Nine Dividend Growth Companies Confident In Their Prospects

Increasing the dividend is a sign of confidence in the business.

I study dividend increases every week, and focus my reviews on the companies that have managed to raise dividends for at least a decade. You can view a list of the nine companies that raised dividends last week  here:

This of course is just one step of my process. I like to regularly screen the dividend growth investment population for quality companies selling at a discount. I review the list of dividend increases as another way to look at the population, and monitor existing holdings. It's also a step that could potentially help identify good companies early.

When a company has raised dividends, it simply ends up on my desk for a quick review, before I decide what to do with it. My review could either determine that fundamentals are not attractive, which means I discard it. If my review determines that fundamentals are attractive, and could potentially continue delivering on them, I would review valuation. If valuation is too high, I would put it on a list of candidates that should be considered if their price declines to a required minimum amount. If valuation is adequate, I would compare this investment to others that fit my entry criteria, and determine if I should buy it or something else.

Another factor in my consideration includes whether I have ownership and how concentrated that ownership is in my portfolio.

As you can see, there are lots of different trade-offs involved.

But at a minimum, I look fundmanetally for:

1. A long history of annual dividend increases

2. Earnings per share growth over the past decade

3. Adequate dividend payout ratio

4. Dividend increases above inflation, including most recent dividend raise

5. Attractive valuation. Note that valuation is part art, part science, as it considers trade-offs between dividend yield and dividend growth, other investment opportunities, interest rates, moats, defensibility of earnings, and how cyclical the business model is.

Relevant Articles:

- Eleven Dividend Growth Companies Raising Dividends Last Week

- 14 Dividend Growth Stocks Raising Dividends Last Week

- Nine Companies Raising Dividends Last Week

- Eight Dividend Growth Stocks Raising Distributions Last Week

Audit your investment decisions

 One of the best things you can do as an investor is to audit your investment decisions.

This is an underrated factor that can help improve as an investor.

Very few investment books ever mention this crucial aspect of investment. But all successful investors practice it.

Reviewing past decisions is helpful, because it can help you identify recurring patterns, misses and opportunities. By identifying problems and opportunities, and addressing them, the investor can improve over time.

It’s important to take a step back, and try to think clearly about what you are missing. It’s hard to take a look at yourself, and see issues. Growth is painful, but worth it.

Of course, in order to have something to evaluate, you have to have those decision points in handy.

In my case, I have a process I follow. But I also have a lot of write-ups, behind each decision.

I also have transaction histories as well. I also have write-ups and population data.

After doing some reviews and analysis over the years, I have found a few interesting tidbits.

Notably, when it comes to stock analyses, I’ve noticed that the best opportunities basically jumped at me. The data was so convincing, that it just spoke to me. However, if I had to spend a lot of time explaining away why an investment is great, despite the data, I was mostly justifying an average decision.

In addition, I had found that selling has been one of the worst decisions I could make. Early on, I was pretty active in my portfolio. I would buy a security at a good value, and then sell it at what I believed to be a high price. I would then re-deploy funds in what looked like a cheaper security. It’s also likely that I was subconsciously engaged in yield chasing as well. What ended up happening is that that “expensive company” I sold turned out to do very well, growing earnings, dividends and intrinsic value. The cheap company I bought turned out just okay, but nothing spectacular. Even worse, I ended up paying taxes on gains in the taxable account. I learned that once I buy a good quality company, I should pretty much sit tight on it, and do nothing. 

This has further been reinforced by studying my mistakes. A lot of times, compounding is not a straight line upwards. There could be times where a security may be going through some temporary bumps/slumps/noise. This is when everyone gets discouraged. Notably by share price going nowhere, which is when media articles start popping up saying that the stock is not working. That’s noise, but it does wear you out if you pay attention to it. It’s even worse for someone with followers online, because everyone asks you about it. It’s death by a thousand cuts. I have learned to ignore and just stick to it. It’s because long-term investing is simple, but not easy. But in most cases, these consolidation phases tend to wear out the weak hands that never make it in investing. By the time they capitulate, the stock is hot again and “works”. Selling because you are impatient is a mistake. 

In general, selling a stock has been a mistake for me. It has been compounded by the fact that the company I replaced it with tends to do worse than the company I sold. It happens all the time, at least 40% - 60% of the time. But the magnitude of missed economic opportunity is larger than the opportunity I replaced it with.

Being patient with a security provides the maximum opportunity to let compounding do the heavy lifting for me. That doesn’t mean sticking my head in the sand. But it also doesn’t mean just getting scared easily either. It also doesn’t mean never selling – but being extremely careful about why you sell.

These days I rarely sell. The main reasons are a dividend cut and because a company has been acquired. Any other reason to sell has largely been a mistake, on average of course. I would encourage you to review your transaction history, and determine if selling has been a mistake over your investing career.

14 Companies Showering Shareholders With More Cash

 As part of my monitoring process, I review the list of dividend increases every week. I usually focus on companies that have managed to boost dividends to shareholders for at least a decade (with one exception this week). 

There were 36 companies that raised dividends in the US last week. Fourteen of them have increased dividends for at least ten years in a row.

The companies that raised their dividends to shareholders are listed below:

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.

Relevant Articles:

- Eleven Dividend Growth Companies Raising Dividends Last Week

- 14 Dividend Growth Stocks Raising Dividends Last Week

- Nine Companies Raising Dividends Last Week

- Eight Dividend Growth Stocks Raising Distributions Last Week

14 Dividend Growth Stocks Raising Dividends Last Week

I review the list of dividend increases each week, as part of my monitoring process. There were 27 companies that increased dividends over the past week.

I reviewed the list and included the companies that have both raised dividends last week and have managed to raise dividends for at least ten years in a row. There were 14 companies that fit this simple screen:

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.

Relevant Articles:

- Eleven Dividend Growth Companies Raising Dividends Last Week

- Nine Companies Raising Dividends Last Week

- Four Dividend Increases In a Time of Tariffs

- Two Recent Dividend Increases and Five Future Dividend Increases

Dividend Strategy with Quality Yields – The Dow Jones Dividend 100 Indices

I found an interesting paper from S&P Dow Jones on the Dow Jones Dividend 100 Indices. This is the index used behind the popular dividend ETF Schwab U.S. Dividend Equity ETF (SCHD).

I've previously discussed the Schwab US Dividend Equity ETF here. 

But let's dive into the paper:

They discuss the overall differentiating factors behind the success of these indices

- Sustainable dividends with financial quality

- Dividend growth against future rising rates

- Investability

They shared the construction methodology behind the Dow Jones 100 Dividend Indices

It's a good process to learn from, whether you are a DIY or ETF investor

S&P found that dividend stocks generate strong returns from dividends and capital gains

They calculated total returns between June 2001 and June 2023 for the Dow Jones U.S. Dividend 100 Index

They found that the dividend index generated a total return of 11.70% annualized, beating the 10.20% for the total market index

Why has that Dividend Index done well?

It's due to its focus on quality, financial stability, which makes it easier to endure tough economic times and thrive during the good times

Dividend Strategies tend to shine during major historical drawdowns

There are several of those listed since 1999:

They also listed the sector weightings:

Contrary to popular beliefs, this strategy has fair allocation accross multiple sectors. It's not the "utilities and financials only"

This is the part that triggers me - I dislike the high turnover of this index.

In my opinion they are losing out on returns by selling their companies too quickly

Next, they showed the spread in dividend yields between US and International overall. For the broader US market, this is due to the increased use of share buybacks in the US vs abroad

I found this chart on sector trends and characteristics informative

You can read the whole paper here:

Dividend Strategy with Quality Yields – The Dow Jones Dividend 100 Indices