Monday, February 24, 2020

17 Dividend Increases For Further Analysis

One of the best books written on Dividend Growth Investing is called " The Single Best Investment: Creating Wealth With Dividend Growth".  The books discussed a study in the Journal of Financial and Quantitative analysis, which examined the information content of dividend changes. The goal of the study was to understand what dividend changes tell us about a company.

The authors Denis, Denis, and Sarin sought to find an appropriate explanation for the well documented association between dividend change announcements and stock price changes. They found that changes in dividends proved to be intended or unintended signaling by management regarding cash flows at the company. 

While many academics had suggested companies that raise their dividends would decrease their capital expenditures (or at least not increase investments), the authors found that just the opposite is true. Companies that increase their dividends are more likely to increase their reinvestment in the business, and companies that decrease their dividends are more likely to reduce capital expenditures. 

The conclusion is inescapable: companies that increase their dividends are companies that are making money—enough to run a thriving business and enough to share with stockholders in the here and now as well.

As dividend growth investors, we are looking for the companies that grow dividends because their business is thriving. One of my monitoring exercises is to review the list of dividend increases every week, and narrow it down to companies that are at least dividend achievers.

There were seventeen companies that raised dividends last week, which also have a minimum ten year streak of annual dividend increases under their belt. The companies are listed in the table below:


Company
Ticker
Share Price
Dividend Yield
New Dividend
Previous Dividend
Dividend Increase
Years of Dividend Increases
10 Year Dividend Growth Rate
Forward P/E
Analog Devices
ADI
122.76
2.02%
0.62
0.54
14.81%
18
10.44%
21.88
Allstate
ALL
123.66
1.75%
0.54
0.5
8.00%
10
9.37%
11.16
Cohen & Steers
CNS
76.96
2.03%
0.39
0.36
8.33%
11
21.82%
22.77
Foot Locker
FL
38.84
4.12%
0.4
0.38
5.26%
10
9.49%
7.43
Genuine Parts Company
GPC
96.23
3.28%
0.79
0.7625
3.61%
64
6.58%
16.31
Harley-Davidson
HOG
35.2
4.32%
0.38
0.375
1.33%
10
14.13%
10.38
Humana
HUM
369.46
0.68%
0.625
0.55
13.64%
10
14.34%
16.61
Coca-Cola
KO
60.13
2.73%
0.41
0.4
2.50%
58
6.91%
24.54
Moody's
MCO
271.71
0.82%
0.56
0.5
12.00%
11
17.46%
26.48
Magna International
MGA
51.56
3.10%
0.4
0.36
11.11%
11
41.62%
7.78
Perrigo Company
PRGO
59.92
1.50%
0.225
0.21
7.14%
17
13.68%
13.74
Service Corporation International
SCI
52.54
1.45%
0.19
0.18
5.56%
10
16.23%
23.04
Sherwin-Williams
SHW
573.61
0.93%
1.34
1.13
18.58%
41
12.28%
22.23
Telephone & Data Systems
TDS
22.23
3.06%
0.17
0.165
3.03%
46
4.38%
28.5
Texas Roadhouse
TXRH
71.52
2.01%
0.36
0.3
20.00%
10
14.87%
27.83
Wal-Mart Stores
WMT
118.6
1.82%
0.54
0.53
1.89%
47
7.18%
21.33
Xcel Energy
XEL
70.82
2.43%
0.43
0.405
6.17%
17
5.15%
24.01


This list is not a recommendation to buy or sell any securities. It is just a list of companies for further research. It is also a list to update my existing observations on companies I own or plan to own at the right price. I analyze companies before buying the,

If I were to evaluate the companies on this list, I would leverage my screening criteria, which I first outlined in 2010.

Notably I would look for the following:

1) Ten years of annual dividend increases
2) Earnings per share that are increasing over the past decade
3) Dividend Payout Ratio below 60% ( however I am willing to make exceptions for REITs, MLPs, Utilities and Tobacco companies)
4) Dividend growth rate that exceeds the rate of inflation ( however this also needs to take into account the rate of earnings and dividend growth)
5) A P/E ratio below 20

Since I have some experience evaluating dividend companies, I also modify my criteria based on the environment we are in and the availability of quality companies. If I see a company with a strong business model and certain characteristics that I like, I may require a dividend streak that is lower than a decade. I have also found success in looking beyond screening criteria by purchasing stocks a little above the borders contained in a screen.

It is important to be flexible, without being too lenient.

Relevant Articles:

How to monitor your dividend investments
Twelve Dividend Growth Stocks Raising Distributions to Investors Last Week
Nineteen Dividend Growth Stocks For Further Research
My Portfolio Monitoring Process In a Nutshell
How to read my weekly dividend increase reports



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