Monday, February 8, 2016

Five Dividend Growth Stocks Rewarding Investors With Higher Dividends

Most of my money is invested in a portfolio of companies that have a track record of regular dividend increases. I have found that dividend payments in a diversified portfolio of equities is more stable than capital gains. This is why I have chosen to live off dividends in retirement. A cash dividend is a return on investment that is tangible and provides the investor with the positive reinforcement to keep holding onto that position. When you get paid to hold on to a stock every 90 days, and that payment goes up every year, it is much easier to ignore stock market fluctuations, and instead focus on fundamentals. After all, that cash dividend is a reminder that those quotes on your brokerage statement are real businesses.

One of my favorite things to look at is the list of dividend increases. I use it to check whether any companies I own are boosting dividends. I also use it to check for hidden dividend stars I may want to put on the list for further research. In this article, I have isolated those companies that raised dividneds in the past week by more than a token amount, which yielded at least 1%, and had managed to increase dividends for at least years in a row. The companies include:

3M Company (MMM) operates as a diversified technology company worldwide. The company raised its quarterly dividend by 8.40% to $1.11/share. This dividend king has managed to increase dividends for 58 years in a row. Over the past decade, it has managed to boost dividends by 9.30%/year. It sells for 18.70 times forward earnings and yields 2.90%. I believe that the company is attractively valued at the moment, though if prices fall down further, it could be an even better value. Check my analysis of 3M for more details.


Archer-Daniels-Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products. The company raised its quarterly dividend by 7.10% to 30 cents/share. This dividend champion has managed to increase dividends for 41 years in a row. Over the past decade, it has managed to boost dividends by 12.70%/year. It is attractively valued at 12.70 times forward earnings and yields 3.50%.

Meredith Corporation (MDP) operates as a diversified media company that focuses primarily on the home and family marketplace in the United States. It operates in two segments, Local Media and National Media. The company raised its quarterly dividend by 8.20% to 49.50 cents/share. This dividend achiever has managed to increase dividends for 23 years in a row. Over the past decade, it has managed to boost dividends by 12.760%/year. It sells for 12.60 times forward earnings and yields 4.50%. I would need to put this company on my list for further research.

Cincinnati Financial Corporation (CINF) engages in the property casualty insurance business in the United States. It operates in five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The company raised its quarterly dividend by 4.30% to 48 cents/share. This dividend king has managed to increase dividends for 58 years in a row. Over the past decade, it has managed to boost dividends by 4.60%/year. It sells for 20.80 times forward earnings and yields 3.20%. Due to the low growth in dividend payments, and high payout ratio, I have not been a fan of the company for several years.

Praxair, Inc. (PX) produces, sells, and distributes atmospheric, process, and specialty gases, as well as surface coatings in North America, Europe, South America, and Asia. The company raised its quarterly dividend by 4.90% to 75 cents/share. This dividend achiever has managed to increase dividends for 24 years in a row. Over the past decade, it has managed to boost dividends by14.80%/year. It sells for 18.90 times forward earnings and yields 2.80%. This is a company I need to add to my list for further research. However, I already have a substantial position to its competitors Air Products & Chemicals (APD), which might prevent me from putting too much into Praxair in the future.

Disclosure: I have a position in MMM and ADM and APD

Relevant Articles:

How to read my weekly dividend increase reports
Spring Cleaning My Dividend Portfolio
Dividend income is more stable than capital gains
Dividend Kings for 2016
What is Dividend Growth Investing?

2 comments:

  1. DGI,

    Thanks for the review. I wanted to add something about CINF. I love how immune you appear to their 55 years of dividend growth. Many an investor seem to throw money at them just because they have a long track record but you're right, even though they have a long track record of raising them, the raise is hardly anything to get excited about. After 55 years, the stock still only yields 3.48% with an annual payout of $1.92 and a payout ratio of 57%. There's a ton of room there and you have to wonder why it hasn't boosted it any further or at a faster pace. I currently work in insurance and I can tell you that the money they aren't paying out is likely not going to furthering the business. Insurance is fast paced but there are few beasts at the real head of the market. I remain skeptical as to whether or not it will ever really be worth our time.

    Regardless, thanks for the review of these stocks. I'll keep my eye on some others here :),

    -Dividend Monster

    ReplyDelete
    Replies
    1. I'm not sure pushing for a higher payout ratio makes sense. That would just add to the risk of cutting the dividend in times of stress. Instead, I think there is correlation between the dividend growth rate and the business as a whole. CINF chooces to be more conservative about growing the business so ends up with a more conservative dividend growth rate. Even though they pay that dividend consistently, and have a +3% yield right now, if you're buying for dividend *growth* instead of current income there are better options with which to place your money.

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