Six Companies Demonstrating A Commitment to Shareholder Returns

My portfolio monitoring process can be best summarized by these two major activities:

1) I screen the dividend growth investing universe, using a few parameters for entry.
2) I look at major announcements, such as earnings releases and dividend increases or cuts

The second process revolves around reviewing press releases for earnings and dividend announcements for the past week. I usually focus my attention on companies that have increased dividends for at least a decade. My analysis has discovered that companies that get to grow dividends for a decade are more likely to continue raising them.

A long history of annual dividend increases is an indication of a strong business that generates more in excess cashflows each year. I am interested in companies whose business model can generate excess cashflows for long periods of time after my investments. My requirement to look for a ten year history of annual dividend increases eliminates a lot of companies who simply got lucky in the right place of the cycle. This requirement also reduces the number of cyclical companies, which generally have poor long-term dividend growth prospects.

I review the trends in earnings per share, dividend payout ratios and growth in dividends, in order to determine the likelihood of further dividend growth in the future. I look at the interplay between all factors, rather than focus on one item over the others. No two companies are the same.

Last but not least, I also look at valuation. Valuation is part art, part science. In general, companies with low multiples tend to have slow growth, while companies with high multiples have higher expected growth. Finding the right balance between these two, coupled with the trade-off between dividend yield and dividend growth, is the secret sauce.

Now that I have spilled all my secrets with you, I wanted to share the companies that raised dividends over the past week. Just as I discussed above, I focused on the companies that have raised dividends for at least a decade, and have also managed to boost dividends last week. The companies include:

Dover Corporation (DOV) provides equipment and components, consumable supplies, aftermarket parts, software and digital solutions, and support services worldwide.

The company increased its quarterly dividend by 1% to 49.50 cents/share. This was the 65th consecutive year in which the Company has increased its annual cash dividend, demonstrating Dovers long standing commitment to returning capital to shareholders. Over the past decade, this dividend king has managed to increase distributions at an annualized rate of 8.60%.

The company earned $3.12/share in 2008, $1.91/share in 2009 and managed to grow profits to $4.61/share in 2019. The company is expected to earn $5.20/share in 2020.

The stock is selling for 20.80 times forward earnings and offers a dividend yield of 1.85%.

Essential Utilities, Inc., (WTRG) operates regulated utilities that provide water or wastewater services in the United States. It offers water services through operating and maintenance contracts with municipal authorities and other parties.

The company increased its quarterly dividend by 7% to 25.10 cents/share. This marked the 28th consecutive year of annual dividend increases for this dividend champion.

Over the past decade, this dividend champion has managed to grow dividends at an annualized rate of 7.50%/year.

Between 2009 and 2019, the company grew earnings from $0.62/share to $1.04/share.
The company is expected to generate $1.48/share in 2020.

The stock is not cheap at 31.90 times forward earnings. It does offer a low yield for a utility of 2.10%, but that is the price to pay for future growth.

STERIS plc (STE) provides infection prevention and other procedural products and services worldwide. It operates in four segments: Healthcare Products, Healthcare Specialty Services, Life Sciences, and Applied Sterilization Technologies.

The company raised its quarterly dividend by 8.10% to 40 cents/share. This marked the 16th year of annual dividend increases for Steris. Over the past decade, this dividend achiever has managed to boost distributions at an annualized rate of 13.20%.

Steris managed to grow earnings from $2.16/share in 2010 to $4.76/share in 2020.

The company is expected to generate $5.49/share in 2021.

The stock is not cheap at 28.10 times forward earnings. It yields 1.05%.

Microchip Technology Incorporated (MCHP) develops, manufactures, and sells semiconductor products for various embedded control applications in the Americas, Europe, and Asia.
The company raised its quarterly dividend by 0.15% to 0.368 cents/share. Microchip Technology has been increasing dividends by a trickle every quarter for some time now, but has a 19 year track record of consecutive annual dividend increases. During the past decade, this dividend achiever managed to boost dividends at an annualized rate of 0.75%.

Between 2010 and 2020, the company grew earnings from $1.16/share to $2.23/share.
The company is expected to generate $5.86/share in 2021.

The stock looks optically cheap at 16.90 times forward earnings, but yields only 1.50% with a slow rate of growth.

Illinois Tool Works Inc. (ITW) manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.

Illinois Tool Works raised its quarterly dividend by 6.50% to $1.14/share. This marked the 46th consecutive annual dividend increase for this dividend champion.

The company managed to grow earnings from $1.89/share in 2009 to $7.74/share in 2019.
The company is expected to generate $5.76/share in 2020.

The stock is not cheap at 33.10 times forward earnings. It offers a dividend yield of 2.40%.

Badger Meter, Inc. (BMI) manufactures and markets flow measurement, control, and communication solutions in the United States, Asia, Canada, Europe, Mexico, the Middle East, and internationally. It offers mechanical or static water meters, and related radio and software technologies and services to municipal water utilities.

The company increased its quarterly dividend by 5.90% to 18 cents/share. This marked the 28th consecutive annual dividend increase for this dividend champion. Over the past decade, this dividend champion has managed to boost distributions at an annualized rate of 10.80%.

Between 2009 and 2019, the company managed to grow earnings from $1.14/share to $1.61/share.
Badger Meter is expected to generate $1.49/share in 2020.

The stock is expensive at 45.30 times forward earnings. Badger Meter yields close to 1.10%.

Relevant Articles:

- Nine Dividend Paying Companies Raising Dividends Last Week
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- Two Cheap Dividend Stocks Raising Dividends Last Week