Monday, December 15, 2014

Four Dividend Increases for Further Review

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

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

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

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

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

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

Full Disclosure: Long GE, WPC

Relevant Articles:

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

5 comments:

  1. Per Fastgraphs.....WPC is clearly overvalued.

    Baldy 2000

    ReplyDelete
  2. Baldy,
    If there is one think I have tried to teach people on this site is the need for independent thinking in their investing. Do not outsource your thinking to someone/something else. Following someone blindly, without doing your own homework, is very very dangerous to the long-term wealth building.

    ReplyDelete
  3. Totally with you on WD40. If only their PE would fall, I might jump right in... Also GE seems like it could be something good to own in a year or two's time. I try to go for 7yrs+ on dividend growth, so it doesn't quite cut it yet for me, unfortunately.

    ReplyDelete
  4. never thought of wd40 stock. Seems like a great idea and steady as well!

    ReplyDelete

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