As part of my monitoring process, I review the list of dividend increases every week. I believe that this exercise provides a quick snapshot of the guidelines I have set up for my investing, and how I implement them with real world information.
In general I look for the following in evaluating companies ( my entry criteria).
1) A minimum of ten years of annual dividend increases
2) A P/E ratio below 20
3) A dividend payout ratio below 60%
4) Annual dividend growth that exceeds inflation
5) Analyzing the trends in earnings per share growth over the past decade
6) I do not have minimum yield requirements any more
Over the past week, the following companies raised dividends. The companies include:
Brown-Forman Corporation (BF.B) manufactures, bottles, imports, exports, markets, and sells various alcoholic beverages worldwide. The company raised its quarterly dividend by 8.20% to 19.75 cents/share. This marked the 34th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost dividends at an annual rate of 8.60%/year. This was supported by growth in earnings per share from 95 cents in 2008 to $1.71 in 2017. The company is expected to earn $1.91/share in 2018. The stock sells for 30.60 times forward earnings and yields 1.30 %. The stock is overvalued at the moment. It may be worth a second look below $38/share.
MDU Resources Group, Inc. (MDU) engages in the regulated energy delivery, and construction materials and services businesses in the United States. The company operates through Electric, Natural Gas Distribution, Pipeline and Midstream, Construction Materials and Contracting, and Construction Services segments. The company raised its quarterly dividend by 2.60% to 19.75 cents/share. This marked the 27th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost dividends at an annual rate of 3.80%/year. Earnings per share declined from $1.76 in 2007 to $1.19 in 2016. The company is expected to earn $1.20/share in 2017. The stock sells for 22.30 times forward earnings and yields 2.90%. Given the high valuation and lack of earnings growth, I do not plan to review the company further from here.
NIKE, Inc. (NKE), together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. The company raised its quarterly dividend by 11.10% to 20 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. Th new yield is 1.35%. Over the past decade, the company has managed to boost dividends at an annual rate of 14.70%/year. The company managed to boost earnings from 94 cents/share in 2008 to $2.51/share in 2017. Nike is expected to earn $2.33/share in 2018.The stock is overvalued at 25 times forward earnings. It may be worth a look if it dips below $46/share.
Union Pacific Corporation (UNP), through its subsidiary, Union Pacific Railroad Company, operates railroads in the United States. The company raised its quarterly dividend by 9.90% to 66.50 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. The new yield is 2.30%. Over the past decade, the company has managed to boost dividends at an annual rate of 22.30%/year. The company managed to boost earnings from $1.71/share in 2007 to $5.07/share in 2016. Union Pacific Corporation is expected to earn $5.80/share in 2017. I find the stock to be overvalued at 22.30 times earnings. Perhaps it may be worth a second look on dips below $100/share.
CDK Global, Inc. (CDK) provides integrated information technology and digital marketing solutions to the automotive retail and other industries worldwide. The company operates through Retail Solutions North America, Advertising North America, and CDK International segments. The company raised its quarterly dividend by 7.10% to 15 cents/share. This marks the third consecutive annual dividend increase for this ADP spin-off. (the spin-off occurred in 2014). Based on my data sources, CDK Global has managed to boost earnings from $1.10/share in 2015 to $1.99/share in 2017. The company is expected to earn $2.97/share in 2018. The new yield is 0.90%. The stock is overvalued at 33 times earnings. Even using forward earnings, the stock is overvalued.
Lancaster Colony Corporation (LANC) manufactures and markets specialty food products for the retail and foodservice markets in the United States. The company raised its quarterly dividend by 9.10% to 60 cents/share. This marked the 55th consecutive annual dividend increase for this dividend king. The company managed to grow earnings from $1.11/share in 2008 to $2.15 in 2017. The stock is expected to earn $4.64/share in 2018. I see it as overvalued at 27 times forward earnings and a yield of 1.90%.
Relevant Articles:
- Dividend Kings List for 2017
- Dividend Achievers Offer Income Growth and Capital Appreciation
- Dividend Champions - The Best List for Dividend Investors
- What should I do about those non-dividend paying stocks I received in a spin-off?
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