Dividend Growth Investor Newsletter

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Monday, April 29, 2024

Seven Dividend Growth Stocks Increasing Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process.

I use this exercise to review existing companies and identify companies for further research.

In my evaluation, I review the rate of dividend increase relative to the historical average. In general, I look for consistent dividends. This is where I note decelerating dividend growth as a potential red flag. 

I then review the trends in earnings per share, in order to determine if that dividend growth is on a solid footing. Rising earnings are the fuel behind future dividend increases.

I also review the valuation as well. That means looking at the P/E ratio and dividends in relation to dividend growth.

During the last week, there were seven companies which have managed to grow dividends for at least a decade, which also increased dividends last week. The companies include:



Comfort Systems USA, Inc. (FIX) provides mechanical and electrical installation, renovation, maintenance, repair, and replacement services for the mechanical and electrical services industry in the United States. It operates through two segments, Mechanical and Electrical. 

The company hiked quarterly dividends by 20% to $0.30/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 15%.

Between 2014 and 2023 the company managed to grow earnings from $0.61/share to $9.03/share.

The stock sells for 25.38 times forward earnings and yields 0.40%.


Avery Dennison Corporation (AVY) operates as a materials science and digital identification solutions company in the United States, Europe, the Middle East, North Africa, Asia, Latin, America, and internationally. 

The company increased quarterly dividends by 9% to $0.88/share. This is the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade the company has managed to grow dividends at an annualized rate of 10.80%.

The company managed to grow earnings from $2.61/share in 2014 to $6.23/share in 2023.

The company is expected to earn $9.39/share in 2024.

The stock sells for 23.33 times forward earnings and yields 1.61%.



Delek Logistics Partners, LP (DKL) provides gathering, pipeline, transportation, and other services for crude oil, intermediates, refined products, natural gas, storage, wholesale marketing, terminalling water disposal and recycling customers in the United States. 

The partnership increased quarterly distributions by 1.4% to $1.07/unit. This distribution represents a 4.4 percent increase over Delek Logistics’ distribution for the first quarter 2023. This is the eleventh year of annual distribution increases for this dividend achiever.

Delek Logistics Partners has increased distributions for 11 years in a row. It has an annualized distribution growth of 11.34% over the past decade.

The partnership yields 10.21% today.


Nasdaq, Inc. (NDAQ) operates as a technology company that serves capital markets and other industries worldwide. It operates in three segments: Capital Access Platforms, Financial Technology, and Market Services.

Nasdaq increased quarterly dividends by 9.10% to $0.24/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade the company has managed to grow dividends at an annualized rate of 17.40%.

Nasdaq managed to grow earnings from $0.82/share in 2014 to $2.10/share in 2023.

The company is expected to earn $2.69/share in 2024.

The stock sells for 22.32 times forward earnings and yields 1.60%.


Parker-Hannifin Corporation (PH) manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. 

Parker-Hannifin increased quarterly dividends by 10% to $1.63/share. This is the 68th consecutive annual dividend increase for this dividend king. The company has managed to grow dividends at an annualized rate of 12.48% over the past decade.

Between 2014 and 2023, the company managed to grow earnings per share from $6.98 to $16.23.

The company is expected to earn $24.43/share in 2024.

The stock sells for 22.66 times forward earnings and yields 1.18%.


Sysco Corporation (SYY) engages in the marketing and distribution of various food and related products to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally.

Sysco increased quarterly dividends by 2% to $0.51/share. This marked the 48th consecutive annual dividend increase for this dividend aristocrat. Over the past decade, the company has managed to grow dividends at an annualized rate of 5.86%.

Between 2014 and 2023 the company managed to grow earnings per share from $1.59 to $3.49.

The company is expected to earn $4.32/share in 2024.

The stock sells for 17.85 times forward earnings and yields 2.65%.


Tompkins Financial Corporation (TMP) provides commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. The company operates through three segments: Banking, Insurance, and Wealth Management. 

Tompkins Financial increased quarterly dividends by 1.60% to $0.61/share. This is the 38th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to increase dividends at an annualized rate of 4.54%.

Between 2014 and 2023 the company's earnings per share went from $3.51 to $0.66.

The company is expected to earn $4.54/share in 2024.

The stock sells for 10.20 times forward earnings and yields 5.27%.


Relevant Articles:

- Eight Dividend Growth Stocks Rewarding Shareholders With a Raise






Wednesday, April 24, 2024

How to determine if your dividends are safe

As dividend growth investors, our goal is to buy shares in a company that will shower us with cash for decades to come.

One of the important things to look out for in our evaluation of companies involves determining the safety of that dividend payment.

A quick check to determine dividend safety is by looking at the dividend payout ratio. This metric shows what percentage of earnings are paid out in dividends to shareholders.

In general, the lower this metric, the better. As a quick rule of thumb, I view dividend payout ratios below 60% as sustainable. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. When a company pays out almost all of its earnings as dividends, that leaves little room for maneuvering if earnings decline. In addition, this leaves little for investing and growing the business. While there are some exceptions when it comes to certain pass-through entities such as Real Estate Investment Trusts, it is still good business practice to practice a WCGW mentality (What Could Go Wrong).

For example, dividend king Automatic Data Processing (ADP) earned $8.25/share in 2013 and paid out $4.79 in annual dividend income per share. The dividend payout ratio is a safe 56%. This means that this dividend king is likely to continue rewarding its long-term shareholders with a dividend increase into the future. This will further extend ADP’s streak of 50+ consecutive annual dividend increases.

However, there are exceptions to the 60% payout ratio rule.

For example, companies in certain industries such as utilities have strong and defensible earnings streams. In addition, they can afford to distribute a higher portion of earnings as dividends to shareholders due to the stability of their business model.

Another example have included tobacco companies, which tend to distribute high portions of net income to shareholders, since they do not need to reinvest back in the business in order to grow income. Plus, they have limited opportunities to reinvest those cashflows at high rates of return that the tobacco business already provides for them.  That being said, one should probably be cautious in not putting too much weight in such enterprises, because while their revenue streams have historically been defensible and stable, there is little margin of safety in case of unforeseen shocks.

Speaking of exceptions, you should note that for certain pass-through entities such as Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs), the traditional dividend payout ratio is not a good metric for dividend safety. For REITs, instead of using earnings we evaluate profitability through Funds from Operations. Therefore, we evaluate dividend safety by using Funds From Operations Payout Ratio – which calculates the proportion of dividends over the FFO. I like to get a feel for the FFO Payout Ratio over the past decade when evaluating individual REITs. However, I am most comfortable with FFO Payout Ratios around 70% - 80% or below. For Master Limited Partnerships we look at the Distributable Cash Flow per Unit Payout Ratio.

In general, when in doubt, I like to review the ten year trends in the dividend payout ratio. If a company has paid a consistently high dividend payout, while growing earnings and dividends, I am not as worried.

I do not just look at the dividend payout ratio in isolation however. When I analyze companies, I look at the relationship between earnings, dividends and the dividend payout ratio. Evaluating the trends in these three indicators over the past decade is extremely helpful.

In general, we look for companies that grow earnings and dividends at roughly similar annual rates every year. As a result, the dividend payout ratio stays in a certain range. This depends on whether the company is in one of the three stages of dividend growth.

We want to avoid situations where management is growing dividends per share faster than earnings per share. The dividend payout ratio will go up to a certain ceiling if dividends are raised without a corresponding growth in earnings per share. This action is unsustainable, and could lead to dividend cuts down the road ( even if the dividend looks safe today).

If earnings per share do not grow, we could see a stop to dividend increases. If management keeps growing the dividend, or if earnings start falling from here, or if the company takes on too much new debt, it is possible that the dividend be cut.

Without growth in earnings per share, future dividend growth has an upper ceiling. In addition, any future growth in intrinsic value for the share price will also be limited, due to stagnating earnings. That doesn't mean however that share prices can't go higher from here (or lower), if investor expectations get overly cheerful ( or gloomy).

Another factor to consider is the quality of earnings. We want companies whose earnings are relatively immune to the economic cycles. This makes forecasting earnings easier, which allows managements to have a distribution in place that is not at the mercy of bad results during the next recession. If we have company earnings that are not defensible, but fluctuate, we may be in for a bad surprise during the next downturn. We want stability in earnings, which can then be counted on to provide stable and rising dividend income. If earnings tend to get depressed during recessions, the dividend has high risk of cut. This is why a low dividend payout ratio has to be evaluated in conjunction with trends for earnings per share and dividends per share.

Conclusion

Today we discussed the factors I leverage to reduce the risk of dividend cuts. While the risk of dividend cut will always be out there, I believe that it can be managed by the strategic dividend growth investor. The nice factor to consider is that in a diversified portfolio consisting of 50 securities, one dividend cut by 50% is easy to overcome if the rest of components grow distributions to offset the cut. In addition, by selling after a dividend cut and reinvesting the proceeds in a company that keeps growing distributions can have a positive income and psychological benefit for the investor, because it would allow them to reassess the situation with a cool head.

Having an investment plan that focuses on dividend safety, valuation, and sound portfolio management could ultimately be beneficial in including all factors listed above, and help the investor reach their goals and objectives.

Relevant Articles:


Monday, April 22, 2024

Eight Dividend Growth Stocks Rewarding Shareholders With a Raise

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps in monitoring existing positions and potentially identifying companies for further research.

This exercise also provides a good overview of the types of reviews I make to determine if I should place a company on my list for further reviews.

In general, I require a long track record of annual dividend increases first. A long track record of annual dividend increases does not happen by accident. It is an indication of quality, competitive advantage and the ability to generate excess cashflows, in order to be able to shower shareholders with more cash for over a decade.

I also require growth in earnings per share over the past decade. Rising earnings per share provide the fuel behind future dividend growth. All of this can potentially drive growth in intrinsic value as well.

I also review trends in dividends per share and the dividend payout ratio as well. In terms of dividend growth, I check to see for consistency. I also review the latest dividend increase in comparison to the 5 and 10 year history.

I also want to see dividend increases that are fueled by earnings per share growth, rather than an expansion of the dividend payout ratio. In general, the lower the payout ratio the better. In addition, I want to see a dividend payout ratio that is in a range.

Last but not least, I review current valuation. This means looking at P/E ratio, along with historical dividend growth, while also taking into account how cyclical the business is.

This sounds like a lot of work. But after doing this for a while, it becomes second nature.

Over the past week, there were five dividend growth companies which raised dividends to shareholders. The companies include:


Bar Harbor Bankshares (BHB) operates as the holding company for Bar Harbor Bank & Trust that provides banking and nonbanking products and services primarily to consumers and businesses. 

The company raised quarterly dividends by 7.10% to $0.30/share. This is the 21st consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 7.07%.

The company managed to grow earnings from $1.65/share in 2014 to $2.96/share in 2023. It is expected to earn $2.75/share in 2024.

The stock sells for 9.27 times forward earnings and yields 4.71%.


Donegal Group Inc.(DGICA) (DGICB), an insurance holding company, provides property and casualty insurance to businesses and individuals. It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance.

The company increased the dividend on it's A shares by 1.50% to $0.1725/share. It increased the dividend on it's B shares by 1.60% to $0.155/share. 

This dividend achiever has increased dividends to shareholders for 22 consecutive years. It has a 10 year annualized dividend growth rate of 2.90%.

Earnings per share have gone from $0.55/share in 2014 to $0.13/share in 2023.

The A shares yield 4.80% today, while the B shares yield 4.90%.


Johnson & Johnson (JNJ) researches, develops, manufactures, and sells various products in the healthcare field worldwide. 

Johnson & Johnson increased the quarterly dividend by 4.20% to $1.24/share. This is the 62nd 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 6.10%.

Between 2014 and 2023, the company managed to grow earnings from $5.80/share to $13.88/share.

The company is expected to earn $10.65/share in 2024.

The stock sells for 13.89 times forward earnings and yields 3.35%.


Sonoco Products Company (SON) designs, develops, manufactures, and sells various engineered and sustainable packaging products in North and South America, Europe, Australia, and Asia. 

The company increased quarterly dividends by 1.96% to $0.52/share. This is the 41st consecutive year this dividend champion has increased its annualized dividend.

The company has managed to raise dividends at an annualized rate of 5.10% over the past decade.

Sonoco is expected to earn $5.18/share in 2024. The company managed to grow earnings from $2.21/share in 2014 to $4.83/share in 2023.

The stock sells for 11 times forward earnings and yields 3.65%.


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

The company increased quarterly distributions by 6.20% to $0.1725/unit. This is the 12th year of consecutive annual distribution increases for this dividend achiever. Over the past decade, this entity has managed increase distributions at an annualized rate of 7%.

The stock sells for 12.83 times earnings and yields 6.70%.


The Travelers Companies, Inc. (TRV) provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United States and internationally. The company operates through three segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance. 

The company increased its quarterly dividend by 5% to $1.05/share. Over the past decade, Travelers has managed to grow dividends at an annualized rate of 7.20%. This is the 20th consecutive annual dividend increase for this dividend achiever.

Between 2014 and 2023, the company grew earnings from $10.82/share to $12.93/share.

The company is expected to earn $18.30/share in 2024.

The stock sells for 11.70 times forward earnings and yields 1.96%.


Winmark Corporation (WINA) is a resale company operates as a franchisor for small business in the United States and Canada. 

The company raised quarterly dividends by 12.50% to $0.90/share. This is the 14th consecutive annual dividend increase for this dividend achiever

The company managed to grow dividends at an annualized rate of 31.95% over the past decade.

Between 2014 and 2023, the company managed to grow earnings from $3.96/share to $11.55/share.

The company is expected to earn $10.95/share in 2024.

The stock sells for 35 times forward earnings and yields 0.93%.


Value Line, Inc. (VALU) produces and sells investment periodicals and related publications. 

The company announced it's tenth consecutive increase in its dividend, as it raised quarterly dividends by 7.10% to $0.30/share.

Between 2014 and 2023 the company grew earnings from $0.69/share to $1.91/share. 

The stock sells for 19.30 times earnings and yields 3.21%.


Relevant Articles:

- Five Dividend Growth Companies Raising Dividends Last Week




Thursday, April 18, 2024

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.


Monday, April 15, 2024

Five Dividend Growth Companies Raising Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps in monitoring existing positions and potentially identifying companies for further research.

This exercise also provides a good overview of the types of reviews I make to determine if I should place a company on my list for further reviews.

In general, I require a long track record of annual dividend increases first. A long track record of annual dividend increases does not happen by accident. It is an indication of quality, competitive advantage and the ability to generate excess cashflows, in order to be able to shower shareholders with more cash for over a decade.

I also require growth in earnings per share over the past decade. Rising earnings per share provide the fuel behind future dividend growth. All of this can potentially drive growth in intrinsic value as well.

I also review trends in dividends per share and the dividend payout ratio as well. In terms of dividend growth, I check to see for consistency. I also review the latest dividend increase in comparison to the 5 and 10 year history.

I also want to see dividend increases that are fueled by earnings per share growth, rather than an expansion of the dividend payout ratio. In general, the lower the payout ratio the better. In addition, I want to see a dividend payout ratio that is in a range.

Last but not least, I review current valuation. This means looking at P/E ratio, along with historical dividend growth, while also taking into account how cyclical the business is.

This sounds like a lot of work. But after doing this for a while, it becomes second nature.

Over the past week, there were five dividend growth companies which raised dividends to shareholders. The companies include:


Agree Realty Corporation (ADC) is a publicly traded real estate investment trust focusing on the acquisition and development of properties net leased to industry-leading, omni-channel retail tenants. As of December 31, 2023, the Company owned and operated a portfolio of 2,135 properties, located in 49 states 

This REIT raised monthly dividends by 1.20% to $0.25/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 6%.

Between 2014 and 2023, the REIT managed to grow FFO from $2.19/share to $3.59/share. The REIT is expected to generate $4.07/share in FFO in 2024.

The REIT sells for 13.94 times forward FFO and yields 5.34%


Aon plc (AON) is a professional services firm, which provides a range of risk and human capital solutions worldwide.

The company increased quarterly dividends by 9.80% to $0.675/share. This is the 13th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 13.40%.

The company managed to increase earnings from $4.73/share in 2014 to $12.60/share in 2023.

The company is expected to earn $16.23/share in 2024. 

The company sells for 19.16 times forward earnings and yields 0.88%.


Costco Wholesale Corporation (COST) engages in the operation of membership warehouses in the US and Internationally.

The company increased quarterly dividends by 13.70% to $1.16/share. This marked the 20th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 12.63%.

Costco managed to grow earnings from $4.69/share in 2014 to $14.18/share in 2023. The company is expected to earn $16/share in 2024.

The stock sells for 45.78 times forward earnings and yields 0.64%.


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.

The company raised quarterly dividends by 7% to $1.0065/share. This marks the 68th consecutive year that P&G has increased its dividend and the 134th consecutive year that P&G has paid a dividend since its incorporation in 1890. This dividend king has managed to grow dividends at an annualized rate of 4.67% over the past decade.

Procter & Gamble managed to grow earnings per share from $4.19 in 2014 to $6.07 in 2023.

The company is expected to earn $6.41/share in 2024.

The stock sells for 24.29 times forward earnings and yields 2.59%. Check my review of Procter & Gamble for more information about the company.


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

The company increased quarterly dividends by 8.50% to $0.2225/share. This marks the 55th consecutive year in which this dividend king has increased its dividend.

Between 2014 and 2023 the company managed to grow earnings from $1/share to $2.67/share.

The company is expected to earn $4.29/share in 2024.

The stock sells for 18.08 times forward earnings and yields 1.15%.


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- Procter & Gamble (PG) Increases Dividends for 68th Consecutive Year






Wednesday, April 10, 2024

Procter & Gamble (PG) Increases Dividends for 68th 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 7% to $1.0065/share yesterday. This dividend increase marked the 68th consecutive year that P&G has increased its dividend and the 134th 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.

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 35 years of dividend increases for Procter & Gamble:




Over the past five years, P&G has managed to increase dividends at an annualized rate of 5.58%. The ten year average is 4.57%.





Earnings per share have increased from $4.19 in 2014 to $6.07 in 2023. The company is expected to generate $6.42/share in earnings in 2024.



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 2014 to 61% in 2023. 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 62%, 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 $4.19/share and paid a quarterly dividend of 60.15 cents/share, for an annual dividend yield of 2.97%. The P/E was at 19.33.

Fast forward to today, and the company is paying a quarterly dividend of  $1.0065/share, for a total yield on cost of 4.97%. If we take dividend reinvestment into consideration, a $1,000 investment ten years ago would be generating $66.50 in annual dividend income today.




At the current price, the stock seems overvalued at 24.42 times forward earnings. The stock yields 2.57%. 

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Monday, April 8, 2024

The Illusion of Choice in Consumer Goods

One of my favorite charts shows a listing of eleven consumer goods companies, and the brands that they own. It reinforces my belief that strong brands grow dividends.

You can view this chart from here:



This illustration shows these massive companies that control large portions of a given segment of the market. While the sheer number of brands creates the illusion that there is unlimited choice, the reality is that just a few brands control what you buy on a regular basis. It looks like there is a lot of competition, when in reality just a few companies control a lot of the brands we purchase. The sheer reach of brands is fascinating. 

This is understandable, given the fact that many companies own brands that target different segments. Many of these companies have established relationships with retailers for shelf space. Many of these retailers value these brands, because consumers expect to see them, and want them. It is a mutually beneficial relationship.

This of course is a result of creating new brands from scratch, as well as decades of consolidations through mergers and acquisitions.

As an investor, I like looking at companies with solid brands that consumers buy on a recurring basis. I also like the consumer goods companies, because they sell goods that consumers would buy even during a recession. I like companies with large brands that have a dominant position, because I believe that a successful company that has been successful for a long time would likely continue being successful in the future.  Having scale is helpful in procuring the lowest per unit costs, as you have centralized marketing, purchasing and distribution. The more successful you get, the more you stack the odds in your favor.

The companies listed in this chart represent some good ideas for further research. They are not automatic buys of course. When I evaluate companies, I generally like to look for:

1) A track record of annual dividend increases

2) Growth in earnings per share over the past decade

3) Growth in dividends per share over the past decade

4) Dividend sustainability

5) Good entry valuation

I like the stability for some of their business models. These companies do well in a slow but steady way, and navigate near term economic turbulent nicely. While past performance is not indicative of future results, I believe that several of these companies would still be dominant in the next 50 years. If you are reading this in 2074, please let us know how this prediction turned out.

The companies included in the chart are:

Company

Ticker

Years Annual Dividend Increases

10 Year Dividend Growth

P/E

Dividend Yield

Nestle

NSRGY

29

4.00%

18.00

3.21%

PepsiCo

PEP

51

8.10%

20.74

2.99%

Procter & Gamble

PG

67

4.70%

24.33

2.41%

Unilever

UL

0

2.60%

16.87

3.83%

Coca-Cola

KO

62

5.10%

21.14

3.26%

Mondelez

MDLZ

12

11.30%

19.33

2.50%

Danone

DANOY

2

3.80%

16.31

3.48%

Kraft Heinz

KHC

0

-2.45%

12.19

4.30%

General Mills

GIS

4

4.60%

15.50

3.38%

Associated British Foods

ASBFY

3

4.15%

13.80

2.52%

Colgate-Palmolive

CL

60

3.70%

25.18

2.28%


Nestle (NSRGY) operates as a food and beverage company. 

Nestle is an international dividend aristocrat, which has managed to increase dividends annually since 1995. It has managed to boost dividends over the past decade at an annualized rate of 4%. Check my analysis of Nestle for more information about the company.

The stock sells for 18 times forward earnings and yields 3.21% today.


PepsiCo (PEP) operates as a food and beverage company worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region. 

The company is a dividend aristocrat with a 51 year track record of consecutive annual dividend increases. PepsiCo has managed to boost dividends at an annualized rate of 8.10% over the past decade.

The stock sells for 20.74 times forward earnings and yields 2.99% today.


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

The company is a dividend king with a 67 year track record of consecutive annual dividend increases. Over the past decade, Procter & Gamble has managed to grow dividends at an annualized rate of 4.70%.

The stock sells for 24.33 times forward earnings and yields 2.41% today.


Unilever (UL) operates as a fast-moving consumer goods company. It operates through Beauty & Personal Care, Foods & Refreshment, and Home Care segments.

Unilever was an international dividend achiever, which had increased dividends for 25 years in a row. However, it missed raising dividends last year, which reset the track record to zero years. Unilever has managed to boost dividends at an annualized rate of 2.60% over the past decade.

The stock sells for 16.87 times forward earnings and yields 3.83% today.


Coca-Cola (KO) is a beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. 

The company is a dividend king with a 62 year track record of consecutive annual dividend increases. Over the past decade, Coca-Cola has managed to grow dividends at an annualized rate of 5.10%.

The stock sells for 21.14 times forward earnings and yields 3.26% today.


Mars Inc is a privately held company. It's owned by members of the Mars family.


Mondelez (MDLZ) manufactures, markets, and sells snack food and beverage products worldwide. 

The company was formed in 2012, when Kraft Foods split into two. Mondelez has managed to increase dividends annually since the split. Over the past decade, Mondelez has managed to increase dividends at an annualized rate of 11.30%.

The stock sells for 19.33 times forward earnings and yields 2.50% today.


Danone S.A. (DANOY) operates in the food and beverage industry in Europe, Ukraine, North America, China, North Asia, the Oceania, Latin America, rest of Asia, Africa, Turkey, the Middle East, and the Commonwealth of Independent States. The company operates through Essential Dairy & Plant-Based, Specialized Nutrition, and Waters segments.

The company has not achieved a consistent streak of annual dividend increases in its dividend. Nevertheless, it managed to grow dividends by 3.80%/year over the past decade.

The stock sells for 16.31 times forward earnings and yields 3.48% today.


Kraft Heinz (KHC) manufactures and markets food and beverage products.

Kraft Heinz was formed from the merger of Kraft Foods and Heinz. Sadly, the company cut dividends a few years ago, and has kept them unchanged. Kraft Foods had split into two in 2012, and had managed to increase distributions for a few years before that. It has a negative annualized rate of dividend growth of 2.45% over the past decade.

The stock sells for 12.19 times forward earnings and yields 4.30% today.


General Mills (GIS) manufactures and markets branded consumer foods worldwide. The company operates in five segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; Asia & Latin America; and Pet. 

General Mills has increased dividends for 4 years. The company lost its status of a dividend achiever in 2018. This ended a 15 year streak of consecutive annual dividend increases. Over the past decade however, it managed to grow annual dividends at a rate of 4.60%.

The stock sells for 15.50 times forward earnings and yields 3.38% today.


Associated British Foods plc (ASBFY) operates as a diversified food, ingredients, and retail company worldwide. It operates through five segments: Grocery, Ingredients, Agriculture, Sugar, and Retail.

The company ended its long streak of annual dividend increases around the time of the Covid outbreak. The dividend payment has recovered since however and they are growing it again. Over the past decade, Associated British Foods has managed to increase dividends at an annualized rate of 4.15%. 

The stock sells for 13.80 times forward earnings and yields 2.52% today.


Colgate-Palmolive Company (CL) manufactures and sells consumer products in the United States and internationally. It operates through two segments: Oral, Personal and Home Care; and Pet Nutrition.

The company is a dividend king with a 60 year track record of consecutive annual dividend increases. Over the past decade, Colgate-Palmolive has managed to grow dividends at an annualized rate of 3.70%.

The stock sells for 25.18 times forward earnings and yields 2.28% today.


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