As part of my investment review process, I monitor the list of dividend increases every week. This exercise allows me to see any recent dividend increases for companies I own, and check if the rate of dividend growth is steady. I also use this process as a tool to help me identify dividend growth stocks for further research.
When reviewing companies that raised dividends last week, I focused on the ones that have a minimum history of at least ten consecutive annual raises under their belt. This is just to reduce the number of companies to a more manageable level and remove any companies which did not have the business strength to grow distributions for a decently long period of time. As an astute reader pointed out to me however, with the effects of the financial crisis being ten years ago, we are now seeing companies that cut dividends in 2007 – 2009 being added to the dividend achievers lists. This is a good reminder to always try and go above and beyond in your analysis, and stress test assumptions.
In my individual security review, I look for growth in earnings per share, in order to evaluate the likelihood of future dividend growth. I do not want to see a company where earnings per share have hit a high plateau, while all dividend growth happens through the increase in the payout ratio.
I also like to review valuation, in conjunction with growth in earnings per share, dividend per share and dividend yields. When I analyze individual companies I also look at dividend safety by looking at the dividend payout ratio. However, I also evaluate dividend safety by requiring growth in earnings per share as well.
Over the past week, there were several companies which announced dividend increases for their shareholders. The companies include:
The Hershey Company (HSY) manufactures and sells confectionery products. The company operates through two segments, North America; and International and Other.
The company increased its quarterly dividend by 7.10% to 77.30 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 8.80%/year.
Between 2009 and 2018, earnings increased from $1.90/share to $5.58/share. Hershey is expected to generate $5.75/share in 2019.
The stock is overvalued at 26.50 times forward earnings and yields 2%. Hershey may be worth a look on dips below $115/share.
Kellogg Company (K) manufactures and markets ready-to-eat cereal and convenience foods. The company operates through U.S. Snacks, U.S. Morning Foods, U.S. Specialty Channels, North America Other, Europe, Latin America, and Asia Pacific segments.
The company raised its quarterly dividend by 2% to 57 cents/share. This marked the 16th year of annual dividend increases for this dividend achiever. The last increase is smaller than the ten-year average of 5.40%/year.
Between 2009 and 2018, earnings grew from $3.16/share to $3.83/share. Kellogg is expected to generate $3.83/share in 2019.
The stock is attractively valued at 15.30 times forward earnings and yields 3.90%. Given the slow growth in earnings, I view the stock as hold.
The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. It operates in four segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Away From Home. The company raised its quarterly dividend by 3.50% to 88 cents/share. This represented the Company's eighteenth consecutive year of dividend growth. The latest dividend increase was smaller than the ten year average of 10%/year.
Between 2009 and 2018, the company managed to grow earnings from $4.15 to $4.52/share. These figures are not adjusted for one-time items such as amortization charges related to acquisitions. J.M. Smucker is expected to generate $7.12/share in 2019.
The stock is attractively valued at 16.10 times forward earnings and offers a competitive dividend yield of 3.10%. Given the slow pace of latest dividend increase I would want to monitor the company more closely before deciding if I want to add to my position.
Republic Services, Inc. (RSG) provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico. The company raised its quarterly dividend by 8% to 40.50 cents/share. The company has managed to grow annual dividends for 16 years in a row. The raise was consistent with the ten year average of 7.30%/year.
Between 2009 and 2018, Republic Services has managed to grow earnings from $1.30/share to $3.16/share. The company is expected to generate $3.23/share in 2019.
Right now the stock is overvalued at 27.90 times forward earnings and offers a dividend yield of 1.80%. Republic Services would be worth a second look on dips below $65/share.
Union Pacific Corporation (UNP), engages in the railroad business in the United States. The company raised its quarterly dividend by 10% to 97 cents/share. This marked the thirteens consecutive annual dividend increase for this dividend achiever. During the past decade, Union Pacific has managed to grow dividends at an annualized rate of 20.70%/year.
Between 2009 and 2018, the company has managed to grow earnings per share from $1.87 to $7.91.
Union Pacific is expected to generate $8.98/share in 2019.
The stock is overvalued at 19.80 times forward earnings and yields 2.20%.
Community Trust Bancorp, Inc. (CTBI) operates as the bank holding company for Community Trust Bank, Inc. that provides commercial and personal banking services to small and mid-sized communities. The bank raised its quarterly dividend by 5.60% to 38 cents/share. This marked the 39th consecutive year of annual dividend increases for this dividend champion. The rate of dividend increases has been accelerating, and is higher than the ten year average of 2.50%/year over the past decade.
Between 2009 and 2018, the bank has managed to grow earnings from $1.50/share to $3.35/share.
The bank is expected to earn $3.52/share in 2019.
The stock is attractively valued at 11.80 times forward earnings and yields 3.70%.
Bank of Marin Bancorp (BMRC) operates as the holding company for Bank of Marin that provides a range of financial services primarily to professionals, small and middle-market businesses, individuals, and not-for-profit organizations in California, the United States.
The bank raised its quarterly dividend by 10.50% to 21 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, Bank of Marin Bancorp has been able to boost dividends at an annualized rate of 8.50%.
Bank of Marin Bancorp has managed to grow earnings from $1.09/share in 2009 to $2.33/share in 2018. It is expected to generate $2.39/share in 2019.
Right now, the stock is selling at the high end of the valuation I am willing to pay for a bank. The stock is trading at 18.30 times forward earnings and offers a dividend yield of 1.90%.
UGI Corporation (UGI) distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.
The company raised its quarterly dividend by 8.30% to 32.50 cents/share. This is the second of two dividend increases announced in conjunction with the AmeriGas (APU) merger transaction. The new dividend rate represents an increase of 25% over the payment from the same time last year. UGI is a dividend champion that has paid common dividends for 135 consecutive years and raised its dividend in each of the last 32 years. The annualized rate of dividend growth over the past decade is 7.30%.
Between 2009 and 2018, UGI Corporation has managed to grow earnings from $1.57/share to $2.74/share. UGI Corporation is expected to earn $2.37/share in 2019.
Right now the stock seems overvalued at 21.70 times forward earnings and offers a dividend yield of 2.50%.
Eagle Bancorp Montana, Inc. (EBMT) operates as the bank holding company for Opportunity Bank of Montana that provides various retail banking products and services in Montana.
The bank raised its quarterly dividend by 2.70% to 9.5 cents/share. This marked the 19th year of consecutive annual dividend increases for this dividend contender. During the past decade, this company achieved annualized dividend growth of 3.40%.
Earnings per share grew from $0.52 in 2009 to $0.91 in 2018. It is expected to earn $1.59/share in 2019.
Eagle Bancorp Montana looks cheap at 10.90 times forward earnings today. The dividend yield is adequate 2.70% but the dividend growth is low at around 3%.
ONEOK, Inc. (OKE) engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. ONEOK raised its quarterly dividend to 89 cents/share, which was a 7.90% increase over the distribution paid during the same time last year. ONEOK is a dividend achiever which has rewarded shareholders with a raised for 17 years in a row. Over the past decade, ONEOK has managed to grow dividends at an annualized rate of 16.90%. Right now, ONEOK yields 5.30%.
Relevant Articles:
- Dividend Achievers versus Dividend Contenders & Champions
- Five Dividend Increases For Further Research
- Nine Companies That Love To Raise Their Dividends
- Three Dividend Achievers Distributing More Cash to Shareholders
Tuesday, July 30, 2019
Thursday, July 25, 2019
Five Dividend Increases For Further Research
Welcome to another edition of my dividend increase reports. Every week, I look at the list of dividend increases as part of my portfolio monitoring process. I also use this list as a potential source of ideas for further research.
I started with the list of dividend increases for the past week, which was reduced to a more manageable level by introducing a few simple filters. Namely, I focus on the companies with a ten year streak of dividend increases. I use this filter because I have found too many companies with small histories of dividend increases that fail to continue raising dividends at the first sign of trouble. I want to look for companies which have a shareholder friendly dividend policies, and which have the earning power and stability in underlying business operations to continue paying and raising dividends through thick or thin.
In my reviews of the list, I end up looking at dividend growth rates, recent dividend increases, as well as trends in earnings per share. Most importantly, I look at valuation as well.
The companies which raised dividends last week include:
PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials worldwide. The company raised its dividends by 6.30% to 51 cents/share. This marked the 48th year of consecutive annual dividend increases for this dividend champion. Over the past decade, this dividend champion has managed to boost distributions at an annualized rate of 5.90%.
Between 2008 and 2018, PPG Industries managed to grow earnings from $1.63/share to $5.47/share. PPG industries is expected to earn $6.27/share in 2019.
The stock looks fairly valued at 18.90 times forward earnings. PPG Industries yields 1.70%. I like the consistency in dividend growth, although I would prefer if the stock price is lower and the yield is a little better. Check my analysis of PPG Industries for more information about the stock.
Stanley Black & Decker, Inc. (SWK) engages in tools and storage, industrial, and security businesses worldwide. The company increased its quarterly dividend by 4.50% to 69 cents/share. This marked the 52nd consecutive annual dividend increase for this dividend king. During the past decade, this dividend king has managed to grow dividends at an annualized rate of 7.40%.
Between 2008 and 2018, the company managed to grow earnings from $3.84/share to $8.15/share (adjusted for one-time items). Stanley Black & Decker is expected to generate $8.62/share in 2019.
Right now, Stanley Black & Decker is attractively valued at 17.70 times forward earnings. The stock yields 1.80%. It looks like a good company to add to my list for future research, despite the slowdown in annual dividend growth.
Unum Group (UNM) provides financial protection benefit solutions in the United States, the United Kingdom, and internationally. It operates through Unum US, Unum International, Colonial Life, and Closed Block segments. The company increased its quarterly dividend by 9.60% to 28.50 cents/share.
This marked the 11th annual dividend increase for this dividend achiever. Over the past decade, Unum Group has managed to grow dividends at an annualized rate of 12.60%. Between 2008 and 2018, Unum’s earnings per share rose from $1.61/share to $5.20/share ( adjusted for one time items).
Unum Group is expected to earn $5.43/share in 2019.
Right now, the stock is attractively valued at 6.10 times forward earnings. Unum Group yields 3.40%. I would add the stock to my list for further research.
National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long term, net leases. The REIT increased its quarterly dividend by 3% to 50 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. During the past decade, this REIT has managed to grow distributions at an annualized rate of 2.80%/year.
Between 2009 and 2018, the REIT managed to grow FFO from $1.12/share to $2.53/share.
The REIT is overvalued at 20.80 times FFO. National Retail Properties yields 3.80%. I find the stock to be a good hold today but would not be adding at current prices.
Computer Services, Inc., (CSVI) delivers core processing, digital banking, managed services, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate entities in the United States. The company increased its quarterly dividend by 16.70% to 21 cents/share. This was the 48th consecutive annual dividend increase for this company, according to the company’s press release. However, according to the company’s 2004 annual report, the company had raised dividends for 15 years in a row then. Over the past decade, Computer Services has managed to grow dividends at an annualized rate of 15%.
According to the company reports, between 2009 and 2019, the company managed to grow earnings from $1.31/share to $3.23/share.
Right now, Computer Services seems fairly valued at 12.20 times earnings, and offers a well covered dividend yield of 2.10%. I probably need to add this stock to my list for further research.
Relevant Articles:
- Nine Companies That Love To Raise Their Dividends
- Three Dividend Achievers Distributing More Cash to Shareholders
- Five Dividend Machines Working Hard for Their Owners
- Eight Dividend Achievers Showering Owners With More Cash
I started with the list of dividend increases for the past week, which was reduced to a more manageable level by introducing a few simple filters. Namely, I focus on the companies with a ten year streak of dividend increases. I use this filter because I have found too many companies with small histories of dividend increases that fail to continue raising dividends at the first sign of trouble. I want to look for companies which have a shareholder friendly dividend policies, and which have the earning power and stability in underlying business operations to continue paying and raising dividends through thick or thin.
In my reviews of the list, I end up looking at dividend growth rates, recent dividend increases, as well as trends in earnings per share. Most importantly, I look at valuation as well.
The companies which raised dividends last week include:
PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials worldwide. The company raised its dividends by 6.30% to 51 cents/share. This marked the 48th year of consecutive annual dividend increases for this dividend champion. Over the past decade, this dividend champion has managed to boost distributions at an annualized rate of 5.90%.
Between 2008 and 2018, PPG Industries managed to grow earnings from $1.63/share to $5.47/share. PPG industries is expected to earn $6.27/share in 2019.
The stock looks fairly valued at 18.90 times forward earnings. PPG Industries yields 1.70%. I like the consistency in dividend growth, although I would prefer if the stock price is lower and the yield is a little better. Check my analysis of PPG Industries for more information about the stock.
Stanley Black & Decker, Inc. (SWK) engages in tools and storage, industrial, and security businesses worldwide. The company increased its quarterly dividend by 4.50% to 69 cents/share. This marked the 52nd consecutive annual dividend increase for this dividend king. During the past decade, this dividend king has managed to grow dividends at an annualized rate of 7.40%.
Between 2008 and 2018, the company managed to grow earnings from $3.84/share to $8.15/share (adjusted for one-time items). Stanley Black & Decker is expected to generate $8.62/share in 2019.
Right now, Stanley Black & Decker is attractively valued at 17.70 times forward earnings. The stock yields 1.80%. It looks like a good company to add to my list for future research, despite the slowdown in annual dividend growth.
Unum Group (UNM) provides financial protection benefit solutions in the United States, the United Kingdom, and internationally. It operates through Unum US, Unum International, Colonial Life, and Closed Block segments. The company increased its quarterly dividend by 9.60% to 28.50 cents/share.
This marked the 11th annual dividend increase for this dividend achiever. Over the past decade, Unum Group has managed to grow dividends at an annualized rate of 12.60%. Between 2008 and 2018, Unum’s earnings per share rose from $1.61/share to $5.20/share ( adjusted for one time items).
Unum Group is expected to earn $5.43/share in 2019.
Right now, the stock is attractively valued at 6.10 times forward earnings. Unum Group yields 3.40%. I would add the stock to my list for further research.
National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long term, net leases. The REIT increased its quarterly dividend by 3% to 50 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. During the past decade, this REIT has managed to grow distributions at an annualized rate of 2.80%/year.
Between 2009 and 2018, the REIT managed to grow FFO from $1.12/share to $2.53/share.
The REIT is overvalued at 20.80 times FFO. National Retail Properties yields 3.80%. I find the stock to be a good hold today but would not be adding at current prices.
Computer Services, Inc., (CSVI) delivers core processing, digital banking, managed services, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate entities in the United States. The company increased its quarterly dividend by 16.70% to 21 cents/share. This was the 48th consecutive annual dividend increase for this company, according to the company’s press release. However, according to the company’s 2004 annual report, the company had raised dividends for 15 years in a row then. Over the past decade, Computer Services has managed to grow dividends at an annualized rate of 15%.
According to the company reports, between 2009 and 2019, the company managed to grow earnings from $1.31/share to $3.23/share.
Right now, Computer Services seems fairly valued at 12.20 times earnings, and offers a well covered dividend yield of 2.10%. I probably need to add this stock to my list for further research.
Relevant Articles:
- Nine Companies That Love To Raise Their Dividends
- Three Dividend Achievers Distributing More Cash to Shareholders
- Five Dividend Machines Working Hard for Their Owners
- Eight Dividend Achievers Showering Owners With More Cash
Monday, July 22, 2019
Dividend Growth Investor Newsletter Turns One
Last year, I launched a premium dividend investing newsletter. In my newsletter, I share a list of ten companies that I am investing in for the month. I leverage the principles and lessons that I have learned in building my dividend growth portfolio to the coveted dividend crossover point.
The stated purpose of the portfolio is to reach $1,000 in monthly dividend income by investing $1,000 in ten dividend growth stocks each month. The real purpose of the newsletter is to educate investors, and provide a process of evaluating companies, building a portfolio, and monitoring its progress against the goals and objectives. I believe that the best way to teach the principles of successful dividend growth investing is to present actionable information in real time, not hide behind a backtest or a theoretical academic model with little practical use. Subscribers are able to observe me make investment decisions in real time, by putting my own money on the line.
After one year of investing, I have assembled a portfolio consisting of 45 dividend growth companies. The forward dividend income has been increasing, fueled by new contributions and organic growth from the 28 dividend increases to date. The portfolio has a forward annual dividend income of $410 as of today.
For the next week, I would like to invite you to sign up for the Dividend Growth Investor newsletter, if you haven’t done so already. I offer this service at a very affordable $65/year or $6/month. This is a promotional price that will never increase, if you sign up today. After August 1, the price will increase for new members.
When you sign up today, you will get access to the last two newsletters. The latest newsletter was just sent out on Sunday, July 21st. I followed the instructions of the newsletter, and invested in the companies mentioned today. I plan to send an updated list of dividend portfolio holdings by August 4.
There is a 7 days free trial, during which you will be able to decide if this service is for you.
You can subscribe using this Paypal form:
Thank you for reading!
Dividend Growth Investor
The stated purpose of the portfolio is to reach $1,000 in monthly dividend income by investing $1,000 in ten dividend growth stocks each month. The real purpose of the newsletter is to educate investors, and provide a process of evaluating companies, building a portfolio, and monitoring its progress against the goals and objectives. I believe that the best way to teach the principles of successful dividend growth investing is to present actionable information in real time, not hide behind a backtest or a theoretical academic model with little practical use. Subscribers are able to observe me make investment decisions in real time, by putting my own money on the line.
After one year of investing, I have assembled a portfolio consisting of 45 dividend growth companies. The forward dividend income has been increasing, fueled by new contributions and organic growth from the 28 dividend increases to date. The portfolio has a forward annual dividend income of $410 as of today.
For the next week, I would like to invite you to sign up for the Dividend Growth Investor newsletter, if you haven’t done so already. I offer this service at a very affordable $65/year or $6/month. This is a promotional price that will never increase, if you sign up today. After August 1, the price will increase for new members.
When you sign up today, you will get access to the last two newsletters. The latest newsletter was just sent out on Sunday, July 21st. I followed the instructions of the newsletter, and invested in the companies mentioned today. I plan to send an updated list of dividend portfolio holdings by August 4.
There is a 7 days free trial, during which you will be able to decide if this service is for you.
You can subscribe using this Paypal form:
Thank you for reading!
Dividend Growth Investor
Monday, July 15, 2019
Nine Companies That Love To Raise Their Dividends
In today’s article, I will share a list of companies, which raised dividends last week. The list focuses on companies which have a ten year streak of annual dividend increases, and is part of my monitoring process. I review each dividend increase relative to the ten year average, in order to understand dividend growth consistency for the organization. I also review trends in earnings per share, in order to determine the likelihood of future dividend increases. Last but not least, I also review valuations. I have found that valuation is an important piece of the puzzle, which can show if you are about to lock in a high or low future rate of return on investments.
During the past week, there were nine dividend growth companies, which raised dividends to shareholders. The companies include:
Marsh & McLennan Companies, Inc. (MMC) is a professional services company, provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. It operates in two segments, Risk and Insurance Services, and Consulting. Marsh & McLennan Companies, Inc. increased the quarterly cash dividend from $0.415 to $0.455 per share. This marked the tenth consecutive year of annual dividend increases for this newly minted dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 7%.
Between 2009 and 2018, Marsh & McLennan managed to grow earnings from $0.42/share to $3.23/share. However, the company’s earnings have failed to grow on aggregate since 2003, despite the growth in the past decade. The company is expected to generate $4.58/share in 2019.
Currently, the stock is overvalued at 22.40 times earnings. The stock yields 1.80%.
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services.
Enterprise Products Partners L.P. increased the cash distribution paid to limited partners to $0.44 per common unit, or $1.76 per unit on an annualized basis.
This distribution, which represents a 2.3 percent increase over the distribution declared with respect to the second quarter of 2018, is the partnership’s 60th consecutive quarterly distribution increase. The partnership has increased distributions for 20 years in a row, which makes it a member of the elite list of dividend achievers. During the past decade however, it has managed to boost distributions at an annualize rate of 5.90%.
Currently, the partnership yields 5.80%. EPD is one of the few MLPs which have a 1.50 times coverage from distributable cash flows per share, which leaves some cushion on distribution safety. This also allows it to reinvest a portion of cashflows back into growing the business. MLPs are a little more complex around tax time, because distributions are not dividends and require the filling out of additional tax forms at the federal and state levels. That’s why some investors avoid the sector completely.
Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, and powertrain-related component products worldwide. It operates in five segments: Engine, Distribution, Components, Power Systems, and Electrified Power.
Cummins Inc. increased the company's quarterly cash dividend by 15 percent to 1.311 dollars per share. This marked the 14th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, Cummins has been able to grow dividends at an annualized rate of 22.20%.
Between 2008 and 2018, Cummins managed to grow earnings from $3.85/share to $13.15/share. The company is expected to generate $16.21/share in 2019.
Cummins looks cheap at 10.60 times forward earnings. The stock yields an attractive 3.10% today. I just wanted to warn you that as a cyclical company, earnings are highest close to the top of the cycle, which makes the P/E lowest. Therefore, the stock tends to look cheapest on a P/E basis when things are great, while the stock would look overpriced when earnings decline during the next recession.
MSC Industrial Direct Co., Inc. (MSM), distributes metalworking and maintenance, repair, and operations (MRO) products in the United States, Canada, and the United Kingdom. MSC Industrial Direct raised its quarterly dividend by 19% to $0.75 per share. This marked the 16th consecutive year of annual dividend increases for this dividend achiever. During the past decade, the company has managed to grow dividends by an annualized rate of 12%.
Between 2008 and 2018, the company has managed to grow earnings from $3.05/share to $5.80/share. The company is expected to earn $5.35/share in 2019.
Currently, the stock looks attractively valued at 13.60 times forward earnings. The stock yields 4.10%.
Duke Energy Corporation (DUK), operates as an energy company in the United States. It operates through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables. The company declared a quarterly dividend of $0.945/share, a 1.90% increase from prior dividend of $0.9275. This marked the 15th year of annual dividend increases for this dividend achiever. Over the past decade, Duke has been able to boost annual distributions at a rate of 3%/year.
Between 2008 and 2018, the company’s earnings went from $3.24/share to $3.76/share. The company is expected to generate adjusted earnings per share in the $4.80 - $5.20/share range in 2019. In comparison, adjusted earnings per share for 2018 came up to $4.72/share. Therefore, I believe that 2019’s results will be only slightly higher. Fun fact – earnings per share haven’t increased much since the early 1990s, which is why Duke had to cut dividends in 2007. If earnings per share do not grow much in the future, Duke may have to cut dividends again, because there is limited room for dividend growth in the future.
The stock looks expensive using 2018 earnings per share of $3.76 – the P/E is at 23.60. The stock yields 4.30% today. I believe that Duke is a hold today, with dividends reinvested elsewhere.
Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and wellbeing company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale.
The company increased quarterly dividends to 45.75 cents per share, which is an increase of 4 percent. This marks the 44th consecutive year that this dividend champion has raised the dividend. The rate of dividend growth per the last increase is down considerably from the ten year average at 15%/year and the 5 year average at 7.30%/year. I can’t be complaining however, as rival CVS Health has kept dividends unchanged.
Between 2008 and 2018, Walgreen’s has been able to grow its earnings from $2.18/share to $5.05/share. The company is expected to earn $5.98/share in 2019, followed by a modest growth to $6.02/share in 2020.
Walgreen’s looks attractively priced at 9.30 times forward earnings and offers a dependable dividend yield of 3.30%. The slowing down of the dividend growth rate is something to monitor however, because it indicates that the business environment is cloudy enough, which explains the low growth in forward EPS estimates. Check my analysis of Walgreen's for more information about the company.
Fastenal Company (FAST), engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, and internationally. It offers fasteners, and other industrial and construction supplies under the Fastenal name.
The company raised its quarterly dividend to 22 cents/share. This was a 2.30% increase from the last payment. However, the dividend was 10% higher than the payment done during the same time last year. Fastenal is a dividend achiever with a 20 year record of annual dividend increases under its belt. Fastenal has managed to grow distributions at an annualized rate of 19.50% over the past decade.
The company has managed to grow earnings from $0.47/share in 2008 to $1.31/share in 2018. Fastenal is expected to earn $1.41/share in 2019.
The stock is slightly overvalued at 22 times forward earnings. It does offer a well-supported dividend yield at 2.80%. Fastenal may be worth a second look on dips below $28/share.
Occidental Petroleum Corporation (OXY), engages in the acquisition, exploration, and development of oil and gas properties in the United States and internationally. The company operates through three segments: Oil and Gas, Chemical, and Midstream and Marketing.
Occidental Petroleum raised its quarterly dividend by 1.30% to 79 cents/share. Occidental has increased its dividend every year for 17 consecutive years. It has a ten year annualized dividend growth rate at 10.20%. However, dividend growth has been below 2%/year over the past three years.
Between 2008 and 2018, earnings per share declined from $8.31/share to $5.39/share.
The company is expected to generate $3.78/share in 2019.
The stock looks cheap at 13.80 times forward earnings. Occidental yields 6.10%. It does have a high forward payout ratio at 83.60% today, which is a little too high for my liking. The carnage in the oil sector since 2014 has destroyed the earnings records of many oil and gas companies.
Ryder System, Inc. ( R ) provides transportation and supply chain management solutions worldwide.
The company operates through three segments: Fleet Management Solutions (FMS), Dedicated Transportation Solutions (DTS), and Supply Chain Solutions (SCS). Ryder (R ) increased its quarterly dividend by 3.70% to 56 cents/share. This marks the 15th consecutive annual dividend increase for this dividend achiever. The latest dividend increase is lower than the ten year annualized rate of growth of 8.70%.
Between 2008 and 2018, Ryder has managed to boost earnings from $3.49/share to $5.17/share. The company is expected to generate $6.14/share in 2019.
Ryder is attractively valued at 9.40 times forward earnings and offers a dependable yield of 3.90%. The slowdown in dividend growth over the past two years indicates a management team which is getting nervous about near term business conditions.
Relevant Articles:
- Walgreens Boots Alliance (WBA) Dividend Stock Analysis
- Dividend Achievers versus Dividend Contenders & Champions
- Three Dividend Achievers Distributing More Cash to Shareholders
- How to read my weekly dividend increase reports
During the past week, there were nine dividend growth companies, which raised dividends to shareholders. The companies include:
Marsh & McLennan Companies, Inc. (MMC) is a professional services company, provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. It operates in two segments, Risk and Insurance Services, and Consulting. Marsh & McLennan Companies, Inc. increased the quarterly cash dividend from $0.415 to $0.455 per share. This marked the tenth consecutive year of annual dividend increases for this newly minted dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 7%.
Between 2009 and 2018, Marsh & McLennan managed to grow earnings from $0.42/share to $3.23/share. However, the company’s earnings have failed to grow on aggregate since 2003, despite the growth in the past decade. The company is expected to generate $4.58/share in 2019.
Currently, the stock is overvalued at 22.40 times earnings. The stock yields 1.80%.
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services.
Enterprise Products Partners L.P. increased the cash distribution paid to limited partners to $0.44 per common unit, or $1.76 per unit on an annualized basis.
This distribution, which represents a 2.3 percent increase over the distribution declared with respect to the second quarter of 2018, is the partnership’s 60th consecutive quarterly distribution increase. The partnership has increased distributions for 20 years in a row, which makes it a member of the elite list of dividend achievers. During the past decade however, it has managed to boost distributions at an annualize rate of 5.90%.
Currently, the partnership yields 5.80%. EPD is one of the few MLPs which have a 1.50 times coverage from distributable cash flows per share, which leaves some cushion on distribution safety. This also allows it to reinvest a portion of cashflows back into growing the business. MLPs are a little more complex around tax time, because distributions are not dividends and require the filling out of additional tax forms at the federal and state levels. That’s why some investors avoid the sector completely.
Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, and powertrain-related component products worldwide. It operates in five segments: Engine, Distribution, Components, Power Systems, and Electrified Power.
Cummins Inc. increased the company's quarterly cash dividend by 15 percent to 1.311 dollars per share. This marked the 14th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, Cummins has been able to grow dividends at an annualized rate of 22.20%.
Between 2008 and 2018, Cummins managed to grow earnings from $3.85/share to $13.15/share. The company is expected to generate $16.21/share in 2019.
Cummins looks cheap at 10.60 times forward earnings. The stock yields an attractive 3.10% today. I just wanted to warn you that as a cyclical company, earnings are highest close to the top of the cycle, which makes the P/E lowest. Therefore, the stock tends to look cheapest on a P/E basis when things are great, while the stock would look overpriced when earnings decline during the next recession.
MSC Industrial Direct Co., Inc. (MSM), distributes metalworking and maintenance, repair, and operations (MRO) products in the United States, Canada, and the United Kingdom. MSC Industrial Direct raised its quarterly dividend by 19% to $0.75 per share. This marked the 16th consecutive year of annual dividend increases for this dividend achiever. During the past decade, the company has managed to grow dividends by an annualized rate of 12%.
Between 2008 and 2018, the company has managed to grow earnings from $3.05/share to $5.80/share. The company is expected to earn $5.35/share in 2019.
Currently, the stock looks attractively valued at 13.60 times forward earnings. The stock yields 4.10%.
Duke Energy Corporation (DUK), operates as an energy company in the United States. It operates through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables. The company declared a quarterly dividend of $0.945/share, a 1.90% increase from prior dividend of $0.9275. This marked the 15th year of annual dividend increases for this dividend achiever. Over the past decade, Duke has been able to boost annual distributions at a rate of 3%/year.
Between 2008 and 2018, the company’s earnings went from $3.24/share to $3.76/share. The company is expected to generate adjusted earnings per share in the $4.80 - $5.20/share range in 2019. In comparison, adjusted earnings per share for 2018 came up to $4.72/share. Therefore, I believe that 2019’s results will be only slightly higher. Fun fact – earnings per share haven’t increased much since the early 1990s, which is why Duke had to cut dividends in 2007. If earnings per share do not grow much in the future, Duke may have to cut dividends again, because there is limited room for dividend growth in the future.
The stock looks expensive using 2018 earnings per share of $3.76 – the P/E is at 23.60. The stock yields 4.30% today. I believe that Duke is a hold today, with dividends reinvested elsewhere.
Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and wellbeing company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale.
The company increased quarterly dividends to 45.75 cents per share, which is an increase of 4 percent. This marks the 44th consecutive year that this dividend champion has raised the dividend. The rate of dividend growth per the last increase is down considerably from the ten year average at 15%/year and the 5 year average at 7.30%/year. I can’t be complaining however, as rival CVS Health has kept dividends unchanged.
Between 2008 and 2018, Walgreen’s has been able to grow its earnings from $2.18/share to $5.05/share. The company is expected to earn $5.98/share in 2019, followed by a modest growth to $6.02/share in 2020.
Walgreen’s looks attractively priced at 9.30 times forward earnings and offers a dependable dividend yield of 3.30%. The slowing down of the dividend growth rate is something to monitor however, because it indicates that the business environment is cloudy enough, which explains the low growth in forward EPS estimates. Check my analysis of Walgreen's for more information about the company.
Fastenal Company (FAST), engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, and internationally. It offers fasteners, and other industrial and construction supplies under the Fastenal name.
The company raised its quarterly dividend to 22 cents/share. This was a 2.30% increase from the last payment. However, the dividend was 10% higher than the payment done during the same time last year. Fastenal is a dividend achiever with a 20 year record of annual dividend increases under its belt. Fastenal has managed to grow distributions at an annualized rate of 19.50% over the past decade.
The company has managed to grow earnings from $0.47/share in 2008 to $1.31/share in 2018. Fastenal is expected to earn $1.41/share in 2019.
The stock is slightly overvalued at 22 times forward earnings. It does offer a well-supported dividend yield at 2.80%. Fastenal may be worth a second look on dips below $28/share.
Occidental Petroleum Corporation (OXY), engages in the acquisition, exploration, and development of oil and gas properties in the United States and internationally. The company operates through three segments: Oil and Gas, Chemical, and Midstream and Marketing.
Occidental Petroleum raised its quarterly dividend by 1.30% to 79 cents/share. Occidental has increased its dividend every year for 17 consecutive years. It has a ten year annualized dividend growth rate at 10.20%. However, dividend growth has been below 2%/year over the past three years.
Between 2008 and 2018, earnings per share declined from $8.31/share to $5.39/share.
The company is expected to generate $3.78/share in 2019.
The stock looks cheap at 13.80 times forward earnings. Occidental yields 6.10%. It does have a high forward payout ratio at 83.60% today, which is a little too high for my liking. The carnage in the oil sector since 2014 has destroyed the earnings records of many oil and gas companies.
Ryder System, Inc. ( R ) provides transportation and supply chain management solutions worldwide.
The company operates through three segments: Fleet Management Solutions (FMS), Dedicated Transportation Solutions (DTS), and Supply Chain Solutions (SCS). Ryder (R ) increased its quarterly dividend by 3.70% to 56 cents/share. This marks the 15th consecutive annual dividend increase for this dividend achiever. The latest dividend increase is lower than the ten year annualized rate of growth of 8.70%.
Between 2008 and 2018, Ryder has managed to boost earnings from $3.49/share to $5.17/share. The company is expected to generate $6.14/share in 2019.
Ryder is attractively valued at 9.40 times forward earnings and offers a dependable yield of 3.90%. The slowdown in dividend growth over the past two years indicates a management team which is getting nervous about near term business conditions.
Relevant Articles:
- Walgreens Boots Alliance (WBA) Dividend Stock Analysis
- Dividend Achievers versus Dividend Contenders & Champions
- Three Dividend Achievers Distributing More Cash to Shareholders
- How to read my weekly dividend increase reports
Thursday, July 11, 2019
Dividend Achievers versus Dividend Contenders & Champions
When I started my journey of Dividend Growth Investing at the end of last decade, I focused on the list of Dividend Aristocrats and the list of Dividend Achievers. The dividend aristocrats list focuses on companies which have managed to increased dividends for 25 years in a row.
The dividend achiever list on the other hand includes companies which have managed to increase dividends every year for at least a decade. The Nasdaq Dividend Achievers™ is composite of companies with a history of increasing dividend payouts. This select group of companies is committed to enhancing shareholder value through the return of capital to shareholders.
A newer list, which I have argued to be more comprehensive is the list of dividend champions, contenders and challengers, which used to be maintained by the late David Fish. If you group the list of dividend champions and contenders, you end up with a list of companies which have managed to grow dividends annually for at least a decade. You can obtain the list from DripInvesting here.
I compared the list of dividend achievers with the list of dividend champions and contenders in order to see the differences between these two groups of securities.
As of the end of June 2019, there were 263 dividend achievers. You can obtain the list of dividend achievers from this website.
In comparison, there were 233 dividend contenders and 136 dividend champions on the CCC list. That is a total of 369 companies which have managed to boost dividends for at least ten consecutive years.
I went ahead and did a quick reconciliation between the two lists, in order to identify the reasons behind the changes.
In the first review I did, I focused on the companies on the dividend achievers list, which were not listed as either dividend champions or dividend contenders.
I found out three differences, where companies were listed on the dividend achievers list, but not on the list of dividend champions and contenders.
The first two were Abbott Laboratories and ITT Industries with a 6 and 7 year track record of annual dividend increases. Abbott Laboratories was kept out, because the 2013 split into Abbott and Abbvie was viewed as a dividend cut, which it wasn’t. An investor in legacy Abbott would have received shares of new Abbott and Abbvie. Their annual dividend income would have kept going up every year since the split in 2013. Therefore, the late Dave Fish should have kept Abbott on the list, the same way Altria was kept on the list after its split into Altria, Phillip Morris International and Kraft Foods.
ITT industries is another company that had a lot of spin-offs and splits in the business over the past decade. In 2011, ITT spun off its defense businesses into a company named Exelis, and its water technology business into a company named Xylem Inc. Collective ITT, Xylem and ITT Exelis post-spin dividends were immediately equal to pre-spin ITT quarterly dividend. However, it turned out that dividends per share in 2010 and 2011 were exactly the same and hadn’t moved. Therefore, I agree with late Dave Fish’s assessment that the company be kept out of the dividend contenders list. I disagree with the dividend achievers list assessment that they kept the stock in the list.
The third difference is a timing one – the dividend achievers list includes L3 Harris (LHX), which is created as a result of the merger between Harris (HRS) and L3 (LLL). This is a timing variance, which will be corrected by the time the next CCC list is uploaded.
The second review I did focused on companies on the CCC list ( dividend champions and contenders), but not on the list of dividend achievers. There were a total of 109 companies missing from the list of dividend achievers. You can download the list of differences from this link.
47 of the companies on the companies had a streak of exactly ten years. Therefore, it is fair to assume that these companies are not on the list of dividend achievers because they just achieved their ten year track record. The list of dividend achievers is updated once per year, while the list of dividend contenders is updated once per month. I would view this difference as a timing difference.
For the other 62 companies however, I am unable to determine why they would be excluded from the list of dividend achievers.
It is quite possible that they are excluded because these companies are not actively traded enough, or traded on the Over-The-Counter, not on NYSE or Nasdaq. Why would this matter at all? This is because index funds must be able to sell and buy shares quickly and at high volume, in order to accommodate inflows and outflows from investors, while following their index. If the index consists of thinly traded companies, an index fund would have a tough time following these companies. Therefore, it is easier to excluded these companies from the get-go. This is where your opportunity to review this companies comes to play of course. I wouldn’t be surprised if a portfolio of these 62 companies will do better than a portfolio of the 263 dividend achievers over the next decade. Let’s revisit in 2029, shall we?
As a long-term buy and hold investor, I do not care about trading volume, because I do not plan to jump in and out of stocks. I hope to find a quality company at an attractive price, with a record of annual dividend increases, which can manage to grow earnings over time. One such company I invested in 2010 was Hingham Institution for Savings (HIFS). Because the bank is thinly traded, it was excluded from the list of dividend achievers. This is unfortunate, because the company is one of the best performing investments I have had in my investment career.
The other reason for a few of the differences is the fact that the CCC list includes a few foreign companies, such as Thomson Reuters (TRI), Canadian National Railways (CNI), Enbridge (ENB), HDFC Bank Limited (HDB). It would make sense that these should be part of the Canadian Dividend Achievers and International Dividend Achievers Indices, not an index that is focused on US companies. The overly narrow focus of indices can be a blessing and a curse of course. My focus is on companies, whose profits can support annual growth in dividends per share, and their reliability in tough times. It does not matter to me if a company is US based, Foreign based, and whether it fits into a narrowly defined artificially created bucket such as mid-cap, small-cap, large-cap etc. Most indices focus on a narrow slice of a population, for better or worse.
While I disagree with the exclusion of so many companies from the dividend achievers index, I do agree that dividends matter.
Why Dividends Matter (source)
Companies that pay regular dividends tend to be in better financial health and produce sustained earnings and revenue growth.
Dividends help identify well-managed companies; every dividend declaration represents a promise by management and a vote of confidence by the board of directors in the company's leadership.
Companies that consistently raise their dividend payouts also raise the bar on their own performance expectations.
Shares of dividend-paying companies possess built-in value that makes them generally more resilient in down markets, with solid appreciation potential during earnings-driven market upturns — with less price volatility.
Relevant Articles:
- S&P Dividend Aristocrats Index – An Incomplete List for Dividend Investors
- 2019 List of Dividend Aristocrats Revealed
- 2019 Dividend Champions List
- Why do I like the Dividend Aristocrats?
The dividend achiever list on the other hand includes companies which have managed to increase dividends every year for at least a decade. The Nasdaq Dividend Achievers™ is composite of companies with a history of increasing dividend payouts. This select group of companies is committed to enhancing shareholder value through the return of capital to shareholders.
A newer list, which I have argued to be more comprehensive is the list of dividend champions, contenders and challengers, which used to be maintained by the late David Fish. If you group the list of dividend champions and contenders, you end up with a list of companies which have managed to grow dividends annually for at least a decade. You can obtain the list from DripInvesting here.
I compared the list of dividend achievers with the list of dividend champions and contenders in order to see the differences between these two groups of securities.
As of the end of June 2019, there were 263 dividend achievers. You can obtain the list of dividend achievers from this website.
In comparison, there were 233 dividend contenders and 136 dividend champions on the CCC list. That is a total of 369 companies which have managed to boost dividends for at least ten consecutive years.
I went ahead and did a quick reconciliation between the two lists, in order to identify the reasons behind the changes.
In the first review I did, I focused on the companies on the dividend achievers list, which were not listed as either dividend champions or dividend contenders.
I found out three differences, where companies were listed on the dividend achievers list, but not on the list of dividend champions and contenders.
The first two were Abbott Laboratories and ITT Industries with a 6 and 7 year track record of annual dividend increases. Abbott Laboratories was kept out, because the 2013 split into Abbott and Abbvie was viewed as a dividend cut, which it wasn’t. An investor in legacy Abbott would have received shares of new Abbott and Abbvie. Their annual dividend income would have kept going up every year since the split in 2013. Therefore, the late Dave Fish should have kept Abbott on the list, the same way Altria was kept on the list after its split into Altria, Phillip Morris International and Kraft Foods.
ITT industries is another company that had a lot of spin-offs and splits in the business over the past decade. In 2011, ITT spun off its defense businesses into a company named Exelis, and its water technology business into a company named Xylem Inc. Collective ITT, Xylem and ITT Exelis post-spin dividends were immediately equal to pre-spin ITT quarterly dividend. However, it turned out that dividends per share in 2010 and 2011 were exactly the same and hadn’t moved. Therefore, I agree with late Dave Fish’s assessment that the company be kept out of the dividend contenders list. I disagree with the dividend achievers list assessment that they kept the stock in the list.
The third difference is a timing one – the dividend achievers list includes L3 Harris (LHX), which is created as a result of the merger between Harris (HRS) and L3 (LLL). This is a timing variance, which will be corrected by the time the next CCC list is uploaded.
The second review I did focused on companies on the CCC list ( dividend champions and contenders), but not on the list of dividend achievers. There were a total of 109 companies missing from the list of dividend achievers. You can download the list of differences from this link.
47 of the companies on the companies had a streak of exactly ten years. Therefore, it is fair to assume that these companies are not on the list of dividend achievers because they just achieved their ten year track record. The list of dividend achievers is updated once per year, while the list of dividend contenders is updated once per month. I would view this difference as a timing difference.
For the other 62 companies however, I am unable to determine why they would be excluded from the list of dividend achievers.
It is quite possible that they are excluded because these companies are not actively traded enough, or traded on the Over-The-Counter, not on NYSE or Nasdaq. Why would this matter at all? This is because index funds must be able to sell and buy shares quickly and at high volume, in order to accommodate inflows and outflows from investors, while following their index. If the index consists of thinly traded companies, an index fund would have a tough time following these companies. Therefore, it is easier to excluded these companies from the get-go. This is where your opportunity to review this companies comes to play of course. I wouldn’t be surprised if a portfolio of these 62 companies will do better than a portfolio of the 263 dividend achievers over the next decade. Let’s revisit in 2029, shall we?
As a long-term buy and hold investor, I do not care about trading volume, because I do not plan to jump in and out of stocks. I hope to find a quality company at an attractive price, with a record of annual dividend increases, which can manage to grow earnings over time. One such company I invested in 2010 was Hingham Institution for Savings (HIFS). Because the bank is thinly traded, it was excluded from the list of dividend achievers. This is unfortunate, because the company is one of the best performing investments I have had in my investment career.
The other reason for a few of the differences is the fact that the CCC list includes a few foreign companies, such as Thomson Reuters (TRI), Canadian National Railways (CNI), Enbridge (ENB), HDFC Bank Limited (HDB). It would make sense that these should be part of the Canadian Dividend Achievers and International Dividend Achievers Indices, not an index that is focused on US companies. The overly narrow focus of indices can be a blessing and a curse of course. My focus is on companies, whose profits can support annual growth in dividends per share, and their reliability in tough times. It does not matter to me if a company is US based, Foreign based, and whether it fits into a narrowly defined artificially created bucket such as mid-cap, small-cap, large-cap etc. Most indices focus on a narrow slice of a population, for better or worse.
While I disagree with the exclusion of so many companies from the dividend achievers index, I do agree that dividends matter.
Why Dividends Matter (source)
Companies that pay regular dividends tend to be in better financial health and produce sustained earnings and revenue growth.
Dividends help identify well-managed companies; every dividend declaration represents a promise by management and a vote of confidence by the board of directors in the company's leadership.
Companies that consistently raise their dividend payouts also raise the bar on their own performance expectations.
Shares of dividend-paying companies possess built-in value that makes them generally more resilient in down markets, with solid appreciation potential during earnings-driven market upturns — with less price volatility.
Relevant Articles:
- S&P Dividend Aristocrats Index – An Incomplete List for Dividend Investors
- 2019 List of Dividend Aristocrats Revealed
- 2019 Dividend Champions List
- Why do I like the Dividend Aristocrats?
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