Monday, August 30, 2021

Three Dividend Growth Stocks Rewarding Shareholders With Higher Payouts

Dividend growth investing is a simple but effective strategy. It is widely misunderstood too.

As a Dividend Growth Investor, I look for companies with a long history of annual dividend increases.

A long streak of consecutive annual dividend increases is typically an indication of a business with strong competitive advantages, good growth prospects, high returns on invested capital, and strong and recurring cash flows. A long streak of annual dividend increases is typical for companies with wide moats, which have tended to grow earnings per share for decades. As a long-term dividend investor, my goal is to identify such a business early in the game, buy it at an attractive price, and ride the economic trend for as long as possible. In other words, I am after companies that can grow earnings and dividends over time. I buy and hold forever, or in my case, for as long as they do not cut dividends.

Before doing so of course, I always review the company, its fundamentals and check the qualitative aspect of the business as well. Once I initiate a position, I also monitor the company for any major developments. But as part of my risk management process, I keep portfolio weights in check, and I very rarely would sell an existing position. I may not add to it if it stops meeting my entry criteria, which is guaranteeing a low allocation, as I build positions slowly and over time.

One of my favorite monitoring exercises is to check the list of dividend increases every week. That way, I get to see if my existing investments continue raising dividends, and if my thesis is still working. I also get to identify companies for future research through this exercise. In addition, I get to read the press releases and gauge managements sentiment towards the near-term prospects of the business.

My weekly review focuses on companies that have increased distributions for at least ten years in a row. During the past week, the three companies that raised dividends include:

EastGroup Properties, Inc (EGP) is a self-administered equity real estate investment trust focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States 

Eastgroup properties hiked its quarterly dividend by 13.90% to 90 cents/share. This marked the tenth year of consecutive annual dividend increases for this newly minted dividend achiever. Over the past decade, the company has managed to boost dividends at an annualized rate of 3.90%.

The REIT is expecting to generate $5.87/share in FFO in 2021.

The REIT is selling for 29.14 times forward FFO and yields 2.10%.

Altria Group, Inc. (MO) manufactures and sells cigarettes, oral tobacco products, and wine in the United States.

Altria increased its quarterly dividend by 4.70% to 90 cents/share.

This marked the 52nd year of consecutive annual dividend increases for this dividend king.

Over the past decade, Altria has managed to increase dividends at an annualized rate of 9.10%. The pace of annual dividend growth has slowed down in the past two – three years however.

The company is expecting to earn $4.62/share in 2021.

The stock is selling for 10.55 times forward earnings and yields 7.38%. Check my analysis of Altria for more information about the company.

Extra Space Storage Inc. (EXR) is a self-administered and self-managed REIT. The company owned and/or operated 1,906 self-storage stores in 40 states, Washington, D.C. and Puerto Rico.

Extra Space Storage hiked its quarterly dividend by 25% to $1.25/share. This REIT has increased dividends for 11 years in a row. It has a ten year annualized dividend growth of 24.60%, which is very high. The five year annualized growth is 10% and the three year annualized growth is 4.90%.

The REIT is expected to earn $6.57/share in 2021.

The stock sells for 27.51 times forward FFO and yields 2.75%.

Relevant Articles:






Friday, August 27, 2021

Altria Delivers A Smoking Hot Dividend Increase

Altria Group, Inc. (MO), through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States. It offers cigarettes primarily under the Marlboro brand; cigars principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands. The company also produces and sells varietal and blended table wines, and sparkling wines.

The company delivered another smoking hot dividend increase to shareholders yesterday, by increasing its quarterly dividend by 4.70% to 90 cents/share. This marked the 52nd year of consecutive annual dividend increases for this dividend king. The new annualized dividend rate is $3.60 per share, representing a yield of 7.38% based on Altria’s closing stock price of $48.75 on August 26, 2021. The raise is also better than the 2.40% raise received last year.

I liked the following passage from the press release:

Today’s dividend increase reflects Altria’s intention to return a large amount of cash to shareholders in the form of dividends and is consistent with Altria’s long-term objective of a dividend payout ratio target of approximately 80% of its adjusted diluted earnings per share. This increase marks the 56th dividend increase in the past 52 years.

To me it shows a dedication to paying a dividend, but keeping the payout ratio around 80%. Altria may still do some buybacks, as it focuses on its core business.

Over the past decade, Altria has managed to more than double its dividend. The company paid out $1.22/share in 2008, and it paid out $3.40/share in 2020. 


The fascinating part for me is that the stock sold for around $26/share a decade ago. Over the past decade, Altria has distributed close to $26/share in dividends alone to those shareholders who held on. In addition, that stock has almost doubled in price (and at the highs in 2017 it had tripled in price, albeit the stock was expensive). Someone who bought a decade ago has an yield on cost of 13.84%.

If you reinvested those dividends however, you would have more than tripled your money and your yield on cost would be over 23% today. In other words, you would be getting your original cost back in the form of dividends almost every 4 years.

The first time I mentioned Altria in 2009, it sold for about $15/share. Someone who invested back then would be earning and yield on cost of 24%. In other words, they would be getting their original cost back in dividends alone every 4 years, while also fully participating in any stock upside.

Between 2008 and 2020, Altria managed to boost its earnings per share from $1.45 to $3.80. The earnings for 2019 and 2020 have been adjusted to exclude the one-time charges related to the investment in JUUL in 2018. The company expects to generate between $4.56/share and $4.62/share in adjusted earnings per share in 2021.



On a side note, the earnings per share for 2016 and 2017 and 2019 have been adjusted to exclude one-time accounting items.

There are a lot of reasons to like Altria. The products are branded and addictive and the market for tobacco products so far is in the hands of a few major players with Altria holding a dominant position. There is some threat of future legislation banning the sale of tobacco products or making it uneconomical. However, local governments take in a ton of money by heavily taxing tobacco products. It is hard to find another scapegoat that can be taxed so heavily.

The other factor to consider is that while the number of smokers is expected to be decreasing over time, so far the increase in prices has more than offset the drop in consumers. At some point, this could reverse, but this has been the fear for several decades now. So far, price increases have more than offset volume declines, which results in growing net income year over time. Future growth in earnings will also be driven by productivity improvements, as well as strategic acquisitions and new product developments. Share buybacks are another tool that could increase earnings per share over time. As an owner of a 10% stake in Anheuser - Busch Inbev (BUD), Altria's fortunes are also tied to the performance of this entity.

New regulations could potentially be bad for e-cigarettes, which compete with Altria’s products. However, there may be regulation against certain types of its products, which is one reason why tobacco stocks seem to have sold off as of recently. I am not sure if I would embrace marijuana’s legalization, or Altria’s deals to acquire stakes in cannabis companies. The cannabis market is still young, and may disrupt the market for tobacco products. The winners from legalization may not be known for years down the road however.

The company is embracing the future for non-heated tobacco products, through expanding IQOS and Marlboro HeatSticks into retail stores statewide across Georgia, Virginia, North Carolina and South Carolina and to the Northern Virginia metro market. 

The stock is a very good value today, albeit a risky one, as indicated by the high current yield. That being said, I am taking an increasingly concentrated bet, because I have the highest portion of my dividend income coming from Altria. If I am wrong, and the tobacco business is being disrupted at a faster pace than anticipated, my portfolio could take a hit in dividend income. If the stock goes further down, I would be unable to add further to the position from a risk management perspective. (I have been saying that for two years however)

Growth in earnings per share is impressive, given the fact that the company has paid out 80% of earnings to shareholders annually. In addition, the company also managed to repurchase 10% of shares outstanding during that same time period.

The company just announced a $2 billion share buyback with its annual reporting for 2020. In addition, the net cash from the sale of its Ste. Michelle Wine Estates Business for $1.20 billion will be used for share repurchases too.

Altria would also be able to sell its stake in Anheuser Busch Inbev (BUD) in October 2021. If it does dispose of this stake, it is likely that it would be used to repurchase shares in the open market or distribute a special dividend to shareholders.

Back in 2016, Anheuser Busch acquired UK based brewer SAB Miller, in which Altria had a 29% stake. As part of the ABI Transaction, Altria received a substantial portion of their consideration in the form of restricted shares that cannot be sold or transferred for a period of five years following the ABI Transaction, subject to limited exceptions. There is a a five-year lock-up (subject to limited exceptions) ending October 10, 2021. After that, Altria can sell those shares at the right price.

The company’s dividend payout ratio has declined from 85% in 2008 to a little over 89% in 2020. Management has stated its target for Altria’s dividend payout ratio of approximately 80% of its adjusted diluted earnings per share. That hasn’t stopped it from more than doubling earnings per share over the past decade. The payout ratio is generally looking high, because dividends are set based on the growth of next years earnings.


Right now, the future dividend payout of $3.60/share seems reasonably covered, using forward earnings of $4.56/share. The forward payout ratio actually comes out to 78.95%

Currently, the stock is attractively valued at 10.69 times forward earnings and yields 7.38%. I believe that the dividend is defensible and can grow over time above the rate of inflation.

Relevant Articles:

- The Best Performing Sector of the 20th Century

- Warren Buffett and Charlie Munger on Investing in Tobacco Stocks



Wednesday, August 25, 2021

The Best Performing Sector of the 20th Century

One of my favorite publications is the Credit Suisse Global Investment Returns Yearbook. It lists a ton of historical data on the returns for several different markets and asset classes since the beginning of the 20th century. You can review the 2020 Yearbook from this location.

The research discussed ESG investing, and shared some research on the profitability of investing in Sin Stocks. Notable sin stocks include the types of tobacco, alcohol, gambling and in some instances weapons. Over the 81 years 1926-2006, US sin stocks outperformed by 3%−4% per year, while international sin stocks outperformed by 2½% per year over a shorter interval (1985–2006).

Credit Suisse crunched some data on US stocks and sectors, and found out that $1 invested in the US market in 1900 would have turned to $58,191 by 2020. This provides an annualized return of 9.60%.


Tobacco was the best performing sector, as it turned a $1 invested in 1900 to over $8 million by 2020. This provides an annualized return of 14.20%. Alcohol was the second best performing industry, but its data started in 1927, so it didn’t span the whole 20th century.

Credit Suisse also looked at the UK stock market, where one Pound invested in 1900 grew to 43,687 by 2020, for an annualized return of 9.30%. The best performing sector was alcohol, turning one pound to 491648, for an annualized return of 11.50%. Their data on tobacco didn’t start until 1920. However, tobacco turned out to be the second best performing UK sector.

The traditional argument as to why sin stocks tend to do well is because a certain portion of the investor population would not invest in them. As a result, they trade at a discount to intrinsic value, which results in larger profits for the investor. For example, if all else is equal in terms of earnings growth, a tobacco company selling at 10 times earnings and yielding 5% would generate better total returns over time than a soap maker that sells for 20 times earnings and yields 2.50%.

Some claim that this discount is warranted, given the increased regulatory and litigation risk. The fact that government could outlaw Tobacco or Alcohol is a possibility, albeit a very remote one. At least in the US, state and local governments are addicted to revenues from sales of tobacco products. It would be very difficult to find another venue that would replace lost revenues should the sales of tobacco and alcohol be banned.

The irony is that increased regulation on tobacco in particular have essentially created a lasting moat, or a barrier to entry, that makes it harder for new entrants into the market. 


Source: Ash Park 

Tobacco and alcohol are addictive products, with tobacco more so than alcohol. Demand is inelastic, and people tend to smoke and drink no matter what the economy does. Historically, tobacco companies have managed to increase prices at a pace that is faster than declines in number of smokers. As a result, revenues and profits have increased, despite the decrease in number of smokers. There is brand loyalty, as smokers tend to stick to their type of cigarette. 

Even Buffett has realized the strong brand loyalty and addictive nature of the product.

During the RJR Nabisco hostile takeover fight in 1987, Warren Buffett was quoted as telling the following to the CEO of Salomon Brothers:

"I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty"

However, his remarks at the 1994 Berkshire Hathaway annual meeting point out his reasoning as to why he may not invest in the future: (Source)

"It is fraught with questions that relate to societal attitudes and those of the present administration. I would not like to have a significant percentage of my net worth invested in tobacco businesses. The economy of the business may be fine, but that doesn't mean it has a bright future"

He further explains his reasoning in the 1997 Annual Meeting. Notably, it is probably due to his personal ethical/moral beliefs and his belief on the company's prospects.

The 2020 edition included some additional research on ESG Investing, which seems to be in Vogue today. In my opinion, ESG investing is a way for asset managers to differentiate themselves and help them in charging higher fees to clients. I believe that investing for profit is already difficult. Assigning arbitrary ethical and moral standards on investments makes the job of an investor pretty much impossible. That’s because instead of evaluating investments on their merits, ESG focuses on arbitrary ethical beliefs. In essence, you are engaging in virtue signaling, instead of focusing on making money. If you are allocating money to serve your beliefs first, and wondering about profits second, you are basically engaging in charity. Nothing wrong with that, but this is not investing. I prefer to make my money investing rationally, and only then use my profits to allocate for my charitable beliefs. I do not expect companies to donate directly in accordance with my personal beliefs. That’s because everyone’s ideas on ethics/morality can differ, as they exist on a spectrum.

I believe that ethical investing does not exist. However, I am not going to impose my imperfect views of course. I do understand if some folks are against tobacco or alcohol, and I respect their views.

We do have some threats coming up in the smokeless and vapor products, that could jeopardize the traditional cigarette model. For some companies like Phillip Morris International and iQos, that's an opportunity. British American Tobacco also has some alternative brands. Altria could also do well with JUUL. We don't know which product consumers would like, and stick to however.

That being said, today I see several tobacco companies as being attractively valued.

These companies include:

British American Tobacco (BTI) , which provides tobacco and nicotine products to consumers worldwide. It offers vapor products, tobacco heating products, and modern oral products; combustible products; and traditional oral products, such as Swedish-style snus and American moist snuff.

BAT has managed to grow dividends annually since 1997.

The stock sells for 8.24 times forward earnings and yields 7.92%. Check my analysis of BAT for more information about the company.

Altria (MO), which manufactures and sells cigarettes, oral tobacco products, and wine in the United States. 

The company has increased dividends for 52 years in a row. 

This dividend king is selling for 10.43 times forward earnings and yields 7.10%. Check my analysis of Altria for more information about the company.

Altria was the best performing stock in the S&P 500 between 1957 and 2012:


Source: Stocks for the Long Run

If your grandmother bought 40 shares (cost of $1,000) of Philip Morris in 1925 and joined its dividend reinvestment plan, her shares would have been worth over $1 billion dollars by the end of 2012.

Tobacco companies have delivered outstanding performance in the past century. However, they have not done so well over the past 4 - 5 years, which is why some investors are unsure about the sector.

On one hand, it looks like an opportunity to invest at a bargain price in an industry with strong economics, which has delivered dividends, earnings and total returns to shareholders for decades.

On the other hand, the market participants may be showing correctly that there are some risks that folks are not thinking about. 

Given the high yields, it clearly shows that investors are viewing those companies as high risk. While the dividend payout ratios are high, they have historically been high as well. That being said, if management teams view clouds on the horizon, they will likely cut dividends. The odd part is that debt markets quote lower yields on bonds for tobacco companies like Altria, than the stock market. For example, Altria bonds due in 2039 sell at an yield of 4%. (Source)

Given the cheap rates on borrowing today, it may not be surprising if someone takes one of these tobacco companies private. That investment can pay off in a decade. 

What is your opinion on tobacco stocks today? Please feel free to share in the comments below

Relevant Articles:

- Warren Buffett and Charlie Munger on Investing in Tobacco Stocks

- Terry Smith on Investing in Tobacco Stocks





Monday, August 23, 2021

Six Dividend Growth Stocks Rewarding Shareholders With Raises

I review the list of dividend increases every week, as part of my review process. This is one notification that pushes me to review developments around companies I own. It also helps me observe companies for future research. 

I usually focus my attention on companies that have managed to increase dividends for at least a decade.

Monro, Inc. (MNRO) provides automotive undercar repair, and tire sales and services in the United States.

Monro raised its quarterly dividend by 18.20% to 26 cents/share. This marked the 16th year of consecutive annual dividend increases for this dividend achiever

During the past decade, the company managed to grow dividends at an annualized rate of 13.60%.

Between 2012 and 2021, the company’s earnings went from $1.69/share to $1.01/share.

The company is expected to earn $2.07/share in 2021. 

The stock is selling for 26.87 times forward earnings and yields 1.87%

Stock Yards Bancorp, Inc. (SYBT) operates as the holding company for SYB that provides various banking products and services in Louisville, Indianapolis, and Cincinnati. It operates in two segments, Commercial Banking and WM&T.

Stock Yard Bancorp raised its quarterly dividend by 3.70% to 28 cents/share. This marked the twelfth year of consecutive annual dividend increases for this dividend achiever. During the past decade, the company has managed to grow dividends at an annualized rate of 8.90%.

The company managed to grow earnings from $1.14/share in 2011 to $2.59/share in 2020.

The company is expected to earn $3.63/share in 2021

The stock sells for 14.22 times forward earnings and yields 2.17%.

Cboe Global Markets, Inc. (CBOE) operates as an options exchange worldwide. It operates through five segments: Options, North American Equities, Futures, European Equities, and Global FX.

Cboe raised its quarterly dividend by 14.30% to 48 cents/share. This marked the 11th consecutive year that this dividend achiever has raised its dividend. Over the past decade, the company has managed to grow dividends at an annualized rate of 22.80%/year.

CBOE managed to grow earnings from $1.52/share in 2011 to $4.27/share in 2020.

The company is expected to earn $5.62/share in 2021.

The stock sells for 23.09 times forward earnings and yields 1.48%.

Dillard's, Inc. (DDS) operates retail department stores in the southeastern, southwestern, and midwestern areas of the United States.

Dillard’s raised its quarterly dividend by 33.30% to 20 cents/share. This marked the 11th year of consecutive annual dividend increases for this dividend achiever. Dillard’s has managed to grow dividends at an annualized rate of 14.10% over the past decade.

The company earned $8.52/share in 2012, but it’s earnings per share ended up declining gradually over the past decade, despite reducing the number of shares outstanding in half during the time period. Dillard’s lost $3.16/share in 2021, which is not surprising given the Covid-19 pandemic that affected a lot of brick and mortar retailers.

The company is expected to earn $7.64/share in 2021.

The stock is selling for 26.24 times forward earnings and yields 0.40%.

American Financial Group, Inc. (AFG) provides specialty property and casualty insurance products in the United States.

The company raised its annual dividend by 12% to $2.24/share. This marked the 16th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 12.40%.

Between 2011 and 2020, the company managed to grow earnings from $3.32/share to $8.20/share.

The company is expected to earn $9.22/share in 2021

The stock sells for 14.83 times forward earnings and yields 1.46%.

MGE Energy, Inc (MGEE) operates as a public utility holding company primarily in Wisconsin. It operates through five segments: Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other.

The board of directors of MGE Energy, Inc. increased the regular quarterly dividend rate approximately 5% to $0.3875 per share

This dividend increase marks the company's 46th consecutive year of increasing its dividend.

Between 2011 and 2020, this dividend champion managed to grow earnings from $1.76/share to $2.60/share.

The company is expected to earn $2.94/share in 2021.

The stock is selling for 28.05 times forward earnings and yields 1.79%.

Relevant Articles:





Thursday, August 19, 2021

Dollar General (DG) Dividend Stock Analysis

Dollar General Corporation (DG) is a discount retailer that provides various merchandise products in the southern, southwestern, Midwestern, and eastern United States.

The company initiated a dividend in 2015 at a quarterly rate of 22 cents/share, and has managed to boost it to 42 cents/share in 2021. The rate of the last dividend increase was 16.67% in March 2021. I expect a higher than average dividend growth, because the company is in the initial phase of dividend growth, has a low dividend payout ratio and it also grows earnings at a decent rate.

Between 2011 and 2020, the company managed to increase earnings from $2.22/share to $10.62/share. The company is expected to earn $10.19/share in 2021.


Growth in earnings per share will be driven by increase in number of stores, increases in same-store sales, and share buybacks. Driving profitable sales growth and capturing growing opportunities should serve DG well, along with improving its advantage as a low-cost operator.

Dollar General offers compelling value and convenience to its shoppers, through competitive prices in a small store format. Most of the goods sold by Dollar Stores are food and daily essentials, which are less frequently purchased online and are for immediate consumption, limiting the appeal of waiting days or more for delivery. Dollar stores are able to open in areas other retailers wouldn't because of their small size. A large portion of new stores opened in the US this year are Dollar stores, with about 1/3rd of them being Dollar General stores.

The company offers convenience to its shoppers, has the advantages of scale, and has the purchasing power to maintain low costs. It offers a lot of private labels in its stores, and a limited number of items, which is good for margins. Most of DG’s stores are in smaller towns, which makes it a very competitive option for shoppers and explains the high gross margins. The company can increase penetration in urban markets, which can bode well for sales. Only about a quarter of stores are in urban areas. This means that 75% of stores are in areas with population of less than 20,000 people. They are strategically placed in food deserts, where other grocery options are miles away. The typical consumer is a lower-income family, that doesn’t shop in large quantities.

Investing in high-growth opportunities, including new store expansion and other strategic initiatives, should remain at the top of the priority list when it comes to capital allocation. The company can also continue investing in its distribution center network, in order to support new store growth and increased productivity. Initiatives include focusing on non-consumables, DG Fresh, and Fast Track.

Dollar stores are also capturing more affluent shoppers hunting for discounts on essentials. Consumers may be looking to save even more money now that inflation is ticking up.

Dollar General has repurchased shares at a steady clip over the past decade. It looks like the company has managed to repurchase at least 3% of shares outstanding in each year since 2011. The only exception is in 2018, when it repurchased 2.56%.

The dividend payout ratio started at 22.30% in 2015 and is at 13.60% today. There is ample room for future dividend growth from earnings growth, as well as a gradual increase in the dividend payout ratio.

 


The stock is selling for 21.44 times forward earnings and yields 0.77%. While the company is at the top of its valuation range in terms of P/E, it will most probably grow earnings per share at a decent rate over the next decade.

Relevant Articles:

How to select winning retail stocks

- Invest in Products People Love



Monday, August 16, 2021

Five Companies Rewarding Shareholders With a Raise

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me review existing holdings and identify companies for future research.

I focus my attention on the companies with a ten year track record, in order to identify companies that can deliver dividend increases for longer than a typical length of the average economic cycle.

I am looking for companies that can grow earnings and dividends, even during a recession.

The companies that have a ten year streak of annual dividend increases, which also raised dividends last week include:

Badger Meter, Inc. (BMI) manufactures and markets flow measurement, quality, control, and communication solutions in the United States, Asia, Canada, Europe, Mexico, the Middle East, and internationally.

The company raised its quarterly dividend by 11.10% to 20 cents/share. This marks the 29th consecutive year of increasing the dividend. Over the past decade, this dividend champion has managed to grow dividends at an annualized rate of 10.40%.

“Today’s 11% dividend increase marks the company’s 29th consecutive year of increasing its dividend, and is a true testament to our legacy of consistently rewarding our shareholders. Dividends are an important element of the Company's balanced and disciplined approach to capital allocation, and a reflection of the strong confidence that Badger Meter has in our ability to continue to generate and grow our earnings and cash flow both organically and via acquisition,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer. (press release)

Between 2011 and 2020, the company managed to grow earnings from 64 cents/share to $1.69/share.

The company is expected to earn $1.96/share in 2021.

The stock is selling for 53.38 times forward earnings and yields 0.69%.

Broadridge Financial Solutions, Inc. (BR) provides investor communications and technology-driven solutions for the financial services industry worldwide.

The company increased its quarterly dividend by 10.30% to 64 cents/share. The annual dividend has increased for the 15th consecutive year.

Over the past decade, Broadridge has managed to boost dividends at an annualized rate of 14.40%.

Between 2012 and 2021, this dividend achiever has managed to grow earnings from 97 cents/share to $4.65/share.

The company expects to earn $6.45/share in 2021.

The stock is selling for 26.81 times forward earnings and yields 1.48%.

International Bancshares Corporation (IBOC) is a multibank financial holding company that provides commercial and retail banking services.

The company raised its semi-annual dividend by 9.10% to 60 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever.

Over the past decade, the company has managed to boost dividends at an annualized rate of 11.80%.

Between 2011 and 2020, the company managed to boost earnings from $1.69/share to $2.62/share.

The stock sells for 11.83 times trailing earnings and yields 2.81%.

Nordson Corporation (NDSN) engineers, manufactures, and markets products and systems to dispense, apply, and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids worldwide. It operates through two segments, Industrial Precision Solutions (IPS) and Advanced Technology Solutions (ATS).

Nordson raised its quarterly dividend by 30.80% to 51 cents/share. This represents the 58th consecutive year of annual dividend increases for this dividend king.

Over the past decade, the company has managed to increase dividends at an annualized rate of 14.60%.

Between 2011 and 2020, Nordson managed to grow earnings from $3.25/share to $4.27/share.

The company is expected to earn $7.53/share in 2021.

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

The company raised its quarterly dividend by 7.50% to 43 cents/share.  This marked the 17th consecutive annual dividend increase for this dividend achiever.

Over the past decade, Steris has managed to increase dividends at an annualized rate of 11.50%.

The stock is selling for 30.10 times forward earnings and yields 0.90%

Between 2012 and 2021, the company managed to grow earnings from $2.31/share to $4.63/share.

The company is expected to earn $7.72/share in 2021.

The stock is selling for 28.26 times forward earnings and yields 0.79%.


Relevant Articles:

Seven Companies Demonstrating A Commitment to Shareholder Returns

44 Dividend Champions For Further Research

Nine Companies Delivering Solid Dividend Growth

- Seven Dividend Growth Stocks Rewarding Shareholders With Raises


Monday, August 9, 2021

Seven Companies Demonstrating A Commitment to Shareholder Returns

As part of my monitoring process, I review the list of dividend increases every week. I focus my attention on the companies that have managed to increase dividends for at least a decade, when reviewing the list of dividend increases.

This helps me review existing holdings, and identify companies for further research.

Over the past week, there were several companies that raised dividends to shareholders, which also have at least a ten year track record of annual dividend increases. The companies include:

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 increased its quarterly dividend by 7% to $1.22/share. This marked the 50th consecutive year of annual dividend increases for this newly minted dividend king. The company has managed to grow dividends at an annualized rate of 13.10% over the past decade.

Between 2011 and 2020, Illinois Tool Works managed to grow earnings from $4.19/share to $6.63/share.

The company is expected to earn $8.56/share in 2021.

The stock is selling for 26.59 times forward earnings and yields 2.14%

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

The company raised its quarterly dividend by 1% to 50 cents/share. This marked the 66th consecutive year in which this dividend king has increased its annual cash dividend. The company has managed to grow dividends at an annualized rate of 8.20% over the past decade. The rate of dividend growth has slowed down since 2018 however.

Between 2011 and 2020, Dover managed to grow earnings from $4.74/share to $4.70/share.

The company is expected to earn $7.50/share in 2021.

The stock is selling for 22.59 times forward earnings and yields 1.18%.

Federal Realty Investment Trust (FRT) operates as a real estate investment trust, which engages in the ownership, management, development, and redevelopment of retail and mixed-use properties. 

This REIT raised its quarterly dividend by 0.90% to $1.07/share. This marked the 54th consecutive annual dividend increase for this dividend king. This Real Estate Investment Trust prides itself in its consistency of operations, which have allowed it to raise dividends for 54 years in a row. Annual distributions rose from 12 cents/share in 1967 to an estimated $4.28/share at the new distribution rate. The company has managed to grow dividends at an annualized rate of 4.70% over the past decade.



Federal Realty Investment Trust has managed to grow dividends at a rate of 5.40%/year over the past decade. This was supported by growth in Funds From Operations from $4/share in 2011 to $4.38/share in 2020. The REIT is expected to earn $4.91/share in 2021.

Currently, this REIT is overvalued at 24.70 times FFO and yields 3.53%. 

Carlisle Companies Incorporated (CSL) operates as a diversified manufacturer of engineered products in the United States, Europe, Asia, Canada, Mexico, the Middle East, Africa, and internationally. It operates through four segments: Carlisle Construction Materials, Carlisle Interconnect Technologies, Carlisle Fluid Technologies, and Carlisle Brake & Friction.

The company raised its dividend by 3% to 54 cents/share. This marked the 45th year of consecutive annual dividend increases for this dividend champion. The company has managed to grow dividends at an annualized rate of 12% over the past decade.

Between 2011 and 2020, Carlisle managed to grow earnings from $2.86/share to $5.80/share.

The company is expected to earn $9.05/share in 2021.

The stock is selling for 22.70 times forward earnings and yields 1.05%.

Fidelity National Financial, Inc. (FNF) provides various insurance products in the United States. The company operates through Title, F&G, and Corporate and Other segments.

Fidelity National Financial increased its quarterly dividend by 11.10% to 40 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever.

Between 2011 and 2020, Fidelity National Financial managed to grow earnings from $1.65/share to $4.99/share.

The company is expected to earn $6.51/share in 2021.

The stock sells for 7.18 times forward earnings and yields 3.42%.

Terreno Realty Corporation (TRNO) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.

Terreno Realty increased dividends by 17.20% to 34 cents/share. This marked the tenth year of consecutive annual dividend increases for this newly minted dividend achiever. 

The company is expected to generate $1.70/share in FFO in 2021.

The stock is selling for 40.11 times forward FFO and yields 2%.

NewMarket Corporation (NEU) engages in the petroleum additives businesses.

The company raised its quarterly dividend by 10.52% to $2.10/share. This marked the 16th year of consecutive annual dividend increases for this dividend achiever.  The company has managed to grow dividends at an annualized rate of 17.60% over the past decade. The rate of dividend growth has slowed down to 6.30% in the past 5 years however.

Earnings per share grew from $15.09 in 2011 to $24.64 in 2020. 

The stock is selling for 12.60 times earnings and yields 2.56%.

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Wednesday, August 4, 2021

44 Dividend Champions For Further Research

A dividend champion is a company which has managed to raise annual dividends for a minimum of 25 years in a row. There are 142 companies in the US that are dividend champions.

The dividend champions list is one of my favorite lists to research. You can download it from this website.

It includes a lot of data, which can be used to identify companies for further research.

I recently obtained the list of Dividend Champions as of July 2021, and ran a simple screen, in order to identify companies that grew dividends at a fast pace.

I narrowed my search to:

1) Dividend champions, which are companies that have a 25 year track record of annual dividend increases

2) Companies with a ten year annualized dividend growth of 10%

I am looking for companies with a long streak of annual dividend increases, because I am looking for sustainable long-term dividend growth and total returns. My goal is to identify a group of companies to hold for the long run. I am not interested in identifying a company that I would then have to sell a few years later. That’s inefficient use of my time and could lead to a lot of taxes, especially if I sell stock with large unrealized capital gains.

The list of the 44 companies that fit the two criteria can be found below:

Company

Ticker

 

 

No.

7/30/21

Div.

DGR

DGR

Name

Symbol

Sector

Industry

Yrs

Price

Yield

5-yr

10-yr

Automatic Data Proc.

ADP

Information Technology

IT Services

45

209.63

1.77

13.2

11.8

Albemarle Corp.

ALB

Materials

Chemicals

27

206.04

0.76

5.9

10.5

A.O. Smith Corp.

AOS

Industrials

Building Products

27

70.33

1.48

20.9

21.9

Air Products & Chem.

APD

Materials

Chemicals

39

291.03

2.06

10.1

10.4

BancFirst Corp. OK

BANF

Financials

Banks

27

55.48

2.45

13.5

10.7

Franklin Resources

BEN

Financials

Capital Markets

41

29.55

3.79

12.5

13.9

Badger Meter Inc.

BMI

Information Technology

Electronic Equipment, Instruments & Components

28

101.03

0.71

12.4

10.4

Cardinal Health Inc.

CAH

Health Care

Health Care Providers & Services

25

59.38

3.31

5.8

10.1

Church & Dwight

CHD

Consumer Staples

Household Products

25

86.58

1.17

7.5

20.0

Canadian National Railway

CNI

Industrials

Road & Rail

26

108.63

1.77

11.7

12.6

Carlisle Companies

CSL

Industrials

Industrial Conglomerates

44

202.24

1.04

13.3

12.0

Computer Services Inc.

CSVI

Information Technology

IT Services

50

58.06

1.86

14.4

16.2

Cintas Corp.

CTAS

Industrials

Commercial Services & Supplies

39

394.18

0.96

21.8

19.3

Donaldson Company

DCI

Industrials

Machinery

35

66.19

1.33

4.6

13.0

Ecolab Inc.

ECL

Materials

Chemicals

29

220.83

0.87

7.3

11.7

Enbridge Inc.

ENB

Energy

Oil, Gas & Consumable Fuels

25

39.35

6.62

10.4

11.3

Expeditors International

EXPD

Industrials

Air Freight & Logistics

27

128.25

0.90

7.6

10.0

First Farmers Financial Corp.

FFMR

Financials

Banks

31

44.00

3.09

17.0

15.6

General Dynamics

GD

Industrials

Aerospace & Defense

30

196.03

2.43

9.9

10.2

W.W. Grainger Inc.

GWW

Industrials

Trading Companies & Distributors

50

444.58

1.46

5.3

11.1

Hormel Foods Corp.

HRL

Consumer Staples

Food Products

54

46.38

2.11

13.2

16.0

International Business Machines

IBM

Information Technology

IT Services

26

140.96

4.65

5.4

10.0

Illinois Tool Works

ITW

Industrials

Machinery

46

226.67

2.01

16.8

13.1

Jack Henry & Associates

JKHY

Information Technology

IT Services

31

174.09

1.06

11.5

16.3

Lincoln Electric Holdings

LECO

Industrials

Machinery

26

139.43

1.46

11.1

13.3

Lowe's Companies

LOW

Consumer Discretionary

Specialty Retail

59

192.69

1.66

17.1

18.9

Matthews International

MATW

Industrials

Commercial Services & Supplies

26

34.60

2.49

9.4

11.3

Medtronic plc

MDT

Health Care

Health Care Equipment & Supplies

44

131.31

1.92

10.3

10.0

3M Company

MMM

Industrials

Industrial Conglomerates

63

197.94

2.99

7.5

10.8

NACCO Industries

NC

Energy

Oil, Gas & Consumable Fuels

36

25.07

3.15

18.4

13.9

Nordson Corp.

NDSN

Industrials

Machinery

57

226.13

0.69

11.2

14.6

NextEra Energy Inc.

NEE

Utilities

Electric Utilities

27

77.90

1.98

12.7

10.8

Bank OZK

OZK

Financials

Banks

25

40.71

2.80

14.4

21.8

Parker-Hannifin Corp.

PH

Industrials

Machinery

65

312.03

1.32

6.9

12.6

Polaris Industries

PII

Consumer Discretionary

Leisure Products

26

131.07

1.92

3.2

12.0

Roper Technologies Inc.

ROP

Industrials

Industrial Conglomerates

28

491.34

0.46

15.4

18.4

SEI Investments Company

SEIC

Financials

Capital Markets

30

60.80

1.22

7.8

13.9

Sherwin-Williams Co.

SHW

Materials

Chemicals

43

291.03

0.76

14.9

14.0

S&P Global Inc.

SPGI

Financials

Capital Markets

48

428.72

0.72

15.2

11.0

Stryker Corp.

SYK

Health Care

Health Care Equipment & Supplies

28

270.94

0.93

10.8

14.4

Target Corp.

TGT

Consumer Discretionary

Multiline Retail

54

261.05

1.38

4.4

12.3

T. Rowe Price Group

TROW

Financials

Capital Markets

35

204.16

2.12

11.6

12.8

VF Corp.

VFC

Consumer Discretionary

Textiles, Apparel & Luxury Goods

48

80.20

2.44

9.0

12.9

Walgreens Boots Alliance Inc.

WBA

Consumer Staples

Food & Staples Retailing

46

47.15

4.05

5.8

11.5

Total:

1.96

11.11

13.41

The average yield as of July 31, 2021 is 1.96% and the average 10 year dividend growth is 13.41%.

When I start digging further and also looking at 5 year dividend growth that also exceeds 10%/year , I see that the list of companies drops down further to 26. That just goes to show you that a ten year high growth may hide the fact that recent dividend growth has slowed down. So you need to check for recent dividend growth, trends in earnings per share, trends in payout ratios as well as valuation. Investing is part art and part science.

Company

Ticker

 

 

No.

7/30/21

Div.

DGR

DGR

Name

Symbol

Sector

Industry

Yrs

Price

Yield

5-yr

10-yr

Automatic Data Proc.

ADP

Information Technology

IT Services

45

209.63

1.77

13.2

11.8

A.O. Smith Corp.

AOS

Industrials

Building Products

27

70.33

1.48

20.9

21.9

Air Products & Chem.

APD

Materials

Chemicals

39

291.03

2.06

10.1

10.4

BancFirst Corp. OK

BANF

Financials

Banks

27

55.48

2.45

13.5

10.7

Franklin Resources

BEN

Financials

Capital Markets

41

29.55

3.79

12.5

13.9

Badger Meter Inc.

BMI

Information Technology

Electronic Equipment, Instruments & Components

28

101.03

0.71

12.4

10.4

Canadian National Railway

CNI

Industrials

Road & Rail

26

108.63

1.77

11.7

12.6

Carlisle Companies

CSL

Industrials

Industrial Conglomerates

44

202.24

1.04

13.3

12.0

Computer Services Inc.

CSVI

Information Technology

IT Services

50

58.06

1.86

14.4

16.2

Cintas Corp.

CTAS

Industrials

Commercial Services & Supplies

39

394.18

0.96

21.8

19.3

Enbridge Inc.

ENB

Energy

Oil, Gas & Consumable Fuels

25

39.35

6.62

10.4

11.3

First Farmers Financial Corp.

FFMR

Financials

Banks

31

44.00

3.09

17.0

15.6

Hormel Foods Corp.

HRL

Consumer Staples

Food Products

54

46.38

2.11

13.2

16.0

Illinois Tool Works

ITW

Industrials

Machinery

46

226.67

2.01

16.8

13.1

Jack Henry & Associates

JKHY

Information Technology

IT Services

31

174.09

1.06

11.5

16.3

Lincoln Electric Holdings

LECO

Industrials

Machinery

26

139.43

1.46

11.1

13.3

Lowe's Companies

LOW

Consumer Discretionary

Specialty Retail

59

192.69

1.66

17.1

18.9

Medtronic plc

MDT

Health Care

Health Care Equipment & Supplies

44

131.31

1.92

10.3

10.0

NACCO Industries

NC

Energy

Oil, Gas & Consumable Fuels

36

25.07

3.15

18.4

13.9

Nordson Corp.

NDSN

Industrials

Machinery

57

226.13

0.69

11.2

14.6

NextEra Energy Inc.

NEE

Utilities

Electric Utilities

27

77.90

1.98

12.7

10.8

Bank OZK

OZK

Financials

Banks

25

40.71

2.80

14.4

21.8

Roper Technologies Inc.

ROP

Industrials

Industrial Conglomerates

28

491.34

0.46

15.4

18.4

Sherwin-Williams Co.

SHW

Materials

Chemicals

43

291.03

0.76

14.9

14.0

S&P Global Inc.

SPGI

Financials

Capital Markets

48

428.72

0.72

15.2

11.0

Stryker Corp.

SYK

Health Care

Health Care Equipment & Supplies

28

270.94

0.93

10.8

14.4

T. Rowe Price Group

TROW

Financials

Capital Markets

35

204.16

2.12

11.6

12.8


Of course, the list is not a recommendation to buy or sell, just a list of companies for further research. 

When I review companies, I look for:

1) Trends in Earnings Per Share
2) Trends in Dividends Per Share
3) Trends in the Payout Ratio
4) Valuation
5) Track Record of Annual dividend increases
6) Determine whether a company can keep growing earnings and dividends in the future

Check my analysis of Church & Dwight (CHD) for more information on what I look at when analyzing companies.

Thank you for reading!

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