Monday, July 20, 2015

Six Dividend Growth Stocks That Keep Delivering For Their Shareholders

Dividend growth stocks are the gift that keeps on giving. I like the fact that most of the work in selecting good dividend growth stocks is upfront in analyzing those investments. What follows next is a lifetime of dividend payments, distributed every quarter, which grow over time. My goal is to assemble enough dividend growth stocks in my portfolio, in order to start generating income to pay for my retirement. My dividend portfolio is a silent worker in my household, who works 24/7 for me, and who dutifully shares all of their income with me. This income is completely passive in nature, and it does not require me to wake up at 6 am every day, shuffle TPS reports all day long, and make sure I do not forget to put a coversheet on those same reports.

I like watching dividend growth investing at work – this is when the companies I own keep rewarding me with a higher dividend check for a decision I made years ago. There were several notable companies which raised their dividends to shareholders. The list includes:

Omega Healthcare Investors, Inc. (OHI) is a real estate investment trust which invests in healthcare facilities, primarily in long-term healthcare facilities in order to create its portfolio. The company increased its quarterly dividend to 55 cents/share. This increase represents a 7.80% increase over the distribution paid during the same time last year. Omega Healthcare Investors is a dividend achiever, which has managed to grow dividends for 13 years in a row. Over the past decade, this REIT has managed to boost dividends by 10.90%/year. This REIT currently yields 6.20%. Check my review of Omega Healthcare Investors for more details.

Kinder Morgan, Inc. (KMI) operates as an energy infrastructure and energy company in North America. The company operates through Natural Gas Pipelines, CO2, Terminals, Products Pipelines, Kinder Morgan Canada, and Other segments. The company increased its quarterly dividend to 49 cents/share. This represents a 14% increase over the distribution paid during the same time last year. In addition, the company is on track to reach annual dividend payments of $2/year in 2015. Kinder Morgan has managed to raise dividends every single year since it went public in 2011. The stock yields 5.20%.Since this is my largest position, I will not be buying more shares. However, I am bullish on the company and its plans to grow distributions over the foreseeable future.

ConocoPhillips (COP) explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. Its portfolio includes shale and oil sands assets; lower-risk legacy assets in North America, Europe, Asia, and Australia. The company increased its quarterly dividend by 1.40% to 74 cents/share. ConocoPhillips is a dividend achiever, which has managed to grow dividends for 14 years in a row. Over the past decade, the company has managed to boost dividends by 15.20%/year. The stock yields 5.20%. Based on the expected earnings for 2015 of 31 cents/share, the company will be unable to cover distributions well. Even if you look at expected earnings for 2016 of $2.24/share, we could see that the company will be unable to cover dividends from earnings. As such, the defensive dividend growth investor like myself will hold but not add under current conditions. There is one energy company I want to buy, and it is not ConocoPhillips.

The J. M. Smucker Company (SJM) manufactures and markets branded food products worldwide. It operates through four segments: U.S. Retail Coffee; U.S. Retail Consumer Foods; U.S. Retail Pet Foods; and International, Foodservice, and Natural Foods. The company increased its quarterly dividend by 4.70% to 67 cents/share. J. M. Smucker is a dividend achiever, which has managed to grow dividends for 18 years in a row. Over the past decade, this company has managed to boost dividends by 9.60%/year. The stock sells for 18.90 times forward earnings and yields 2.50 %. I have analyzed the company before, but never really pulled the trigger on it.

National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust which acquires, owns, manages, and develops retail properties in the United States. The company increased its quarterly dividend by 3.60% to 43.50 cents/share. National Retail Properties is a dividend champion, which has managed to grow dividends for 26 years in a row. Over the past decade, this REIT has managed to boost dividends by 2.50%/year. This REIT currently yields 4.70%. While I like the business, and find it to be defensive and quality one, I do not like the low growth in distributions. As a result, I would take a pass on National Retail Properties as of today.

Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products. It operates through four segments: Engine, Distribution, Components, and Power Generation. The company increased its quarterly dividend by 25% to 97.50 cents/share. This marked the tenth consecutive annual dividend increase for Cummins. Over the past decade, the company has managed to boost dividends by 25.10%/year. The stock is selling at 12.90 times forward earnings and yields 3%. This is a company that I have not analyzed before. I will add it to my list for further research.

Full Disclosure: Long OHI, KMI, COP,

Relevant Articles:

The Energy Company I want to buy
How to read my weekly dividend increase reports
Dividends Provide a Tax-Efficient Form of Income
How to find long term dividend stock ideas
Why Dividend Growth Stocks Rock?


  1. Long OHI and KMI. Previously owned COP but sold to put more money into XOM and CVX. SJM looks slightly over priced; would need to come down below $100 for me to be seriously interested.

    I worked with CMI before I retired, good company, but I would not consider adding it to the portfolio since my pension comes from an automotive manufacturer (don't want too many eggs in that basket). The folks that I spoke with at CMI earlier this year thought that the run in the stock was over (went from $20 in 2009 to $150+ in 2014), but they weren't thinking of it in terms of DGI. CMI has a very strong brand with a loyal following. Unfortunately, the California Air Resources Board (CARB) enacted new regulations for diesel exhaust emissions in 2006 that resulted in exhaust after treatment systems that are both very expensive and very complex, and that caused reliability to drop. Most of the quality problems have been addressed, but the complexity and expense remain with no solution in sight. Note that the US Environmental Protection Agency (EPA) has adopted similar emissions regulations, so this isn't just a problem with the states that have adopted California regulations, but is a problem in the entire US and Canada.

    1. Hi Keith,

      Thank you so much for your comment on CMI. You really seem to know your stuff. Would those new regulations actually improve the competitive position of large scale companies like CMI, who have the expertise and know-how to address them better? Plus, I wonder if extra complexity would translate into more money for engines or parts..I need to look further into CMI ( my list of companies to look at is shamefully long), but I appreciate your comments a lot.

      I am glad you are not "bored" in retirement ;-)


    2. Bored? Pun intended? You hear retirees say that they are busier than when they were working. Probably not true, but I have enough projects going to stay busy. I spent 8 hours putting oak flooring in one of the bedrooms today. It's a lot harder than it was the last time I did it 2 decades ago. I should be done in another couple of weeks.

      The regulations don't necessarily help the larger companies, but you have to have the resources to do all of the design, research, testing, etc just to play the game. Certification testing is expensive and takes time. I don't know of any start-ups in the diesel engine arena. The cost of replacement parts is a double-edged sword. If a DPF (diesel particulate filter) fails under warranty, it can cost CMI $3K to $5K to replace. If it fails after the warranty period then they can collect from the customer, a very pissed off customer, though.

  2. Enbridge (ENB) would be a good add to your list of dividend growth stocks that keep on delivering. ENB raised their dividend 33% earlier this year making it the 19th consecutive year of increases. The S&P Capital Quality Ranking is a solid A-.

    ENBRIDGE INC. operates the world's longest crude oil and liquids transportation system in North America. The Company also has a growing involvement in natural gas transmission and midstream and is currently expanding its interests in renewable energy incl. wind, solar, hybrid fuel cell, geothermal and waste heat recovery. Enbridge owns and operates Canada's largest natural gas distribution company.

    1. Hi Bernie,

      Thanks for stopping by and commenting. The list in this article shows dividend growth companies, which have recently raised distributions. By checking dividend increases is one of the ways I monitor dividend growth stocks I own or am interested in.

      Enbridge looks like a nice dividend growth stock, with a long history of growing dividends. Several years ago I ended up purchasing Enbridge Energy Management LLC EEQ, which has done very well. However, ENB has done a little better than EEQ. I was attracted to the tax-deferred nature of EEQ distributions.

  3. KMI was the first increase I really noticed since building out the portfolio. Plus, really fun to see the increase automatically come through your Google Sheet spreadsheet for tracking everything. Fun! Off topic but I can't recall this, what does it mean to build a "full position"? I've seen it referenced and even an explanation but I can't explain what it means exactly. Thanks for any help!


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