I review the list of dividend increases every week, as part of my monitoring process. I usually focus my attention on companies that have managed to grow dividends for at least a decade, in order to identify companies with long-runways for future dividend growth.
I believe that dividend increases portray managements best estimate for the business conditions over the next year or so. This is why it is helpful to review the latest dividend increase, relative to the past record, and the trend in earnings. That's a good amount of information to digest. Last but not least, I review trends in earnings in conjunction with valuation and growth, in order to determine if a company could be a good idea today.
Of course, there are a lot of trade-offs involved in the process. There are three types of dividend growth stocks. In general, I want to see companies with lower yields to have higher dividend growth rates. A company with a higher yield would likely have lower dividend growth. Other pieces of information to think through include whether a company is in the initial phases of dividend growth or is more mature.
Over the past week, there were three companies that hiked shareholder distributions, and raised dividends for at least a decade:
Brady Corporation (BRC) manufactures and supplies identification solutions (IDS) and workplace safety (WPS) products to identify and protect premises, products, and people in the United States and internationally.
The company declared a 2.20% increase in the dividend to $0.23/share. This represents the 37th consecutive annual increase in dividends for this dividend champion. Over the past decade, the company has managed to grow dividends at an annualized rate of 2%
The stock sells for 13.17 times forward earnings nd yields 2%. Given the slow pace of dividend growth and low yield, the stock does not seem attractive today.
Avnet, Inc. (AVT) markets, sells, and distributes electronic components. The company operates through two segments, Electronic Components and Farnell.
The company raised quarterly dividends by 11.50% to $0.29/share. This was the ninth year of consecutive annual dividend increases for the company. I decided to include it, despite not raising dividends for a decade, because I found it promising. Over the past 5 years, the company has managed to grow distributions at an annualized rate of 6%.
“We are pleased to announce a double digit increase in our quarterly dividend, furthering our commitment to delivering sustainable shareholder returns,” said Avnet Chief Executive Officer Phil Gallagher. “This increase follows strong performance in our 2022 fiscal year and is a reflection of our confidence in our financial position and ability to promote continued growth and value creation for Avnet stakeholders.”
The stock sells for 6.25 times forward earnings and yields 2.72%. This is an interesting company for research, because earnings per share seem to be growing very quickly as of recently.
TriCo Bancshares (TCBK) operates as a bank holding company for Tri Counties Bank that provides commercial banking services to individual and corporate customers.
The company hiked its quarterly dividend by 20% to $0.30/share. This is the 10th year of consecutive annual dividend increases for this newly minted dividend contender. Over the past decade, the company has managed to hike distributions at an annualized rate of 10.80%.
The company sells for 11.35 times forward earnings and yields 2.57%.
Relevant Articles:
- Types of dividend growth stocks
- Three stages of dividend growth
- Dividend Champions List for 2022
- How I Manage to Monitor So Many Companies