Five Companies Committed to Providing Returns to Shareholders

My monitoring process includes reviewing dividend increases every week. This is a helpful exercise in reviewing existing investments, but also in uncovering new ideas for further research.

Companies decide on the rate and increase in dividends, after a careful evaluation of business needs, growth plans, the economy and opportunities.

Dividend increases provide an indication of managements conviction in the near-term prospects of the business and the stability of its cash flows. An increase in the cash dividend reflects confidence in the prospects for the business. It also shows a commitment to return excess cashflows to shareholders.

In my reviews, I typically focus on the companies that have managed to increase annual dividends for at least a decade. Over the past week, there were five such companies that increased dividends to shareholders:

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

The company raised quarterly dividends by 4.40% to $0.94/share. This marked the 53rd year of consecutive annual dividend increases for this dividend king. Over the past decade, the company has managed to grow dividends at an annualized rate of 8.40%.

The stock sells for 9.60 times forward earnings and yields 7.76%.

Atrion Corporation (ATRI) develops, manufactures, and sells products for fluid delivery, cardiovascular, and ophthalmology applications in the United States, Canada, Europe, and internationally. 

The company raised quarterly dividends by 10.30% to $2.15/share. This marked the 19th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 15.10%.

The stock sells for 33.06 times forward earnings and yields 1.22%.

EastGroup Properties, Inc. (NYSE: EGP), an S&P MidCap 400 company, 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 with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. 

The REIT hiked its quarterly dividends by 13.60% to $1.25/share. This is the eleventh consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 4.60%.

The stock sells for 24.83 times forward FFO and yields 2.39%.

First American Financial Corporation (FAF) provides financial services. It operates through Title Insurance and Services, and Specialty Insurance segments. 

The company raised its quarterly dividend by 2% to $0.52/share. This is the twelfth consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 23.20%. The five year rate is 10.10% however. The company achieved this high rates of dividend growth, because it initiated dividends at a low payout ratio 12 years ago. It's important to not expect high rate of dividend growth to continue for companies in the initial phase of dividend growth.

The stock sells for 9.27 times forward earnings and yields 3.52%

Northrim BanCorp, Inc. (NRIM) operates as the bank holding company for Northrim Bank that provides commercial banking products and services to businesses and professional individuals. It operates in two segments, Community Banking and Home Mortgage Lending. 

The company increased dividends by 22% to $0.50/share. This is the 13th 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 11.60%.

The stock sells for 8.53 times forward earnings and yields 3.90%.

Relevant Articles:

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Lessons from the Japanese Stock Market Bubble

Back in 1989, the Japanese stock market reached an all time high. Japan was growing rapidly, and there was no end in sight behind Japanese industry and innovation. The popular theme was that Japan would overpower the US soon. This is similar to the situation today, where China is viewed as the emerging dominant economic power that would dethrone the US as the number one economy in the world.

Japan was in the midst of a stock and real estate bubble in the 1980s. The Japanese equity market became larger than the US stock market in 1989, with a total market capitalization of over $4 Trillion, versus $3 Trillion for the US.

Japanese land prices were out of control too. The land below the Imperial Palace in Tokyo was worth more than the land in the entire state of California in 1989. (Source)

However, that bubble popped at the beginning of 1990. After over 30 years, the Japanese economy has stagnated, and share and real estate prices are still below the all-time-highs from 1989. The all time high for Nikkei 225 index was 38,915.87 from 1989.

There are many reasons why the stock market did not do as well.

The most obvious reason is that Japanese equities were very overvalued in 1989. They sold for over 50 times earnings by 1989. This was high.

Dividend yields were low at 0.50%, which was low too. Dividend yields had been decreasing since 1970, as share prices kept rising higher and higher.  Investors didn't really care about dividends when share prices kept rising. This is usually what happens during a manic bull run that keeps going for a long period of time.

The most interesting fact however is that real earnings per share didn't grow between 1970 and 1990. Real earnings per share are EPS adjusted by inflation.

The source for the charts so far is the following paper from Kenneth French and James Poterba.  "Were Japanese stock prices too high?"

As was already established above, Japanese equity prices were very high. An investor who planned to retire on Japanese equities in 1989 probably would have expected that stock prices keep going up. Unfortunately, that didn't work and if they had followed a 4% type rule where you sell 4% of stocks each year, they would have run out of money. 

Someone who was a dividend investor would have seen the low dividend yield an concluded that they can only live off 0.50% of portfolio value, which is what the dividend yield was in 1989. It is low, and I would not base a retirement on such a low number as there are alternatives. However it does show that estimated future returns were low.

Fast forward to 2022, and the Nikkei 225 index is still below its all time high set in 1989.

However, Japanese companies started growing dividends about 15 - 20 years ago. Those tiny dividends, when compounded over time ended up accumulating to investor brokerage accounts to the point that Japanese equities are much more attractive than deposits or bonds.

However, it has taken Nikkei almost 32 long years to exceed its 1989 high using dividend reinvestment. Nikkei 225 Total Return hit a record high in 2021.

According to this researcher, if you invested regularly in Japanese stocks beginning in 1989, you would be sitting at a profit by now.

Today Nikkei has a dividend yield of 2.10% and a P/E of 13. (Source)

Nikkei index dividends went from 108 in 2004 to 489 points in 2021.

 Conclusion:

So that was a lot of data to share. I have observed Japan for a while, and I have observed this data too.

I believe that buying an investment at a high valuation is risky. That's because there is a limited margin of safety in this investment, even if its fundamentals perform up to expectations. Even if earnings grow according to expectations, the investor that overpays may have to wait for a long time to make money.

A low dividend yield on a stock market shows that valuation is high. If valuation is high, perhaps an investor should not be spending more than what their investment can generate in dividends. They can theoretically bet that prices will be rising in the short run when they need to money to spend. But that's speculation, as nobody can consistently predict where share prices will be anyways.

If you are a know-nothing investor, building wealth over time through regular dollar cost averaging works. However, you have to be able to stick to that plan through thick or thin, the highs and the lows, and keep investing regularly. You also need to have a long timeframe.

When reviewing equities, we need to look at total returns. Only looking at stock prices is deceptive, as it doesn't show the full picture of investor returns. Nikkei is at 28,400 today, versus an all-time-high if 38,915 in 1989. Accounting for total returns, it has exceeded 1989 highs already. Dividends matter.

It's also important to take a lot of "predictions" about the future with a grain of salt, no matter how mainstream and widely accepted they are. Back in the late 1980s Japan was viewed very favorably, and it was supposed to overtake the US. The reality turned out differently about 30 years later. Nobody really knows anything.

In order to survive and thrive as an investor, you need to create your own process, manage risk and then stick to your plan through thick or thin. At the same time, you have to learn from your mistakes and try to improve continuously. 

In my case, if I had invested in Japan, I probably would have stopped buying companies in the early 1980s. I would have held on to existing companies, but allocated money elsewhere globally if that was possible. US companies were much cheaper throughout the 1980s; many European companies were cheaper in the early part of the 1980s as well;

The hardest part would have been missing out on the 1980 - 1989 epic bull run in Japanese companies, and feeling out of touch with this "new reality", "new paradigm" etc. When someone is doing better than you, they may be louder than anyone else. 

This experience would have taught everyone all the bad lessons that valuation does not matter, dividends don't matter, only share price gains matter etc. So as an investor, developing the patience to hold on to your stocks when they keep going up in price, and developing the patience to hold on to your stocks when they are flat or someone else's stocks do better, is a superpower.

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Five Companies Rewarding Shareholders With Raises

I review the list of dividend increases each month, as part of my monitoring process. As part of this review, I tend to focus attention on companies that have managed to grow dividends for at least a decade.

This review helps me monitor existing positions, and potentially uncover hidden gems for further research. This is a very repetitive and somehow confusing process for a lot of readers, despite the fact that I've been doing it publicly for 14 years here. 

It is just one aspect of Dividend Growth Investing, but it serves as a reminder that it does take time to identify companies for research, researching them and monitoring them. 

I do monitor the list of dividend increases, but I also monitor the dividend growth universe in various ways. Screening using some parameters helps, along with familiarizing myself with as many businesses as possible, and determining the value at which 

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

The company raised quarterly dividends by 4.20% to $0.50/share. This is the 12th consecutive year that CBOE has increased its dividend. Over the past decade, the company has managed to grow dividends at an annualized rate of 15.10%.

The stock is selling at 19.27 times forward earnings and yields 1.55%. I dislike the slowdown in the pace of dividend growth for CBOE, especially in comparison with the rate of growth from the past decade.

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

The company raised its quarterly dividend by 12.50% to $0.63/share. This is the 17th year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 12%.

The stock is selling at 11.72 times forward earnings and yields 1.66%. This looks like an interesting company for further research on my end.

C&F Financial Corporation (CFFI) operates as a bank holding company for Citizens and Farmers Bank that provides banking services to individuals and businesses. 

C&F Financial raised its quarterly dividend by 5% to $0.42/share. This is the 11th year of annual dividend increases for this dividend contender. Over the past decade, the company has managed to grow dividends at an annualized rate of 4.50%.

The stock sells for 6.85 times earnings and yields 3.18%. The slow rate of dividend growth does not really excite me about this stock. Perhaps the valuation is warranted.

Stock Yards Bancorp, Inc. (SYBT) operates as a holding company for Stock Yards Bank & Trust Company that provides various financial services for individuals, corporations, and others in the United States. It operates in two segments, Commercial Banking, and WM&T.

Stock Yards Bancorp raised its quarterly dividend by 3.60% to $0.29/share. This is the 13th consecutive year of annual dividend increases for this dividend contender. Over the past decade, the company has managed to grow dividends at an annualized rate of 8.60%.

The stock sells for 19.64 times forward earnings and yields 1.59%. The slow pace of dividend increases does not excite me, especially when coupled with a low yield today.

Evans Bancorp, Inc. (EVBN) primarily operates as the financial holding company for Evans Bank, N.A. that provides a range of banking products and services to consumer and commercial customers in Western New York and the Finger Lakes Region of New York State. It operates in two segments, Banking Activities and Insurance Agency Activities.

The company raised its semi-annual dividend by 3.20% to $0.64/share. This is the eleventh year of consecutive annual dividend increases for this dividend contender. Over the past decade, the company has managed to grow dividends at an annualized rate of 11.60%.

The stock sells for 9.35 times forward earnings and yields 3.23%. The slow rate of dividend growth does not really excite me about this stock. Perhaps the valuation is warranted.

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Roth IRA’s for Dividend Investors

Nothing is certain in this world except for death and taxes. For many dividend growth investors, this could be characterized as a feeling that they are being taxed to death. I am always on the lookout to legally minimize my investment taxes as much as possible. In fact there is an easy way to invest in dividend paying stocks without ever having to pay taxes on your investment.

The Roth IRA allows individuals who have earned income in a given year to contribute up to $6,500 in after-tax dollars to their retirement account for 2023. The contribution limit for 2022 is $6,000. There is a catch-up contribution of $1,000 for individuals who are 50 years of age or older. While contributions to Roth IRA’s are not deductible on your tax returns, earnings and principal distributions are tax free once certain age and time requirements are met. 

Roth IRA’s allow for tax-free compounding of capital over time. This means that you will not pay taxes on dividends or capital gains on your investments that are placed in a Roth IRA.

The earned income includes compensation from salary, wages, commissions, bonuses and alimony. Income from interest, dividends, annuities or pensions does not count as earned income in the eyes of the IRS.

A non-working spouse can set-up a Spousal Roth IRA, even if they have no working income, as long as the other spouse has enough working income to contribute. For example, if one of the spouses earns $50,000/year, and the other one stays home, they can each contribute $6,500/year to their own Roth IRA's. If they are over the age of 50, the $1,000 catch-up contribution still applies.

The contribution limit for a Roth IRA is the same as the contribution limit for a regular IRA. However the amount that can be contributed to a Roth IRA is the amount remaining after subtracting any contribution made to a regular IRA. This means that if you contributed the maximum allowable amount to your regular IRA of $6,500, you would not be able to contribute anything to a Roth IRA in that year.

There are no required minimum distribution rules for Roth IRAs. 

However, there are phase-out income limits for high earning taxpayers, which reduce the opportunity to use this tax advantaged investment account. A modified adjusted gross income (MAGI) of $228,000 for a couple filing jointly, or $153,000 for an individual makes you ineligible to contribute to a Roth IRA in 2023. The following table outlines the Roth IRA Contribution limits for 2023.

Source: Schwab

There are ways around it of course, using the "Backdoor IRA Conversion" Strategy.  Basically, it entails contributing to a Regular IRA, and immediately converting it to a Roth.

In order to avoid paying taxes on distributions from Roth IRA accounts, investors need to become acquainted with the qualified nontaxable distribution rules.

According to the IRS, qualified nontaxable distributions for Roth IRA’s are those made at least 5 years after the taxpayer’s first contribution to a Roth IRA and made:

1) After the taxpayer become 59.5 years old
2) To a beneficiary after the death of the taxpayer
3) Because the taxpayer becomes disabled
4) For a use of a first time homebuyer

The biggest benefits of a Roth IRA are the long-term tax free compounding of capital, the fact that qualified distributions are tax-free and the fact that there are no required minimum distributions.

Another little known fact behind Roth IRA’s is that direct contributions may be withdrawn at any time. 

This makes them a perfect investment vehicle for investors who plan on retiring early and living off dividends before they reach typical retirement ages of 60 years.

I hold a portion of my assets in a Roth IRA. While the contribution limit is only $6,500, that is still a good start. For a married couple maxing out their Roth IRA's, you have $13,000 to invest. 

In today's commission free world and fractional shares, you can build a diversified portfolio fairly easily.

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Six Dividend Growth Stocks Rewarding Shareholders With a Raise

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

In my review, I focus on companies that have raised dividends for at least a decade. That's a quality filter that screens out a lot of cyclical companies, and companies that may not have what it takes to compound capital for long periods of time. 

Next, I review the raise, along with any pertinent financial information. I like reading management's opinion about the raise, and compare it to financial history for more context. 

When I review companies in more detail, I look at trends in earnings per share and payout ratios, in order to determine if the company can continue delivering in the future.

Over the past week, there were several companies that raised dividends, and have a ten year track record of annualized dividend increases. The companies 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 quarterly dividends by 12.50% to $0.225/share. This was the 30th consecutive year of dividend increases for this dividend champion. Over the past decade, the company has managed to grow dividends at an annualized rate of 9.70%.

Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer, stated, “We remain committed to our long tradition of paying dividends to our shareholders as part of their total returns, and are incredibly proud of achieving 30 consecutive years of dividend increases. Dividends are a key element of our disciplined approach to capital allocation, and evidence of the confidence that Badger Meter has in the resilience of our earnings and cash flow.”

The stock is expensive at 43.78 times forward earnings however. Badger Meter yields 0.81%. Even at the June lows, the stock sold as low as 33 times forward earnings.

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

The company raised its quarterly dividends by 13.30% to $0.725/share. This was the 16th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 14.50%.

"Our results reflect continued execution of our long-term growth strategy, the ongoing digitization of financial services, and strong performance from our Itiviti acquisition.

"Broadridge's resilient business model is built to deliver growth through different economic cycles. Looking ahead, we expect continued growth in Fiscal 2023, with 6-9% organic recurring revenue growth, continued margin expansion, and 7-11% Adjusted EPS growth. Most importantly, we are well-positioned to deliver, again, on our three-year financial objectives, with recurring revenue and Adjusted EPS growth at or above the higher end of the range," Mr. Gokey added.

"Finally, I'm pleased to announce that our Board has approved a 13% increase in our annual dividend amount to $2.90 per share. Broadridge has now increased its dividend for 16 consecutive years, further underlining the strength and resiliency of our business and the durability of the trends driving our growth."

The stock sells for 26.35 times forward earnings and yields 1.58%. Even at the lows in June, the stock only went as low as 20.80 times forward earnings.

J&J Snack Foods Corp. (JJSF) manufactures, markets, and distributes 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 hiked its quarterly dividend by 10.60% to $0.70/share. This is the 17th consecutive year of annual dividend increases for this dividend achiever. The company has managed to grow dividends at an annualized rate of 18% over the past decade.

The stock is expensive at 55.33 times forward earnings. The stock yields 1.61%. Even at the lows in May, the stock sold at 45 times forward earnings.

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).

The company hiked quarterly dividends by a massive 27.50% to $0.65/share. This increase represents Nordson’s 59th consecutive year of annual dividend increases. Over the past decade, this dividend king has managed to grow dividends at an annualized rate of 14.30%.

“Nordson has a proud history of returning a portion of its cash flow to our shareholders. This increase moves our annual dividend yield to slightly over one percent,” said Joseph Kelley, executive vice president and chief financial officer. “This increase reflects our confidence in our long-term profitable growth, which is driven by the continued execution of our Ascend strategy, designed to deliver top-tier growth with leading margins and returns.”

The stock sells for 25.62 times forward earnings and yields 1.07%. Even during the June lows, the stock only got as cheap as 21 times forward earnings.

ResMed Inc. (RMD) develops, manufactures, distributes, and markets medical devices and cloud-based software applications for the healthcare markets. The company operates in two segments, Sleep and Respiratory Care, and Software as a Service.

The company increased quarterly dividends by 4.80% to $0.44/share. This marks the 10th year of consecutive annual dividend increases for this newly minted dividend achiever. Over the past five years however, the company has raised dividends at an annualized rate of 4.94%. 

The stock is expensive at 42 times forward earnings. Even in May, it sold as cheaply as 33 times forward earnings, which is not cheap either. The dividend yield is 0.73%.

Westlake Corporation (WLK) manufactures and supplies petrochemicals, polymers, and building products worldwide. It operates through two segments, Performance and Essential Materials; and Housing and Infrastructure Products. 

The company hiked its quarterly dividends by 20% to $0.2975/share. This was the 18th 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 23.50%. The five year dividend growth is 8.80% annualized however.

The stock is selling at 21.74 times forward earnings. The new dividend yield is 1.15%.

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Twelve Companies Committed to Returning More Profits to Shareholders

Companies that grow dividends tend to have better financial health and produce sustained earnings and revenue growth. Dividends help identify well-managed companies; every dividend declaration represents a promise by management and a vote of confidence by the board of directors in the company's leadership. Companies that consistently raise their dividend payouts also raise the bar on their own performance expectations. These dividend increases show the longstanding commitment of returning capital to shareholders for these companies. These increases also provide evidence that companies are executing on their long-term business strategies.

Shares of dividend-paying companies possess built-in value that makes them generally more resilient in down markets, with solid appreciation potential during earnings-driven market upturns — with less price volatility.

I follow the list of dividend increases weekly as part of my dividend investing strategy. I try to approach investing from different points of view, in order to ensure that I can see emerging dividend success stories and monitor existing holdings.

Over the past week, there were several companies that raised their dividends to shareholders. I am listing below the ones which have managed to grow dividends over the past week and also have at least a ten year track record of annual dividend increases. The companies include:

This list is not a recommendation to buy or sell stocks. It is simply a list of companies that raised dividends last week. The companies listed have managed to grow dividends for at least ten years in a row.

The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.

This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.

Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.

Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.

For a sample analysis of Illinois Tool Works (ITW), check here.

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15 Dividend Paying Companies Raising Dividends Last Week

As part of my monitoring process, I review the list of dividend increases every week. This exercise helps me to monitor existing portfolio holdings, and to identify promising companies for further research.

I tend to focus my attention on companies with at least ten years of annual dividend increases. This activity helps me to focus on companies with a higher chance of delivering sustainable dividends, and lets me identify the companies with a long runway for future dividend increases.

I review each company, in order to determine if it can continue raising its dividends for the foreseeable future. I believe that rising earnings per share are the fuel behind future dividend increases.

I look at rising earnings per share, in conjunction with trends in the dividend payout ratio. A high payout ratio is generally a warning sign, unless the business model is highly predictable or earnings are growing faster than dividends. I generally prefer if earnings and dividends grow at roughly the same long-term rate. Sometimes there are changes, and reasons for why that’s not the case, especially if a company just recently started growing dividends from a low base.

I like to review trends in dividend growth too, and check if it is accelerating, decelerating or just keeping pace at a constant rate.

I also like to review the valuation in terms of P/E and yield. While these are viewed as old-fashioned today, I have found them to be useful yardsticks to follow, along with dividend growth, payout ratio and earnings growth. Valuation is part art, part science.

Over the past week, there were 15 companies that raised dividends that also have a ten year track record of annual dividend increases. The companies include:

This list is not a recommendation to buy or sell stocks. It is simply a list of companies that raised dividends last week. The companies listed have managed to grow dividends for at least ten years in a row.

The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.

This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.

Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.

Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.

For a sample analysis of Kroger (KR), check this article.

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