. The quick review is also the cornerstone of the way I review dividend companies for investment.

Over the past couple of weeks, there were four companies that raised dividends and also checked my boxes for further research. The companies include:

The Procter & Gamble Company (PG) provides branded consumer packaged goods to consumers in North America, Europe, the Asia Pacific, Greater China, Latin America, India, the Middle East, and Africa. The company operates in five segments: Beauty; Grooming; health Care; fabric & Home Care; and Baby, Feminine & Family Care.

P&G raised its quarterly dividend by 4% to 74.59 cents/share. This marked the 63rd consecutive year of annual dividend increases for this dividend king. Over the past decade, it has managed to grow the distributions at an average rate of 6.20%/year.

Earnings per share have trended somewhat lower however, falling from $4.35/share in 2008 to $3.67/share in 2018 (although the latter can be adjusted to exclude certain one-time items to arrive to core EPS of $4.22/share.). Procter & Gamble is expected to generate $4.44/year in 2019.
The stock is overvalued at 24.60 times forward earnings and offers a forward yield of 2.80%. Given the lack of earnings growth over the past decade and the high valuation, I am not interesting in adding to this otherwise stable and reliable consumer giant. This has been the case for a while now, as my last analysis of PG alluded to.

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. The company operates through four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services.

The partnership raised its quarterly distributions to 43.75 cents/unit. The distribution is 2.30% higher than the distribution paid during the same time last year. The rate of distributions growth is slowing down, as the growth over the past decade was 5.30%/year on average. Enterprise Products Partners tens to raise distributions every quarter. The partnership has a 23 year track record of annual hikes in distributions to unitholders. The MLP yields 5.90%.

International Speedway Corporation (ISCA) promotes motorsports themed entertainment activities in the United States. The company raised its annual dividend by 4.30% to 49 cents/share. This marked the 14th year of annual dividend increases for this dividend achiever. During the past decade, it has managed to grow dividends at an annual rate of 14.60%.

Between 2008 and 2018, the company’s earnings went from $2.71 to $1.85/share. The latter was adjusted for one-time items. International Speedway Corporation is expected to earn $2/share in 2019.

The stock sells at 21.50 times forward earnings and yields 1.10%. Given the lack of earnings growth, and the high valuation, I am going to take a pass on the stock.

Bank OZK (OZK) provides retail and commercial banking services to businesses, individuals, and non-profit and governmental entities. The bank raised its quarterly dividend by 4.50% to 22 cents/share. This marked the 24th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth is at 20.30%/annum on average.

Between 2008 and 2018, this bank managed to grow earnings from $0.51/share to $3.24/share. Bank OZK is expected to earn $3.48/share in 2019. I see a lot of dividend investors reviewing Bank OZK over the past few months. The stock is cheap at 8.90 times forward earnings and yields 2.85%. I would have to add the stock to my list for further research.

Thank you for reading!

Relevant Articles:

Procter & Gamble Raises Dividends for 61st Consecutive Year in a Row
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Thursday, April 11, 2019

This is why we diversify

I have spent the last month discussing CVS Health (CVS) and Walgreen’s (WBA) with a lot of readers on my site. I have spent even more time discussing these companies than thinking about any of the ther companies I have a stake in.

The number of questions intensified after Walgreen’s issued a terrible profit miss, and guided no earnings growth in 2019. This brought the stock down a lot to the lowest levels in 6 years. I personally believe that the stock was already priced very bearishly. It is likely that the company faces a lot of headwinds with increased competition, rising scrutiny and a pressure on revenues and margins. Check my analysis of Walgreen's for more information about the company.

CVS Health has these issues as well, along with the high levels of debt after acquiring insurer Aetna and freezing its dividend payment.

As I discussed before, I am more likely to add to Walgreen’s than CVS Health, mostly due to the fact that the former is still growing the dividend. The latter is a more diversified entity, but has more debt, faces integration risks and froze the dividend.

Needless to say, I own stakes in both companies. I have added to both in the past year. However, I have been adding to other companies as well. I would hate to throw money into a bottomless pit, but I also hate to miss out on a bargain. I do have some controls in place, in case I am wrong in my assessments however. I require a decent valuation before buying a stock, because that means I get more dividend income from my initial investment right away. If a stock I buy at a 3% initial yield fails in a decade, I at least get to recover at least 30% of my initial stake. I still lose money, but my loss is smaller.

I also tend to build my position over time, which allows me to average down my cost basis if there is a decline in the share price. Since I build my positions slowly, I also see gradual changes in underlying fundamentals over time. As a result, I may stop adding to a position if I believe that fundamentals are deteriorating.

Last but not least, I also tend to limit the amount of capital I allocate to every investment idea. I do not want to depend on a single entity for the success or failure of my portfolio. I know I will make mistakes along the way, which is why I am trying to lessen their impact on my overall well being when they happen. This is why I diversify my portfolio as much as I can. I do not want one bad apple reducing my dividend income significantly. For example, one dividend cut is more painful if my portfolio consists of 20 individual names and I have a 5% allocation to the company that committed the ultimate sin of dividend investing. The dividend cut will be less painful if I have a portfolio consisting of 100 names, and the dividend cutter represents 1% or 2% of the total portfolio.

While we have an idea of an investment, and can control the screening process, and the portfolio weights, I do not know in advance which of my ideas will do the best and which one will fail miserably. This is why I try to buy over time, I diversify, and try to allocate money as equally as possible. I also try to reinvest dividends selectively into more companies to further diversify my portfolio. As a result, I believe that my portfolio can withstand potential dividend cuts without much reduction in dividend income.

The risk management controls in place include:

1) Dividend safety analysis and valuation analysis before purchase
2) Diversification by number of companies, different sectors and through time (dollar cost averaging)
3) Using dividend income to invest in other companies, in order to further diversify my portfolio
4) Selling dividend cutters, and reinvesting proceeds elsewhere
5) Placing limits on position sizes

I believe that the winners will take care of themselves. This is why my job as a portfolio analyst is to manage the risks. I can do the best job in the areas within my control, in order to place the odds of success in my favor. That way, my portfolio's will not be dependent on the success or failure of a couple of companies, but on the overall investment process of implementing my strategy.

Thank you for reading!

Relevant Articles:

Concentrated versus Diversified Dividend Investing
Dividend Investing Is Not As Risky As It Is Portrayed Out To Be
How to define risk in dividend paying stocks?
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