Nine Dividend Stocks Rewarding Shareholders With A Raise

As part of my monitoring process, I review the list of dividend increases every week. I try to narrow down this list to a more manageable level, by focusing only on companies which have managed to boost their distributions for at least a decade (with one exception listed below). I also tried to provide a brief summary on each company, citing reasons why I like or dislike at the moment. Regular readers will not be surprised that just because a company has managed to raise dividends for a decade, that doesn’t mean that it is an automatic buy. I try to review the trends in earnings, as well as valuations and dividend sustainability, in order to come up with a quick decision whether a company is worth investigating further for a potential addition to the portfolio. In general, I am looking for a company that grows earnings, grows dividends, has an adequate margin of safety in dividends, and has an attractive valuation.

The companies that boosted distributions to shareholders over the past week that met our criteria above include:

AT&T Inc. (T), which provides telecommunications and digital entertainment services. The company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility, and International. The company raised its quarterly dividend by 2% to 50 cents/share. This marked the 34th consecutive annual dividend increase for this dividend champion. The company has tended to boost its quarterly dividend rate by a penny over the past five years. This is due to the high dividend payout ratio, and the very slow growth in earnings per share. Due to the high yield however, shareholders are happy with any raise they can get. The company managed to boost earnings per share from $1.94 in 2007 to $2.10 in 2016. The company is expected to earn $2.92/share in 2017. AT&T is a popular holding for many retirees looking for current income with its 5.20% dividend yield, which is adequately supported by its 69% forward dividend payout ratio. The intense level of competition is the only thing that has stopped me from owning AT&T. The stock is cheap at 13 times forward earnings and that yield of 5.20%. If the company manages to keep the dividend, it can generate very good returns to shareholders over the next decade. Unfortunately, when companies take on too many acquisitions with debt, they have prioritized debt repayment over dividend growth. Let’s hope that this is not the case for AT&T.

Dividends Are The Investors' Friend

I recently learned that John Bogle had mentioned my humble blog in his latest book "The Little Book of Common Sense Investing" from a book review by my friend Mark Seed.

Some excerpts from this article on dividends was mentioned at the end of a chapter on dividend investing titled " Dividends Are The Investor's (Best?) Friend". The chapter discusses the important contribution of dividends towards total returns for the US stock market since 1926. The chapter also discusses the importance of reinvesting those dividends over time. I like how he focused on the stability of dividend income over time, placing a chart of S&P 500 dividend payments since 1926. The only major declines in dividends occurred around the Great Depression in 1929 - 1932, also in 1938, and during the Great Financial Crisis in 2008. The rest of the time we have a smooth uptrend in dividends as whole, as US corporations tend to gradually increase those dividend payouts every year since 1926. The chapter also discusses the importance of keeping costs low, in order to keep the majority of your dividend income. The book will also resonate with dividend investors, since it preaches investors to focus on their dividend checks, and ignore focusing on the fluctuating values of their investments

The book is worth a read by investors from all levels of experience.

I am beyond honored that John Bogle, who is a giant in the field of investing is even aware of my site. Actually, saying I am honored is an understatement.

Nine Dividend Increases For Further Review

As part of our monitoring process, we review the list of dividend increases every week. In this monitoring process I review the rate of dividend increases for companies I own. This is one of the many ways to evaluate if my thesis is still working. I also use this tool as one of the ways to review companies I may be interested in buying at some point in time ( provided the price was good).

I also post these updates on this site to share with you how I quickly evaluate companies and either put them on the list for further research or immediately discard them for the time being. Since our time is limited, we want to focus it on the best opportunities, available at the best prices today, and place the rest of opportunities on hold.

For this weekly review, I focused on the dividend companies whose boards approved a dividend increase over the past week. All of these companies have managed to reward shareholders with an annual raise for at least a decade.

The companies include:

Don't Be An Arrogant Dividend Growth Investor

There are many risks to investing. One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are purely psychological. Investors who act/are overconfident in their abilities, tend to rush through, and make silly mistakes that could be disastrous. Being cocky might work in certain areas of life, but not in investing on the financial markets.

One of the risks that overconfident investors take is when they create a concentrated dividend portfolio. These concentrated portfolios typically include no more than ten to fifteen individual securities. These cocky investors claim that they create these concentrated portfolios because they are only investing in their best ideas. According to these investors it is much easier to focus all your energy on ten individual stocks and research all there is to them, than to focus on thirty or more companies. The reason why I view these investors as overconfident is because they are forgetting that sometimes, no matter how great you are at analyzing investments, some unknown factor might cause you to still lose money. If just one out of ten companies eliminated dividends and fell substantially in the process, it could mean trouble. Contrast this to a portfolio of 30 companies, which is properly diversified and allocated to different sectors. An unexpected blow to one company would not jeopardize the dividend income stream.

Two dividend growth stocks raising dividends like clockwork

The appealing feature of the best dividend growth stocks is their ability to boost annual dividends like clockwork. This feature is even more appealing when strong dividend increases are supported by underlying growth in earnings.

Two prominent companies raised their dividends to shareholders in the past week. Both companies are high quality ones with wide moats. The companies include:

The Walt Disney Company (DIS) is an entertainment company. The Company operates in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media.

Disney’s incomparable collection of iconic brands and franchises continues to deliver strong returns to shareholders, as the company raised its semi-annual dividend by 7.70% to 84 cents/share. This marked the 8th consecutive annual dividend increase for Disney. The new yield is 1.60%. Over the past decade, the company raised its dividend at an annual rate of 18.80%/year.

The strong dividend growth was supported by the increase in earnings from $2.28/share in 2008 to $5.69/share in 2017. Analysts expect the company to earn $6.23/share in 2018.

The stock is attractively valued at 16.90 times forward earnings. Check my analysis of Walt Disney Company for more information about the company.

McCormick & Company (MKC) is engaged in manufacturing, marketing and distributing spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses. The Company's segments include consumer and industrial.

The company reiterated its commitment to dividend growth, by raising its quarterly dividend by 10.60% to 52 cents/share. This marked the 32nd consecutive annual dividend increase for McCormick. The new yield is 2%. Over the past decade, this dividend champion managed to grow its dividend at an annual rate of 9.10%/year.

The strong dividend growth was supported by the increase in earnings from $1.73/share in 2007 to $3.69/share in 2016. Analysts expect the company to earn $4.22/share in 2017.

The stock is overvalued at 24.40 times forward earnings. I would consider adding to my position on dips below $85/share.

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- How I Manage to Monitor So Many Companies
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