Monday, May 17, 2021

Six Dividend Growth Stocks Rewarding Shareholders With Raises

As part of my review process, I monitor the list of dividend increases every week. I use several different resources to come up with a list of dividend increases for the week. I then narrow the list down to include only these companies that have a minimum streak of annual dividend increases. In this case, I focus on companies that raised dividends for at least a decade.

There were six dividend growth stocks that raised dividends last week. The companies that increased dividends over the past week include:

Union Pacific Corporation (UNP) engages in the railroad business in the United States.

The company raised its quarterly dividend by 10.30% to $1.07/share. This dividend achiever has increased annual dividends to shareholder for 15 years in a row. Over the past decade, the company has managed to boost dividends at an annualized rate of 20.50%.

Between 2011 and 2020, the company grew earnings from $3.36/share to $7.88/share.

The company is expected to earn $9.58/share in 2021.

The stock sells for 23.51 times forward earnings and yields 1.90%.

J & J Snack Foods Corp. (JJSF) manufactures, markets, and distributes various nutritional snack foods and beverages to the food service and retail supermarket industries in the United States, Mexico, and Canada. It operates in three segments: Food Service, Retail Supermarkets, and Frozen Beverages.

The company raised its quarterly dividend by 10.10% to 63.30 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. During the past decade, the company managed to raised dividends at an annualized rate of 18.30%.

Earnings increased from $2.93/share in 2011 to $0.96/share in 2020.

The company is expected to earn $2.43/share in 2021. 

The stock is selling for 69.82 times forward earnings and yields 1.50%.

IDEX Corporation (IEX) operates as an applied solutions company worldwide.

The company raised its quarterly dividend by 8% to 50 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, IDEX has managed to increase dividends at an annualized rate of 13.40%.

The company raised earnings from $2.32/share in 2011 to $4.94/share in 2020.

The company is expected to earn $6.21/share in 2021.

The stock is selling for 35.97 times forward earnings and yields 0.97%.

HNI Corporation (HNI) manufactures and sells workplace furnishings and residential building products in the United States, Canada, China, Hong Kong, India, Mexico, Dubai, Taiwan, and Singapore.

The company increased its quarterly dividend by 1.60% to 31 cents/share. This marked the 11th year of annual dividends increasing for this dividend achiever. Over the past decade, the company has managed to boost distributions at an annualized rate of 3.60%.

Earnings per share went from $1.01 in 2011 to $0.98 to 2020.

The company is expected to earn $2.26/share in 2021.

The stock is selling for 19.57 times forward earnings and yields 2.81%.

First Merchants Corporation (FRME) operates as the financial holding company for First Merchants Bank that provides community banking services.

The company raised its quarterly dividend by 11.50% to 29 cents/share. This is the tenth year of consecutive annual dividend increases for this newly minted dividend contender. . During the past decade, it managed to boost dividends at an annualized rate of 38.50%. The bank did cut dividends during the Global Financial Crisis.

Earnings increased from 34 cents/share in 2011 to $2.74/share in 2020.

The company is expected to earn $3.60/share in 2021.

The stock is selling for 13 times forward earnings and yields 2.48%.

Alerus Financial Corporation (ALRS) provides various financial services to businesses and consumers. 

The company increased its quarterly dividend by 6.70% to 16 cents/share. This marked the 23rd year of consecutive annual dividend increases for this dividend achiever. During the past decade, it managed to boost dividends at an annualized rate of 7.50%.

The company grew earnings from $0.80/share in 2011 to $2.52/share in 2020.

The company is expected to earn $2.26/share in 2021.

The stock is selling for 14 times forward earnings and yields 2.03%.

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This is not an automatic list to buy of course. I would review each company, and determine if it makes sense from a fundamentals point of view. This would include reviewing trends in earnings, dividends, payout ratios, revenues, and gaining an understand of the company's business model.

The job is not done just by reviewing fundamentals however. The investor also needs to come up with a conclusion whether the stock is fairly valued at the moment. If it is not, then the investor may come up with a price at which the security may be attractive.

The other thing to consider is that valuation is relative. When evaluating companies, we compare them to other companies with promising fundamental and valuation characteristics. Then, we strive to pick the company or companies with the best values in the investors opportunity set.

While this sounds like a lot of work on the surface, with practice, it becomes almost a second nature.

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