Monday, February 22, 2016

Ten Dividend Growth Stocks Rewarding Long Term Investors With a Raise

I invest in dividend growth stocks for the regular and growing stream of cash dividends. I monitor the list of dividend increases every week. There were several companies that raised dividends last week. I included only those that raised dividends last week and have raised dividends for at least a decade below:

Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, Mexico, Australia, New Zealand, Puerto Rico, the Dominican Republic, and the Caribbean region. The company raised its quarterly dividend by 6.90% to 65.75 cents/share. This marked the 60nd consecutive annual dividend increase for the dividend king Genuine Parts Company. In the past decade, Genuine Parts Company has managed to increase its annual dividend by 6.90%/year. The stock is selling at 19.20 times forward earnings and yields 2.90%. I find the company to be an attractive opportunity for long-term investors at the moment. Check my analysis of Genuine Parts Company for more information.

The Coca-Cola Company (KO), a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. The company raised its quarterly dividend by 6.10% to 35 cents/share. This marked the 54th consecutive annual dividend increase for the dividend king Coca-Cola. In the past decade, Coca-Cola has managed to increase its annual dividend by 9%/year. The stock is selling at 22.60 times forward earnings and yields 3.20%. While raising dividends for 5 decades is an impressive track record, I do not like the fact that earnings per share have not increased since 2012. Without further growth in earnings per share, dividend growth will be limited. Therefore, at this time I would not be interested in adding to Coca-Cola. I would continue holding the stock however, but allocate dividends elsewhere ( in my case, I am spending taxable dividends in 2016).

Digital Realty Trust, Inc. (DLR) is a real estate investment trust (REIT) which engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The REIT raised its quarterly dividend by 3.50% to 88 cents/share. This marked the 12th consecutive annual dividend increase for Digital Realty Trust. In the past decade, Digital Realty Trust has managed to increase its annual dividend by 14.40%/year. The stock is selling at 14.90 times expected FFO of $5.45/share and yields 4.40%. As I reduce exposure to pass-through entities, I am in the process of reducing exposure to Digital Realty as well.

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. The company raised its quarterly dividend by 2% to 50 cents/share. This marked the 43th consecutive annual dividend increase for this dividend champion. In the past decade, Wal-Mart Stores has managed to increase its annual dividend by 12.90%/year. The last three dividend increases have been disappointing at roughly 2%/each. The stock is selling at 15.50 times forward earnings and yields 3.10%. At this time, I do not consider Wal-Mart to be an attractive investment, given the lack of earnings growth for the past four fiscal years. I would continue to hold on to my Wal-Mart stock, but allocate dividends elsewhere. Check my analysis of Wal-Mart for more information.

T. Rowe Price Group, Inc. (TROW) is a publicly owned asset management holding company. The company raised its quarterly dividend by 3.80% to 54 cents/share. This marked the 30th consecutive annual dividend increase for the dividend champion T. Rowe Price Group. In the past decade, T. Rowe Price Group has managed to increase its annual dividend by 16.30%/year. The stock is selling at 15.50 times forward earnings and yields 3.10%. I believe that the stock is attractively valued at the moment, despite the latest dividend increase that was too slow. Since most of T.Rowe Price Group revenues are derived from a portfolio of mutual funds, it is obvious that a choppy stock market environment would eat into short-term revenues. Historically, the company has slowed down the rate of dividend growth. As long as stock prices continue climbing over the long run, and as long as not everyone becomes an index investor, T. Rowe Price Group should prosper. Check my analysis of T.Rowe Price.

NextEra Energy, Inc. (NEE), through its subsidiaries, generates, transmits, and distributes electric energy in the United States and Canada. The company raised its quarterly dividend by 13% to 87 cents/share. This marked the 22nd consecutive annual dividend increase for NextEra. In the past decade, NextEra has managed to increase its annual dividend by 8.10%/year. The stock is selling at 18.70 times earnings and yields 3.10%. When I last reviewed the company a few years ago, I really liked the growth story behind this utility. For whatever reason however, I never really pulled the trigger on it. I believe that the company has more growth ahead for it, though the stock price is getting close to the top of the maximum valuation I am willing to pay for it.

Questar Corporation (STR) operates as an integrated natural gas company in the United States. It distributes natural gas as a public utility in Utah, southwestern Wyoming, and a small portion of southeastern Idaho. The company raised its quarterly dividend by 4.80% to 22 cents/share. This marked the 37th consecutive annual dividend increase for Questar. In the past decade, Questar has managed to increase its annual dividend by 6.60%/year. The stock is selling at 19.20 times earnings and yields 3.50%. The company is in the process of being acquired by Dominion Resources for $25/share in cash. For those of you who like merger arbitrage, and who believe the stock will be indeed acquired, it might make sense to buy the stock and hold on until it closes.

The Sherwin-Williams Company (SHW) develops, manufactures, distributes, and sells paints, coatings, and related products to professional, industrial, commercial, and retail customers primarily in North and South America. The company raised its quarterly dividend by 25.40% to 84 cents/share. This marked the 38th consecutive annual dividend increase for this dividend champion. In the past decade, Sherwin-Williams has managed to increase its annual dividend by 12.60%/year. The stock is selling at 20.50 times forward earnings and yields 1.30%. This is the type of dividend growth stock that offers low yield today, but could deliver high yields on cost over time.

Buckeye Partners, L.P. (BPL) owns and operates liquid petroleum products pipeline systems in the United States. The company operates through four segments: Pipelines & Terminals, Global Marine Terminals, Merchant Services, and Development & Logistics. This MLP raised quarterly distributions to $1.1875/unit, which was up from $1.1375/unit distribution paid at the same time last year. This MLP has increased distributions for 21 years in a row and has a ten year distribution growth rate of 5.10%/year. As I am focusing away from pass through entities, I am posting this increase merely for information purposes for readers.

Xcel Energy Inc. (XEL), through its subsidiaries, engages primarily in the generation, purchase, transmission, distribution, and sale of electricity in the United States. It operates through Regulated Electric Utility, Regulated Natural Gas Utility, and All Other segments. The company raised its quarterly dividend by 6.2% to 34 cents/share. This marked the 13th consecutive annual dividend increase for Xcel Energy. In the past decade, Xcel Energy Stores has managed to increase its annual dividend by 4.10%/year. The stock is selling at 17.80 times forward earnings and yields 3.40%.

Over the past couple of weeks, several people have tried to point out the fact that I had three dividend cuts in the past year - Baxter, Kinder Morgan and ConocoPhillips. Perhaps it is my fault, because I do not like showing off my success from humble beginnings, but prefer to talk about my mistakes as learning opportunities that could benefit my readers. To put this in perspective however, just this week alone I had five dividend increases. In the week prior to that, I had three companies I own raise dividends. The week before that there were two companies I owned that announced their intentions to hike dividends. It is important to keep things in perspective. In my case, it all rests on formulating goals, developing a plan to achieve those goals, and then executing on my plan, while continuously trying to improve on it.

Full Disclosure: Long BAX, BXLT, KMI, GPC, KO, DLR, WMT, TROW,

Relevant Articles:

From zero to $15,000 in dividend income in 8 years
Should I buy Wal-Mart stock at current levels?
How to Increase Dividend Income
How to read my weekly dividend increase reports
How I Manage to Monitor So Many Companies


  1. Yeah the dividend cuts were a pain but you're definitely in the process of rebuilding the lost income organically and not even factoring in the the ability to have preserved capital through selling and reinvesting that capital. The KMI cut was a big loss for our portfolio but so far this year we've recouped over $50 of the lost dividends through organic dividend growth alone. With 10 more months to go for the year the other companies we own will do a big part in easing the pain of the dividend cut.

    1. A diversified dividend portfolio is a beautiful thing, alright. And personally, I'm even feeling better about the KMI I still own now that there is news of the likes of Soros and Buffett picking shares up.

    2. Hi PIP,

      A lot of people forget that when a dividend is cut, you can sell the stock and buy something else with the dividends. In my case, my forward income was at $15,000/year. With KMI I lost about $1,000. When you buy something else with the sale proceeds at a 3% yield, you could increase this by say $300. If the rest of the portfolio manages to boost distributions by a very conservative 4% - 5% my dividend income will be back to breakeven.

      This calculation of course ignores that some dividends are reinvested, and it also ignores the fact that I am adding fresh capital bi-weekly to work. While I am spending taxable dividends this year, I am also reinvesting them in tax-deferred accounts.

      All of this also ignores the fact that when I truly retire from corporate America for good, I will sell all those mutual funds from the 401 (k) and convert the money into an Ira/Roth IRA. The mutual funds yield roughly 2% . The types of income producing companies I am looking at can easily yield 3% on average. So the dividend income I am expecting in the near term is “artificially depressed” for the time being.

    3. Hi Anonymous,

      Diversification is super important. Owning a lot of stocks in a portfolio is important. Owning some fixed income is important as well.

      You will be surprised to hear that there are many people out there who do not understand that different assets perform differently under different economic conditions. Some of those have invested unsuccessfully for decades, yet they are strong headed anyways.

      Good luck in your investment journey!


      PS I actually think that Buffett could have been the driving force behind the KMI investment, though many think it was one of his two lieutenants due to the "low" investment amount. I hope that someone gets to ask him during the shareholder meeting this year.

  2. DGI,

    Walmart is quite the interesting stock right now since they've stalled out. The thing that makes me more comfortable with holding them in my own portfolio is that WMT seems to be one of those too big to fail companies and they came out earlier last year and advised the shareholders that this stall out was upcoming but would be short lived. This is largely due to their employee pay raises and changes in their enterprise. They are however still a major player and I expect them to continue as such as they are a staple in the Midwest to very large populations.

    -Dividend Monster

    1. Wal-Mart is a great company, the dividend is safe and I doubt it will go under in the next 20 years.

      The problem is that it is not growing earnings per share, and therefore dividends are not growing. Hence I would not be considering it for a long-term investment if I were starting out today.

      But as a current shareholder, I am hopeful they can turn this giant ship around towards some growth.

  3. Thanks DGI. What % of your portfolio do you plan on keeping in pass through entities such as REITS in particular.

    Best to you.

    1. I expect direct REIT ownership to be close to zero. Some REITs like Realty Income seem overvalued at yields below 4%. I have thought about buying REIT ETF's, but those have volatile distributions as well. Unfortunately, as my NW grows, I have found myself to be more risk averse. If you are close to winning the game, why take more risks with the money I need, in order to impress people who don't count anyways?

      On the other hand, as I am ramping up 401 (k) contributions to the max, and those mutual funds do own REITS ( perhaps 4% allocations for US and International). As I said before, all new money is going there so as this pile grows in proportion to the whole, the indirect REIT allocation will be there. Therefore, I will likely have an indirect REIT exposure that way until I can convert that 401 (k) into an IRA/Roth IRA. When that will happen is still uncertain right now.

  4. Nicely done DGI.
    STR is already trading @ 24.95 so not much room to cash in on that share price. I sold mine and put it into D. I also own XEL and love DLR. GPC, KO and TROW are doing nicely and keep me pleased too! I also endured COP and KMI dividend cuts. I sold KMI and had trimmed COP prior to the cuts. I still hold some. Keep up your wonderful dividend investing and best to you. Rose :))

    1. You gotta love those dividend increases Rose. Despite the cuts I have experienced in the past year, I am on track to regain everything and then some around sometime this year. This doesn't even take into effect new capital I will put. Somehow I get 3 dividends cuts and everyone assumes dividend growth investing is a bad strategy. I also had 2 companies get bought out in the past year and half (CB and FDO), but for whatever reason, noone told me that DGI is the best super-duper strategy because of that.

      I think that owning STR today can result in a few dividend payments till the deal is consummated at $25/share. It is risky, since upside is capped at the potential dividend, but if deal falls through the downside could be high. But if someone believes there is a high chance of the deal happening, it could be a play. Some hedge funds earn decent sized returns by levering up. This is mostly for more sophisticated players.

  5. DGI,

    Do you software to keep track of dividend cuts or increases? I manually check each stock and it is very time consuming. Thanks.

    1. You may like this article:

  6. T Rowe is interesting to me. I think their assets under management are less sticky than Oaktree though. I will probably waffle and buy half of each if I decide to deploy funds in that sector.

    1. I agree on asset stickiness. I think AMP would have stickier assets than TROW

  7. Enjoyed that KO raise. Being a dividend growth investor means that cuts will come eventually. I experienced cuts in GE and WFC during the 2008/9 crisis but held on to every share and continued to buy. Just goes to show that even bluest of blue chips sometimes falter. It happens. Just mitigate those cuts by diversifying across multiple names.

    1. Hi Keith,

      The KO raise was nice. Hope they can turn things around and start growing the earnings again. I agree that cuts can happen – even the best laid plans don’t always work out as expected.

      Sometimes holding after a dividend cut works, but sometimes it doesn’t. I am curious, have you had any dividend cutters that you held on, and didn’t work out like WFC and GE? Did all of your investments work out?

      A lot of other dividend cutters like Bank of America and Citigroup did not work out for shareholders who held on to them. I didn’t own those ( only owned GE), but many did and are still holding on. Other companies that cut dividends during the 2007 – 2009 meltdown actually went bankrupt after cutting dividends. So holding onto to dividend cutters doesn’t always work out.


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