Monday, March 2, 2015

Dividend Growth Stocks Rewarding Shareholders with a Raise

One of the ways for me to monitor my portfolio as well as my watchlist is by checking the list of dividend increases every week. This also helps me identify emerging dividend growth stocks that nobody is focusing on yet. Dividend increases show confidence of the corporate boards about their company near term earnings. Because US companies do not like to lower dividends, they tend to raise distributions only when they see high likelihood of gains in near term earnings. I enjoy reading press releases that describe the dividend increases as well, since they provide a good insight about the sentiment of those boards as well.

From the list of dividend increases, I isolated those where the company had raised dividends for at least 5 years. A few companies had disappointing increases, but I included them in case anyone else is owning them.

Digital Realty Trust, Inc. (DLR), a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company boosted its quarterly dividend by 2.40% to 85 cents/share. This was a rather disappointing rate of growth for this REIT. It nevertheless marked the 11th consecutive year of dividend increases for this dividend achiever. The ten year dividend growth was 14.40%/year, which is much higher than the current increase. Currently, the stock sells for 13.20 times FFO and yields 5.10%. Given the disappointing raise for this year, I am going to view this REIT as a hold at best. Check my previous analysis of Digital Realty for more details.

The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. This dividend champion has raised distributions for 33 years in a row. The company has managed to boost annual dividends by 9.80%/year over the past decade. Currently, the stock sells for 13.10 times forward earnings and yields 2.30%. I added some shares to my small position in Chubb. I would be more excited about this company if it sells for less than $91/share. Check my analysis of Chubb for more details.

Ross Stores, Inc. (ROST), together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dds DISCOUNTS brand names in the United States.  The company boosted its quarterly dividend by 17.50% to 23.50 cents/share. This marked the 21st consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to raise dividends by 25%/year. Currently, the stock sells for 21.90 times forward earnings and yields 0.90%. I will need to add the company on my list for further research.

Comcast Corporation (CMCSA) operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks segments. The company boosted its quarterly dividend by 11.10% to 0.25 cents/share. This marked the 8th consecutive year of dividend increases for Comcast. The 5 year dividend growth is 26.80%/year. Currently, the stock sells for 18.30 times forward earnings and yields 1.70%. I need to add this company to my list for further research.

Essex Property Trust, Inc. (ESS) operates as a self-administered and self-managed real estate investment trust in the United States. The company boosted its quarterly dividend by 10.80% to $1.44/share. This dividend achiever has increased dividends for 21 years in a row. The company has managed to boost annual dividends by 4.80%/year over the past decade. Currently, the stock sells for 28 times FFO and yields 2.60%. This is a very low yield for a REIT and a high FFO ratio, and shows that this REIT is a little pricey today. Either way, I will add it to my list for further research, since I like learning about business, and I like to be prepared for different opportunities. But I would not touch that unless I can see it under $180/share, which is equivalent to the low range estimate of 20 times forward FFO for 2015.

Southwest Gas Corporation (SWX) is engaged in the purchase, distribution, and transportation of natural gas in Arizona, Nevada, and California. The company boosted its quarterly dividend by 11% to 40.5 cents/share. The company has raised dividends for 9 years in a row. Southwest Gas Corporation has managed to boost annual dividends by 5.70%/year over the past decade. Currently, the stock sells for 17.70 times forward earnings and yields 2.80%. Given the slowdown in dividend growth as of the past few years, I am not going to look further into this company.

Westar Energy, Inc. (WR), an electric utility, generates, transmits, and distributes electricity in Kansas. The company boosted its quarterly dividend by 2.90% to 36 cents/share. This marked the 11th consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase dividends by 6.20%/year. Currently, the stock sells for 16.20 times forward earnings and yields 3.70%. Given the slowdown in dividend growth as of the past few years, I am not going to look further into this company.

Waste Management, Inc. (WM), through its subsidiaries, provides various waste management environmental services to residential, commercial, industrial, and municipal customers in North America. I The company boosted its quarterly dividend by 2.70% to 38.50 cents/share. This marked the 12th consecutive year of dividend increases for this dividend achiever . Over the past decade, the company has managed to increase dividends by 7.20%/year. The rate of dividend growth has slowed down over the past five years however. Currently, the stock sells for 21.80 times forward earnings and yields 2.80%. Given the slow growth in distributions, the high P/E ratio, and the low yield, I would not consider this stock a buy at the moment.

Retail Opportunity Investments Corp. (ROIC), a real estate investment trust (REIT), engages in the acquisition, ownership, and management of necessity-based community and neighborhood shopping centers in the eastern and western regions of the United States. The company boosted its quarterly dividend by 6.30% to 17 cents/share. This will mark the 5th consecutive year of dividend increases for this company. Currently, the stock sells for times 19.70 times FFO and yields 4%.

National Interstate Corporation (NATL), together with its subsidiaries, operates as a specialty property and casualty insurance company in the United States. The company boosted its quarterly dividend by 8.30% to 13 cents/share. This marked the 11th consecutive year of dividend increases for this dividend achiever. Over the past five years, the company has managed to increase dividends by 11.40%/year. Currently, the stock sells for 16.40 times forward earnings and yields 1.90%. The dividend growth makes this an interesting play to put on my list for further analysis.

Infinity Property and Casualty Corporation (IPCC), through its subsidiaries, provides personal automobile insurance with a focus on nonstandard auto insurance in the United States. The company boosted its quarterly dividend by 19.40% to 43 cents/share. This marked the 11th consecutive year of dividend increases for this dividend achiever. In the past decade, the company has managed to increase dividends by 20.70%/year. Currently, the stock sells for 16.80 times forward earnings and yields 2.30%. This looks like an interesting opportunity that I would need to add to my list for further research.

The Home Depot, Inc. (HD) operates as a home improvement retailer. The Home Depot stores sell various building materials, home improvement products, and lawn and garden products as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me, and professional customers. The company boosted its quarterly dividend by 25.50% to 59 cents/share. This marked the 6th consecutive year of dividend increases for this former dividend achiever . Over the past decade, the company has managed to increase dividends by 19.20%/year. Currently, the stock sells for 21.80 times forward earnings and yields 2%. I would need to add the company on my list for further research.

Albemarle Corporation (ALB) develops, manufactures, and markets engineered specialty chemicals. The company boosted its quarterly dividend by 5.50% to 29 cents/share. This marked the 21st consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase dividends by 13.80%/year. Currently, the stock sells for 16.10 times forward earnings and yields 2.10%. I would need to add the company on my list for further research.

Sempra Energy (SRE), an energy-services holding company, develops energy infrastructure, operates utilities, and provides related services. The company boosted its quarterly dividend by 6.10% to 70cents/share This marked the 12th consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase dividends by 10.10%/year. Currently, the stock sells for 22.40 times forward earnings and yields 2.50% I would need to add the company on my list for further research.

Full Disclosure: Long CB, DLR

Relevant Articles:

Five Things to Look For in a Real Estate Investment Trust
S&P Dividend Aristocrats Index – An Incomplete List for Dividend Investors
Three stages of dividend growth
How to read my weekly dividend increase reports
Rising Earnings – The Source of Future Dividend Growth

9 comments:

  1. Hi,

    I'm trying to find the best way to track my dividend portfolio and I would like to ask a few questions relating to the subject in this article:

    1. Where do you see the list of dividend increases?

    2. Do you subscribe to some kind of mail notification for dividend announcements regarding companies you own or look out for?

    Thanks

    ReplyDelete
  2. If you subscribe to press releases for the companies you monitor, you will find out everything including earnings, dividends, M&A etc

    ReplyDelete
    Replies
    1. Thank you for your reply.
      Which form should I look for if I'm only interested in dividend declarations?

      Delete
  3. DGI,

    Thank you for your post. I enjoy reading your blog.
    I have a question, that i hope you can help me with.

    If we assume that i have a portfolio of lets say 100.000$ today and i put a fixed amount of 500$ to work every month, and over the following 10yrs the portfolio will yield an average of 3.5% and the dividends will be raised anually by 8%.

    How do i calculate my yearly dividends 10yrs from now?

    best regards
    Lars

    ReplyDelete
    Replies
    1. I've been using this excel sheet for a few years now for each stock I own. But as it was originally designed it should do exactly what you're looking for.

      dripinvesting.org/tools/DCAModelCalculatorB.xls

      Delete
  4. DGI -
    Thank you for this update. Your articles have been very helpful as I leave the index fund arena and build my DGI portfolio. I am here for the long term and have no interest in trading or timing the market, and understand that we cannot predict the market's future, but do you feel, or even better, have data that shows DGI investing provides continued returns, if not an element of protection, during market downturns?
    Best regards,
    Morris

    ReplyDelete
    Replies
    1. Hi,

      I had a similar urge to know that in October and I decided to check it out.

      I contacted David Fish (the creator of the CC list) and asked him for his oldest copy of the CCC list.

      David Fish was kind enough to send me a link to his archive where I found a CCC list from December 2007 (updated on December 25 2007 I believe).

      That first list had only companies with 25 or more years of consecutive dividend increases (a few were 24 but very close to 25).

      I used virtual currency and allocated $1000 to each company in his list (around 140 companies if I remember correctly) at the market open the day after he originally posted his list.

      I used a website to calculate total-return (don't remember which one though) and inserted the names of the companies one by one as well as the total return into a new excel spreadsheet I made.

      Some of the symbols were missing from that website because they were merged with other companies or changed their symbols, some just went bankrupt as well.
      In order to be conservative I treated all the missing companies as bankrupted companies (even those that were merged and still exist) and treated the $1000 I invested in those as 100% loss.

      Counting the profits from all the surviving companies I still had 77% profit on the entire initial investment (including the investment in the companies I wrote off).

      Just as a comparison I looked at the SPY and it had a return of 36% (I didn't look at the total return though which will be higher and more accurate).

      That little practice convinced me that my dividend portfolio will most likely survive the next downturn and that I won't be selling in panic.

      You can do the same test yourself if you want, it isn't hard, just tedious.

      Delete
  5. I was gifted quite a few shares of HD nearly 20 years ago to help pay for college. I still have a fair number and the years since they started taking their dividend seriously have been nice. I started dripping in August of 2008.

    Dividend went from $.225 to $.59.... I like it. Though the sub-2% yield is a little annoying, but the huge dividend growth in the last few years are great.

    ReplyDelete
  6. Child starter , what is the lowest priced drip stock to put in a child's name as a gift investment that they can grow into it and by that I mean when they are growing up you explain what it is and than the big IQ question is. What age do they comprehend what you did and say to there self that is a really important gift. I would find it interesting as a true gauge of how children understand the business world and at what age and also who grows or saves on there own and at adult age see there real value . Real value meaning of coarse the cost of the stock and the drip growth but also the learning side value which would be a life long memory. The modern day Drip Piggy Bank!

    ReplyDelete

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