As part of my review process, I evaluate dividend increases every week. This process helps me to see how my portfolio holdings are doing. It also helps me to uncover and review new candidates for my portfolio.
I look for dependable dividends from companies with a minimum ten-year streak of annual dividend increases, fueled by earnings growth. I look for dependable dividends from companies with dependable earnings, and solid competitive advantages, which I can acquire at attractive valuations.
During the past week, the following companies increased dividends to shareholders. Each company has a ten year streak of annual dividend increases. I review the latest dividend increase relative to the ten year average, and the growth in earnings per share over the past decade. Last but not least, I discuss current valuation. The companies include:
Franklin Resources, Inc. (BEN) is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. It launches equity, fixed income, balanced, and multi-asset mutual funds through its subsidiaries.
The company increase its quarterly dividend by 3.85% to 27 cents/share. This marked the 40th consecutive annual dividend increase for this dividend champion. During the past decade, it has managed to hike distributions at an annualized rate of 13.20%. The latest increase is a testament to the challenges which the company is facing, as its earnings and assets under management are in a decline.
Between 2008 and 2014, earnings per share increased from $2.22 to $3.79. Franklin Resources earned $2.35/share in 2019. Franklin Resources is expected to generate $2.54/share in 2019.
The company reduced the number of shares from 715 million in 2008 to 504 million in 2019. They were shrinking an already shrinking business – without the buybacks earnings per share growth would have been negative over the past decade.
The stock is cheap at 10.20 times forward earnings, a dividend yield of 4.15% and a payout ratio of 42.50%. If earnings decline over time however, that dividend will be in jeopardy. Check my analysis of Franklin Resources for more information about the company.
Realty Income (O) is a REIT which generates cash flow from over 5,900 real estate properties owned under long-term lease agreements with commercial tenants.
The Monthly Dividend Company is dedicated to providing stockholders with dependable monthly income. Just last week, it increased its monthly dividend to 22.75 cents/share. This is a 2.95% increase over the dividend paid during the same time last year. During the past decade, Realty Income has managed to boost dividends at an annualized rate of 4.45%. After this raise, Realty Income is officially joining the list of Dividend Champions!
Between 2008 and 2018, Realty Income has managed to grow FFO/share from $1.83 to $3.12. The company expects FFO/share to be in the range of $3.26-$3.31.
Right now, the stock of this otherwise well-managed REIT is overvalued at 22.20 times forward FFO. Realty Income yields 3.75%. If I wanted to buy Realty Income at a 5% yield, I would have to wait for an entry price below $55/share.
Check my analysis of Realty Income for more information about the company.
WD-40 Company (WDFC) develops and sells maintenance products, and homecare and cleaning products in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific.
The company boosted its quarterly dividend by 9.80% to 67 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. During the past decade, WD-40 has managed to increase dividends at an annualized rate of 8%.
Between 2009 and 2019, WD-40 has managed to increase earnings from $1.28/share to $4.02/share. WD-40 is expected to earn $4.79/share in 2019.
The stock is really overvalued at 40.80 times forward earnings. Its yield is at 1.35%.
When I reviewed WD-40 in 2014, I considered the stock overvalued at 24.70 times forward earnings and a dividend yield of 2%.
J & J Snack Foods Corp. (JJSF) manufactures, markets, and distributes nutritional snack foods and beverages in the United States, Mexico, and Canada. It operates in three segments: Food Service, Retail Supermarkets, and Frozen Beverages.
J & J Snack Foods managed to increase its quarterly dividend by 15% to 57.50 cents/share, marking its 16th year of annual dividend increases. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 17.10%.
Between 2009 and 2019, J &J Snack Foods has managed to increase earnings from $2.21/share to $5/share. The company is expected to earn $5.21/share in 2020.
Unfortunately, this company’s stock is overvalued at 35.50 times forward earnings. It yields 1.25%.
SEI Investments Company (SEIC) is a publicly owned asset management holding company. Through its subsidiaries, the firm provides wealth management, retirement and investment solutions, asset management, asset administration, investment processing outsourcing solutions, financial services, and investment advisory services to its clients.
The company raised its semi-annual dividend by 6.10% to 35 cents/share. This increase marked the 29th consecutive annual dividend increase for this dividend champion. During the past decade, it has managed to increase distributions at an annualized rate of 14.90%.
The company’s earnings declined from $1.28/share in 2007 to 71 cents/share in 2008. Since then, SEI Investments has managed to grow earnings to $3.14/share in 2018. SEI Investments is expected to generate $3.23/share in 2019.
The stock is slightly overvalued at 20.40 times forward earnings and yields 1.05%.
AT&T Inc. (T) provides telecommunication, media, and technology services worldwide. The company operates through four segments: Communications, WarnerMedia, Latin America, and Xandr.
The company raised its quarterly dividend by 1.95% to 52 cents/share. Over the past decade, AT&T has rewarded shareholders with a 2.25% annualized dividend increase.
Between 2008 and 2018, earnings increased from $2.16 to $2.85/share. AT&T is expected to earn $3.54/share in 2019.
Although the stock has increased in price this year and has a slow growth, it still looks attractively valued at 10.80 times forward earnings and a dividend yield of 5.40%. AT&T may be a good idea for further research for retirees looking for dependable current income. If your analysis shows it is a good idea, it may be worth a look.
Dominion Energy, Inc. (D) produces and transports energy. The company operates in four segments – Power Delivery, Power Generation, Gas Infrastructure and Southeast Energy.
Dominion Energy increased its quarterly dividend by 2.45% to 94 cents/share. This marked the 17th year of annual dividend increases for this dividend achiever. During the past decade, the company has managed to grow distributions at an annualized rate of 7.80%.
The earnings history over the past decade has been spotty, due to one-time adjustments for which the numbers have to be corrected for ( and which won’t be done for the purposes of this weekly review).
Dominion Energy is expected to generate $4.20/share in 2019.
The stock seems richly valued at 19.25 times forward earnings but yields 4.60%. The forward payout ratio is at 89.50%, which is a little high for my liking. Dividend growth may disappoint given the high payout ratio, unless the company manages to grow its earnings per share.
Edison International (EIX) engages in the generation, transmission, and distribution of electricity in the United States. It generates electricity through hydroelectric, diesel/liquid petroleum gas, natural gas, nuclear, and photovoltaic sources.
The company raised its quarterly dividend by 4.10% to 63.75 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. During the past decade, Edison International has managed to increase distributions at an annualized rate of 7.10%.
The company is expected to earn $4.69/share in 2019. Edison International earned $3.68/share in 2008. Earnings have been mostly flat for extended periods of time, interrupted by some one-time declines into loss territory.
Currently, the stock is selling for 15.50 times forward earnings and offers a yield of 3.50%. The company is one of those utilities that grow earnings on an irregular basis, then grows dividends for a while, until it cuts them. Perhaps the performance of their peer PG&E is the real reason I am skeptical about this utility.
Nucor Corporation (NUE) manufactures and sells steel and steel products in the United States and internationally. It operates in three segments: Steel Mills, Steel Products, and Raw Materials.
The company raised its dividend by 0.60% to 40.25 cents/share, marking the 47th year of annual dividend increases for this dividend champion. During the past decade, Nucor has increased dividends by 1.50%/year.
Between 2008 and 2018, earnings per share increased from $5.98 to $7.42. Earnings per share were below 2008’s figures between 2009 and 2017. Nucor is expected to earn $4.33/share in 2019.
The company has not performed very well, relative to other companies. However, it is probably the best performing steel company over the past half a century and the only one with a track record of annual dividend increases to be a dividend champion. ( and perhaps a dividend king in three years). Nucor is operating in an incredibly tough industry, which means that its performance is really good in that perspective. A few of its prominent competitors have lost money and gone bankrupt in that time. That doesn’t mean it is a good investment per se today, but I am writing this merely to point it as an example for further study for serious dividend investors.
Right now, Nucor looks cheap at 13 times forward earnings and a dividend yield of 2.85%.
Erie Indemnity Company (ERIE) provides sales, underwriting, and policy issuance services for the policyholders on behalf of the Erie Insurance Exchange.
The company raised its quarterly dividend by 7.20% to 96.50 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. During the past decade, ERIE Insurance has managed to increase dividends at an annualized rate of 6.70%.
Between 2007 and 2018, Erie Indemnity has managed to grow earnings from $3.43/share to $5.51/share. Erie Indemnity is expected to earn $6.21/share in 2019.
The company is expected to earn 27.20 times forward earnings and yields 2.30%.
Abbott Laboratories (ABT) discovers, develops, manufactures, and sells health care products worldwide.
The board of directors of Abbott increased the company's quarterly common dividend by 12.50% to 36 cents per share.
Abbott has increased its dividend payout for 48 consecutive years and is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have increased dividends annually for at least 25 consecutive years. The dividend champions list included it, when I managed it, consistent with the inclusion of Altria. Since other people are managing it however, they are not including Abbott.
Abbott is expected to generate $3.24/share in 2019.
The stock is overvalued at 26.65 times forward earnings and offers a dividend yield of 1.65%. Abbott may be worth a second look on dips below $65/share.
Relevant Articles:
- My Entry Criteria for Dividend Stocks
- How to value dividend stocks
- Four Dividend Increases for Further Review
- Five Consumer Staples to Consider On Dips