I invest in dividend growth stocks in order to generate a rising stream of dependable dividend income. Dividend income is more stable, and the amount and timing of those dividend payments is more predicable than capital gains. One way I monitor companies I own, and companies I am interested in, includes checking the rates of dividend growth every week. This lets me see if my investment thesis is working out or not. This exercise is helpful, in conjunction with my regular review of each individual stock holding.
I went through the list of dividend increases, and isolated instances where a company has managed to grow dividends for at least a decade. The companies include:
Realty Income Corporation (O) is a real estate investment trust that invests in US commercial real estate. The company raised its monthly dividend to 20.15 cents/share. This new rate represents a 6% increase over the monthly dividend rate set at the same time last year. This dividend growth stock has raised dividends for 23 years in a row. The ten year dividend growth rate is 5%/year. This REITis is overvalued and it is selling for 25.10 times forward the expected FFO of $2.85/share for 2016. This REIT yields 3.40%. I would be interested in buying some shares at a 4% yield, which is equivalent to a price of $60 or below. If I require an entry yield of 5%, I would require an entry price below $49/share.
Reynolds American Inc. (RAI), through its subsidiaries, manufactures, and sells cigarettes and other tobacco products in the United States. It operates through RJR Tobacco, Santa Fe, and American Snuff segments. The company raised its quarterly dividend by 9.50% to 46 cents/share. This dividend achiever has raised dividends for 13 years in a row. The ten year dividend growth rate is 10%/year. The stock is overvalued at 21.60 times forward earnings and yields 3.70%. It would be an interesting investment on dips below $46/share.
Republic Services, Inc. (RSG), together with its subsidiaries, provides non-hazardous solid waste collection, transfer, recycling, and disposal services for commercial, industrial, municipal, and residential customers in the United States and Puerto Rico. It operates in three segments: East, Central, and West. The company raised its quarterly dividend by 6.70% to 32 cents/share. This dividend growth stock has raised dividends for 14 years in a row. The ten year dividend growth rate is 13.10%/year. The stock is overvalued at 23.70 times forward earnings and yields 2.50%. The stock may become attractive on dips below $43/share.
Sunoco Logistics Partners L.P. (SXL) transports, terminals, and stores crude oil, refined products, and natural gas liquids (NGLs). Its Crude Oil segment provides transportation, terminalling, and acquisition and marketing services to crude oil markets in the southwest, Midwest, and northeastern United States. This MLP raised quarterly distributions to 50 cents/share. This MLP yields 7%.
While Hershey is not a dividend achiever, I also included it in the review as this is a company I own and am interested in building out a position there over time.
The Hershey Company (HSY) manufactures, imports, markets, distributes, and sells confectionery products. The company operates through two segments, North America, and International and Other. The company raised its quarterly dividend by 6% to 61.80 cents/share. This dividend growth stock has raised dividends for 7 years in a row. The ten year dividend growth rate is 9.20%/year. The stock is overvalued at 26 times forward earnings and yields 2.20%. The stock would be an interesting addition on dips below $85/share. This would be a reasonable entry price if the proposed acquisition of Hershey by Mondelez doesn’t go through.
Full Disclosure: Long HSY, O,
Relevant Articles:
- Should you celebrate when your dividend paying company is about to be acquired?
- Dividend Achievers Offer Income Growth and Capital Appreciation Potential
- How to read my weekly dividend increase reports
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