Wednesday, April 26, 2023

The building blocks of an investing process

The goal of this website is to inspire readers to identify their goals and objectives, and then create a process to achieve them. I shared this article with readers of my Dividend Growth Investor Newsletter a few months ago. 

This process should be able to address the following:

1. What is your investable universe

2. How to identify companies for further research

3. How to evaluate individual companies

4. When to buy them

5. How much to allocate/risk

6. How to monitor investments

7. When to sell

8. How to improve

I will discuss each point in a little bit more detail below (as it pertains to my situation0:

1. What is your investable universe

The investable universe is the total population of companies, that I would leverage to identify companies for further research. My investable universe is the list of companies that have managed to increase dividends for at least 5 years in a row. Most often however, I would start with companies growing dividends for at least 10 years. 

Some good lists include the Dividend Aristocrats and Dividend Champions, all of which look for companies that have increased dividends for at least 25 years in a row. The aristocrats looks for S&P 500 companies only however. Albeit, there are aristocrats lists covering the S&P Midcap sector, so those should be added too. 

A good list is the dividend achievers one, which includes the companies that have managed to raise dividends for at least a decade.

I love the Dividend Champions/Contenders/Challengers list, which is updated here.

2. How to identify companies for further research

The investable universe is about 800 companies in the US. That’s a pretty big number of companies. In general, the investor may want to familiarize themselves with as many of them as possible, one at a time. However, it is much easier to screen out companies, based on parameters set by the investor.

I tend to focus mostly on companies with 25 year track records, though I could occasionally go as low as 5 years, if I see some promising company. There is a trade-off between a short and a long track record of annualized dividend increases, mostly in terms of dividend growth but also how defensible that is. Companies with longer track records of annual dividend increases may turn out to be able to grow dividends for much longer than a company with a shorter track record. That’s because the shorter track records are generally untested, and there’s a high probability of them being cyclical. 

I narrow the list by using a screening criteria. In general I look for:

1) A track record of annual dividend increases

2) Dividend growth exceeding a certain percentage over the past decade

3) Earnings per share growth over the past decade

4) A dividend payout that is sustainable

5) A business I understand

6) Quality – Moat

7) Good valuation

My screening process is a collection of some objective criteria, as well as subjective criteria. Each investor is different, and each investor perceives information differently based on their experiences and knowledge. It’s important to stick to your circle of competence, while also trying to expand it over time however.

I have watchlists of companies I would love to buy at a certain valuation, and I also monitor companies for weekly dividend increases. I am exposed to ideas of other investors and general conditions with major US companies however, which may or may not impact my decision to look at a company.

3. How to evaluate individual companies

The list of about seven items above is a good way of what I look for, when evaluating individual companies. As you can see from my analyses below, I tend to focus on qualitative and quantitative factors.

I look at the latest dividend increase, in comparison with the last 5 and ten years. I like to look at trends in dividends per share to evaluate how things are going. Dividend policy tends to show me how management thinks about the business conditions in the near term, and longer term.

I also tend to review trends in earnings per share over the past decade. Rising earnings per share are the fuel behind future dividend increases and growth in intrinsic value. I like to see how earnings per share did over previous recessions, and I am always on the lookout for stagnating EPS growth. I’m also on the lookout for one-time items as well – I tend to try and normalize things.

The dividend payout ratio is helpful in Identifying whether dividends are safe. In general, I want to see this ratio stuck in a range. This means that growth in dividends per share closely resembles growth in earnings per share – this is especially true for mature companies. Some companies that just recently initiated dividends can afford to grow them faster than earnings, since they start it off a low base. However, once a natural payout ratio is achieved, earnings and dividends should grow at roughly a similar rate. I am on the lookout for dividends growing faster than earnings, because that may be a warning sign of bad things to happen.

I also focus on the absolute number of the dividend payout ratio. Anything below 60% seems sustainable in general. However, a company with a higher payout ratio requires closer monitoring. If it consistently manages to grow dividends and maintain a high payout ratio, that is a plus. However, there is always a higher risk with higher payout ratios that the next recession would result in a lower earnings power, which could result in a dividend cut. This is where it is important to mention that the trend in payout ratio and the absolute value, should also be evaluated relative to earnings per share growth, stability of the business, defensibility and how cyclical it is.

I also like to evaluate companies qualitatively. This means understanding the business, how it can grow, and see how it survived over the past calamities it was exposed to. This is where having a moat or a strong competitive advantage can be helpful. That could mean being part of a duopoly/oligopoly, having an exclusive government license, some unique product/patent, a strong brand name, lowest cost producer, network effects go into effect. This could be a subjective part of the analysis.

4. A dividend payout that is sustainable

Analyzing companies is great. But even the best company in the world is not worth overpaying for. Knowing when to buy an investment is as important as buying the right investment in the first place.

I try to buy companies when I think they are attractively valued. In general, I look at the current P/E ratio, I look at defensibility/cyclicality of the earnings stream, and I look at historical growth and potential growth expectations. I also look at whether I own the company or not already.

If I see two companies with a P/E of 20, yield of 3% and dividend growth rate of 6%, I would prioritize the one that I do not already have a position in. 

I may prioritize a company with a P/E of 20, yield of 3% and growth of 6% over a company with P/E of 10, yield of 4% and growth of 7% if I thought that the latter is cyclical and the former is more defensive and less likely to suffer during a recession. A higher yielding stock is of no use if it cuts dividends during the next recession.

I tend to build positions slowly and over time. I do reserve the right to change my opinion on the stock, if it turns out I was wrong.  Quite often, slowing down in earnings growth and dividend growth may give me a pause.

I also want to have the best odds of building a decent position size. That’s mostly due to the limiting factor of when I have funds available to invest in the first place. I have a set amount to invest monthly, and do not have hundreds of thousands sitting in cash, waiting to be deployed. Hence, when I initiate a position in a security, I try to estimate the odds of being able to deploy money and build a position over time to at least a decent position size.

I also tend to prioritize companies that are rarely undervalued when building positions, over companies that are often attractively valued.

5.   How much to allocate/risk

Risk management is very important to me as an investor. It ensures I live for another day, and another dividend.

I do a lot of analysis on companies I buy, I look at a lot of different data points too. However, life is unpredictable. It’s important to understand and accept that, and have some humility. 

I try to limit risk through diversification. I tend to own a lot of companies from different industries, and even countries too. I also tend to build my positions slowly and over time. I tend to avoid overpaying for securities and I also tend to avoid adding to companies if the story changes ( dividend growth goes to zero for example or earnings start decreasing/flatlining).

I also tend to try and weight my positions as equally as possible. You may have noticed that I equally weighted the positions in my Roth IRA contributions in 2022 and 2023. That’s because I do not really know exactly which of the companies I own will be the best and the worst today. I believe they are all great, but I also know that the conditions over the next 30 years may result in changes, that could render many of my analyses obsolete. That’s ok. The goal is to minimize risk per individual position, and maximize potential for gain. As you know, if I put $1,000 in a stock, the most I will lose is the money I invested upfront, less any dividends received and reinvested elsewhere. However, my upside is unlimited, provided I do not sell early. This is why I rarely sell by the way, because the opportunity cost is usually too high, especially if we are talking about quality cash machines that are dividend growth stocks.

It gets trickier when I invest a set amount each month. However, it is still possible to decide on position limits. I typically try to avoid having more than 5% in a single security or having more than 5% of my dividend income coming from a single stock. I would simply stop adding to it if it got there, but I would not sell. In a portfolio where I plan to add $1,000/month for 15 years (180 months), I expect to put about $180,000. This means that if I end up with say 50 companies, I should plan to put about $3,600 per security. That would be my limit. I may go overboard however. But I should not have more than $9,000 put in a single security. This limit would also be going up over time, but won’t be at $9,000 until much later in the 15 year journey.

If we are talking about having a maximum of 100 companies, that translates into never putting up more than $2,000 in a single security over a period of 15 years. That’s a good risk management idea, which limits the amount I can lose per security to just $2,000. If I stop adding to a stock at $2,000 in cost, then I can also potentially focus on other lucrative opportunities. I also stop adding to a stock if the conditions worsen too, during the accumulation process. That also keeps amounts at risk per security in check. This is why I end up with a lot of small positions, because I take a lot of small risks. Sometimes things just don’t work out during the dating process. The flipside is that if I do not build a high enough position quickly, I may end up missing out on future opportunities. There is a trade-off in everything.


6. How to monitor investments

Monitoring investments can be done in a variety of ways. 

It could include checking out annual report, quarterly press releases, dividend announcements. The goal of course is to avoid being overwhelmed, while still knowing what’s going on.

In general, I try to take a look at existing companies once every 12 – 18 months. I invest in companies that are resilient and have been around for a long period of time. Nothing significant would happen every 3 months, though it is helpful to check once an year. This involves basically updating my analysis/review. 

I give first priority to the companies that seem attractively priced, because that analysis would be my support behind future additions to said investment. I then give priority in analysis updating to companies that do not seem attractively valued, but seem fundamentally sound and promising. For companies that do not seem attractively valued and fundamentally promising, I may skip doing the work. 

My monitoring process does involve looking at dividend increases. That’s because when I buy a quality company at an attractive valuation, I expect to hold on to it for years, and enjoy rising earnings and dividends. For as long as the dividend is not cut, I would hold on to that position. Once the dividend is cut however, that means that my original thesis was wrong. Hence, I sell.

The challenge with monitoring is that it could take a lot of time, but the added benefit may not be worthwhile. A lot of the companies I have bought seem to be the types that can potentially be tucked into a safety deposit box, and forgotten about. That’s my premise or belief at least. While things change, and some of the companies I own would disappoint dearly, chances are that there would be ones that do better than expected. The latter types would likely cover any losers out there, and hopefully propel that portfolio forward. At least that’s my belief/theory.

Hence, the danger of monitoring is that the investor may see one piece of what sounds like negative news to them, and they would sell a potentially promising company. And if the investor sells those promising companies too early, they would be missing out on that future potential that would cover the losers they would encounter in their investment lifetimes.

This is why I believe it’s best to limit amount at risk per company, so if it doesn’t work out, I know how much I would lose at most. That way the downside is limited. But by patiently holding on for as long as possible, I give companies maximum benefit of the doubt to hopefully realize their full unlimited potential.

7. When to sell

I sell very rarely. 

That’s because turnover is costly in terms of commissions, fees and taxes. In addition, turnover is costly in terms of opportunity cost. 

I sell basically after a dividend is cut. That’s because I invest in companies, expecting earnings and dividends to increase over time. I am willing to ride on this long term trend for years, if not decades. A dividend cut is an admission that my thesis is broken. So I sell, clear my head, and allocate proceeds elsewhere. If a company start raising dividends again, and meets my entry criteria, I would consider it though. 

I also sell after a company I hold is acquired. In general though, I rarely have a choice in these matters. I am not as excited when companies I own get acquired, because I always feel like I am being robbed of my future potential. After all, an acquirer is not likely to be buying another company for charity purposes – they probably see the potential like you and me. But they want to get all of it for themselves, and provide us with a pittance of a premium to last Fridays closing price. Sorry, I went on a tangent again.

I have often sold stock for other reasons too. They have been mistakes, but I would mention them, because you may have better luck than me.

Some folks sell after a valuation gets out of hand. Then they buy something else with the proceeds, which seems cheaper. This sounds like a logical approach to many. The pitfalls are that the company you thought was expensive was actually cheap in hindsight. For example, if that stock had a P/E of 30 and a yield of 1%, it looks expensive. But if growth was 15%/year, that stock could quadruple earnings and dividends in 1 decade. So in 10 years that stock could yield 4% on cost, and even if P/E declines to 20, the stock can deliver a 167% return. Of course, if I sell at a profit in a taxable account, I’d also pay taxes on those realized capital gains. Perhaps another reason why I prefer investing through retirement/tax deferred accounts first.

On the other hand, if I bought a stock with a P/E of 10, and a dividend yield of 3%, it may look like I got myself a bargain. However, if earnings and dividends growth turns out to be slower than expected, I may not get myself much of a bargain after all.

Of course, if you are able to spot undervalued gems frequently, it may make sense to sell the least promising companies with the most promising ones. However, those are hard to spot perfectly in advance. There may be steep opportunity costs in the process of replacing one company with another.


8. How to improve

This is the fun part of it all. After investing for a certain period of time, it makes sense to sit back, gather our notes, and see if there are any lessons to be learned. This may involved studying transaction history, studying past analyses/reviews, in order to identify any room for improvement and any lessons that can help with our investing process.

My mistakes made have included:

- Selling due to some “reason”

- Trying to justify a poor performance with verbiage and narratives

- Not using retirement accounts early enough

- Trying to “time” the markets

- Concentrating in “my best idea”

Improving also means observing how other investors operate, and trying to incorporate “best practices”, ideas etc. It’s easier said than done, and it may involve some trial and error.

Looking at strategies that are different than yours, and learning from people who share different opinions from you can be beneficial. I spent a decade looking at ticker tapes, reading books on different strategies before I decided on dividend growth investing. Buying companies with growing dividends is an idea taken from trend following and momentum. Buying and Holding diversified portfolios with low turnover is an idea taken from indexing. Buying companies at attractive valuations, while trying to avoid overpaying is an idea taken from value investing. My edge is in buying a diversified portfolio of quality dividend stocks at attractive valuations, and then holding on to them tightly for decades. In a world where everyone has a short attention span, and everyone is worried about losing a fraction of a penny to high frequency traders, it pays to invest for the long term. Trying to improve can pay off larger dividends and capital gains for you down the road.


Saturday, April 22, 2023

Thirteen Dividend Growth Stocks Rewarding Shareholders With a Raise

As part of my monitoring process, I review the list of dividend increases. This process helps me review how the companies I own are doing. It also helps me identify companies for further research. I usually focus on the dividend increases for companies with a dividend streak longer than ten years in a row.

For this weekly review, I tend to focus my attention on companies with at least a ten year history of annual dividend increases, which also raised dividends last week. I provide a quick overview of each company that includes the amount of the most recent dividend increase, and compares it to its recent historical record. I also review the streak of annual dividend increases, and review earnings and valuation information.

There were several notable dividend increases over the past week:



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.

You can check out my analysis of Johnson & Johnson (JNJ) for more detail on how I review companies.

Relevant Articles:


Tuesday, April 18, 2023

Johnson & Johnson (JNJ) Dividend Stock Analysis 2023

 Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices & Diagnostics. This dividend king has paid dividends since 1944 and has managed to increase them for 61 years in a row. Dividend increases have been like clockwork every year for decades.

The company just raised dividends by 5.30% to $1.19/share. This is the 61st year of consecutive annual dividend increase for this dividend king.

Johnson & Johnson earned $3.86/share in 2012 and managed to grow earnings to $6.73/share in 2022. The company expected to earn $10.51/share in 2023.


Johnson & Johnson has a diversified product line across medical devices, consumer products and drugs, which should serve it well in the future. This makes the company somewhat immune from economic cycles. Investors looking for a safe and dependable earnings can look no further than Johnson & Johnson. In addition, the company has strong competitive advantages due to its scale, leadership role in various diverse healthcare segments, breadth of product offerings in its global distribution channels, continued investment in R&D, high switching costs to users of its medical devices, as well as its stable financial position.

Future profits growth could come from new product offerings, which are the result of continued investment in research and development, and through strategic acquisitions.

Note that Johnson & Johnson announced a little over an year ago that it would likely be splitting into two companies - one focused on consumer products and the other on pharmaceuticals and medical technologies. It’s consumer health segment will be called Kenvue.

I am not sure how the dividend would be split yet. However, my guess would be that shareholders of legacy Johnson & Johnson would likely generate the same amount of total dividend income. It would just come from two companies, as opposed to one. I would give the spin-off some leniency in getting set-up. But if they do not pay a dividend within an year after the split, I may end up removing them from the portfolio.

Also note that Johnson & Johnson is involved in lawsuits related to its baby powder potentially causing cancer. The suits allege that this powder contains talc, which may have asbestos. These lawsuits could be costly in terms of damages to claimants, and loss of focus on management part. The company has tried to shield itself from those lawsuits by placing the affected subsidiaries in a separate company, and filing for chapter 11 for those subsidiaries only. This request has not been successful in shielding itself from this liability. This could potentially turn out to be very costly for JNJ. Or it could turn out to be a big nuisance, and the company could move on. 

Johnson & Johnson has managed to reduce number of shares outstanding over the past decade, which helped earnings per share growth. Between 2011 and 2013, the number of shares went from 2,775 million to 2,877 million and then declined to 2,664 million. The short bumps up were related to acquisitions.  


The company managed to grow its dividends by 6.40%/year over the past decade. The company's latest dividend increase was announced in April 2022 when the Board of Directors approved a 6.60% increase in the quarterly dividend to $1.13/share.


The dividend payout ratio has increased from 62% in 2012 to 64% in 2022. The ability to generate strong cash flows, have enabled Johnson & Johnson to reward shareholders with higher dividends for 60 consecutive years. I believe that the dividend is safe today, but will likely be limited to future growth in earnings per share of 5% - 6%/year over the next decade. A lower payout is always a plus, since it leaves room for consistent dividend growth and minimize the impact of short-term fluctuations in earnings.

Currently, the stock is fairly valued at 15.30 times forward earnings, yields 2.75% and has a forward dividend payout ratio of 40%. 

Relevant Articles:



Monday, April 17, 2023

Four Dividend Growth Stocks Delivering Dividend Raises to Shareholders

As part of my review process, I monitor dividend increases every week. I compile the list each week, but focus my attention on companies with a ten year track record of annual dividend increases or longer. I am looking for companies that have managed to grow dividends through a typical full length economic cycle of a boom and bust. A ten year requirement for dividend increases weeds out a lot of cyclical companies. It helps me focus on those who have a higher likelihood of future increases.

The fun doesn't stop there however. I review the recent increase relative to the historical record - meaning the past 5 or 10 years. Next, I review the trend in earnings per share, in order to determine if dividend growth is sitting on a stable foundation. I want a business that can grow earnings per share and grow dividends per share from there. I do not want a business that grows dividends by increasing the dividend payout ratio, as that is unsustainable for dividend increases and the business as a whole. I also want a dividend payout ratio that is sustainable, and generally staying within a tight range over time.

Next, I am going to review valuation. Even the best company in the world is not worth overpaying for. In my case, valuation means looking at P/E ratios and dividend growth rates. I try to account for how defensible the business is, whether I already have a position (and its size), and compare different options out there by yield/growth when I am ready to pull the trigger.

Over the past week, there were four companies that raised dividends to shareholders. All have managed to increase dividends for at least ten years in a row:

Aon plc (AON) is a professional services firm, provides advice and solutions to clients focused on risk, retirement, and health worldwide. 

Aon increased quarterly dividends by 9.80% to $0.615/share. This is the 12th consecutive annual dividend increase for this dividend achiever

Over the past decade, the company has managed to increase dividends at an annualized rate of 13.40%. The five year annualized dividend growth is at 9.20%.

Between 2013 and 2022, the company has managed to grow earnings from $3.57/share to $12.23/share.

The company is expected to earn $14.63/share in 2023.

The stock sells for 22.18 times forward earnings and yields 0.76%.


Agree Realty Corporation (ADC) is a publicly traded real estate investment trust primarily engaged in the acquisition and development of properties net leased to industry-leading retail tenants. 

Agree Realty raised quarterly dividends by 1.20% to $0.243/share. This is also a 3.84% raise over the dividend paid during the same time last year. This is the eleventh consecutive annual dividend increase for this dividend achiever.

Over the past decade, the company has managed to increase dividends at an annualized rate of 5.70%. The five year annualized dividend growth is at 6.70%.

Between 2013 and 2022, the company has managed to grow FFO from $2.12/share to $3.47/share.

The company is expected to generate $3.95/share in FFO in 2023.

The stock sells for 16.72 times forward FFO and yields 4.40%.


The Procter & Gamble Company (PG) provides branded consumer packaged goods worldwide. It operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. 

Procter & Gamble raised quarterly dividends by 3% to $0.9407/share. This dividend increase will mark the 67th consecutive year that P&G has increased its dividend and the 133rd consecutive year that P&G has paid a dividend since its incorporation in 1890. The company is a member of the elite dividend kings list.

Over the past decade, the company has managed to increase dividends at an annualized rate of 5%. The five year annualized dividend growth is at 5.70%.

Earnings per share have increased from $3.66 in 2012 to $5.81 in 2022. The company is expected to generate $5.86/share in earnings in 2023.

The stock sells for 25.77 times forward earnings and yields 2.50%. Check my review of Procter & Gamble here.


Star Group, L.P. (SGU) sells home heating and air conditioning products and services to residential and commercial home heating oil and propane customers in the United States

Star Group raised dividend by 6.60% to $0.1625/share. This is the eleventh consecutive annual dividend increase for this dividend achiever.

Over the past decade, the company has managed to increase dividends at an annualized rate of 6.80%. The five year annualized dividend growth is at 6.80%.

The stock sells for 15.37 times forward earnings and yields 5.05%.


Relevant Articles:

- Four Notable Dividend Increases From Last Week





Friday, April 14, 2023

Dividend Growth Stocks Offer Higher Returns With Less Volatility

I recently came upon an interesting study from investment manager Blackrock. They analyzed the total returns for different categories of companies in the S&P 500, based on their dividend policy.

They looked at total returns per year for dividend growers and initiators, S&P 500, non-dividend payers and dividend cutters between 1978 and 2022. They compared the total returns between each category. In addition, they also included volatility for each group as well. You can view the results in the chart below:




Source: Blackrock

I have included the commentary from Blackrock verbatim below:

"Dividend-paying stocks have outperformed nondividend payers over the long term with less volatility, but companies that grow their dividends stand out most, as shown at the upper right. Statistically, a company’s record of and commitment to paying a dividend has instilled a measure of resilience. We find their managements are loath to cut a dividend and send a negative signal to the market, so dividend growers tend to be well-run companies built to weather diverse markets. Stocks with a history of dividend growth also have tended to fare better in a rising-rate environment versus the highest-yielding stocks (essentially “bond proxies”) that tend to follow bond prices down as rates rise."

The results of this study run contrary to the popular narrative I see today. Many investors do not understand the signaling value of increasing dividends. Only a quality company can afford to grow the business and also generate a growing amount of excess cashflows for many years, in order to establish a long track record of annual dividend increases.





Wednesday, April 12, 2023

Procter & Gamble (PG) Increases Dividends for 67th Consecutive Year

The Procter & Gamble Company (PG) provides branded consumer packaged goods worldwide. It operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Procter & Gamble is a member of the elite dividend kings list, which includes companies that have managed to raise annual dividends for at least 50 years in a row. That's not a small feat.

The company increased quarterly dividends by 3% to $0.9407/share yesterday. This dividend increase marked the 67th consecutive year that P&G has increased its dividend and the 133rd consecutive year that P&G has paid a dividend since its incorporation in 1890. (Source)

Management states that this dividend increase reinforces their commitment to return cash to shareholders, many of whom rely on the steady, reliable income earned with their investment in P&G.

This dividend increase was at the slowest annual rate since 2017. It was also lower than my expectations. The table below shows the year that the company raised dividends, the new increased quarterly dividend payment for that year, and the rate of dividend increase for the year. It focuses on the past 20 years of dividend increases for Procter & Gamble:


Over the past five years, P&G has managed to increase dividends at an annualized rate of 5.78%. The ten year average is 4.98%.



Earnings per share have increased from $3.66 in 2012 to $5.81 in 2022. The company is expected to generate $5.86/share in earnings in 2023.


That being said, the core business is very stable, which means that long-term earnings power should not be affected. However, earnings per share have not grown by much over the past decade. The slowdown in dividend growth is a direct result of the slowdown in earnings per share growth. 


In the past decade, the dividend payout ratio increased from 58% in 2012 to 61% in 2022. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.




Based on forward earnings, it appears that the forward dividend payout ratio is at 64%, which means that the dividend is sustainable.

The number of shares outstanding has been decreasing gradually over the past decade too.


It is interesting to look at the company's performance over the past decade for perspective. The stock sold for approximately $81/share a decade ago, earned $3.86/share and paid a quarterly dividend of 56.20 cents/share, for an annual dividend yield of 2.77%. The P/E was at 21.

Fast forward to today, and the company is paying a quarterly dividend of 94.07 cents/share, for a total yield on cost of 4.64%. If we take dividend reinvestment into consideration, a $1,000 investment ten years ago would be generating $65.30 in annual dividend income today.


At the current price, the stock seems overvalued at 25.71 times forward earnings. The stock yields 2.47%. Given the slow dividend growth, it does not seem like a good value today. Perhaps, it could be a better value on dips below $120/share.

Relevant Articles:


Monday, April 10, 2023

Four Notable Dividend Increases From Last Week

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

The past couple of weeks have been slow on the dividend increases front. Last week showed some movement in a few companies that announced dividend hikes to their shareholders. The companies include:


Constellation Brands, Inc. (STZ) produces, imports, markets, and sells beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. 

Constellation Brands raised its quarterly dividend by 11.30% to $0.89/share. This marked the 8th year of consecutive annual dividend increases for this dividend contender. During the past five years, the company has managed to increase distributions at an annualized rate of 10%. The three year annualized dividend growth rate is just 1.90% however.

The company earned $10.33/share in 2014, but ended up losing $0.37/share in 2023. Constellation Brands is expected to earn $11.70/share in 2024.

The stock sells for 19.21 times forward earnings and yields 1.61%.


FedEx Corporation (FDX) provides transportation, e-commerce, and business services in the United States and internationally. 

FedEx hiked quarterly dividends by 9.60% to $1.26/share. FedEx has managed to increase annual dividends for three years in a row.

During the past five years, the company has managed to increase distributions at an annualized rate of 18.13%.

Between 2013 and 2022, FedEx has managed to increase earnings from $8.61/share to $14.52/share. The company is expected to earn $14.92/share in 2023.


The stock sells for 15.56 times forward earnings and yields 2.23%.


H.B. Fuller Company (FUL) formulates, manufactures, and markets adhesives, sealants, coatings, polymers, tapes, encapsulants, additives, and other specialty chemical products worldwide. The company operates through three segments: Hygiene, Health and Consumable Adhesives; Engineering Adhesives; and Construction Adhesives. 

H.B. Fuller raised quarterly dividends by 7.90% to $0.205/share. This represents an 8% increase over the prior quarterly dividend and marks the 54th consecutive year in which this dividend king has increased its dividend. During the past five years, the company has managed to increase distributions at an annualized rate of 4.60%.

Between 2013 and 2022, H.B. Fuller has managed to increase earnings from $1.94/share to $3.37/share. 

The company is expected to earn $4.16/share in 2023.

The stock sells for 15.40 times forward earnings and yields 1.28%.


Bank OZK (OZK) provides various retail and commercial banking services. 

Bank OZK raised quarterly dividends by 2.90% to $0.35/share. This was a 12.90% increase over the distribution paid during the same time last year. Bank OZK has increased its quarterly cash dividend on its common stock for 27 years in a row.

During the past five years, this dividend champion has managed to increase distributions at an annualized rate of 12.20%.

Between 2013 and 2022, Bank OZK has managed to increase earnings from $1.27/share to $4.55/share. The company is expected to earn $5.69/share in 2023.

The stock sells for 5.85 times forward earnings and yields 3.91%


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Sunday, April 2, 2023

Dividend Aristocrats Raises in 2023

The Dividend Aristocrats List includes S&P 500 companies that have managed to increase annual dividends for at least 25 consecutive years. This is not a small accomplishment, as less than 14% of S&P 500 companies can achieve that. That's a restatement to the quality of the business, stability of cash flows, and ability to grow and shower shareholders with more cash for decades.

So far this year, there have been 22 Dividend Aristocrats that increases dividends. Only one of them, V.F. Corporation (VFC) has cut dividends. As a result, V.F. Corporation was deleted from the list in March 2023. I am still including it in my reviews in 2023, since V.F. Corp was part of the list as of the end of 2022.


The overall dividend growth is positive for the aristocrats in 2023.

That's because the pace of dividend increases so far has overcome this dividend cut.

I expect the following companies to increase dividends in April 2023:


IBM (IBM) has managed to increase quarterly dividends by 1 cent/year over the past three years. I would expect quarterly dividends to reach $1.66/share in 2023, up from $1.65/share in 2022.

Johnson & Johnson (JNJ) has managed to increase quarterly dividends by 5% - 6%/year over the past 5 - 10 years. I would expect a dividend hike to $1.19 - $1.20/share in 2023. The current quarterly dividend is $1.13/share.

Procter & Gamble (PG) has also managed to increase quarterly dividends by around 5% - 6%/year over the past 5-10 years. I would expect a dividend hike to $0.96/share in 2023.

Sysco (SYY) has managed to increase quarterly dividends by 2 cents/share over the past three years. I would expect quarterly dividends to reach $0.51/share in 2023, up from $0.49/share in 2022.

Grainger (GWW) has managed to increase quarterly dividends by about 6%/year over the past five years. I would expect a dividend increase in the quarterly payment to $1.82/share in 2023, up from $1.72/share in 2022.

Thank you for reading!

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