Nine Dividend Growth Stocks Rewarding Shareholders With a Raise

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

I review the most recent dividend increase, and compare it to the ten year average to gauge it. While I generally prefer a stable rate of dividend growth that is close to the average, I also understand that businesses face different short-term cycles as well.

I also review the growth in earnings, and payout ratios, in order to determine the likelihood of future dividend increases. A company that grows earnings and maintains a stable payout ratio will be more likely to continue growing that future dividend income stream to investors. On the other hand, a company with a stagnant earnings per share can only be able to grow dividends through an expansion to the payout ratio, which is unsustainable.

Last but not least, I also look at current valuation factors such as P/E ratio and dividend yield, while also taking into consideration the past growth and future growth prospects for each enterprise.

Community Bank System, Inc. (CBU) operates as the bank holding company for Community Bank, N.A. that provides various banking and other financial services to retail, commercial, and municipal customers. It operates through three segments: Banking, Employee Benefit Services, and All Other. 

The company hiked quarterly dividends by 2.30% to $0.44/share. This was the 30th consecutive year of dividend increases for this dividend champion. Over the past decade, CBU has managed to grow dividends at an annualized rate of 5.40%.

The stock sells for 18.71 times forward earnings and yields 2.61%.

Computer Services, Inc. (CSVI) provides 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 raised its quarterly dividend by 7.40% to $0.29/share. According to the company's press release, this cash dividend marks the 51st consecutive annual increase in CSI’s cash dividends paid to shareholders. Over the past decade, Computer Services has managed to grow dividends at an annualized rate of 16%.

The stock sells for 16.80 times earnings and yields 3%.

Chesapeake Financial Shares, Inc. (CPKF) operates as the bank holding company for Chesapeake Bank that provides various banking products and services in Virginia.

The company increased quarterly dividends by 7.10% to $0.15/share. This was the 29th year of consecutive annual dividend increases for this dividend champion. Over the past decade, Chesapeake Financial Shares has managed to grow dividends at an annualized rate of 6.80%.

The stock sells for 8.72 times earnings and yields 2.40%.

Landstar System, Inc. (LSTR) provides integrated transportation management solutions in the United States, Canada, Mexico, and internationally. The company operates through two segments: Transportation Logistics, and Insurance. 

The company boosted quarterly dividends by 20% to $0.30/share. This was the 17th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, Landstar System has managed to grow dividends at an annualized rate of 15.90%.

The stock sells for 12.73 times forward earnings and yields 0.65%.

Mercantile Bank Corporation (MBWM) operates as the bank holding company for Mercantile Bank of Michigan that provides commercial and retail banking services to small- to medium-sized businesses and individuals in the United States.

The company raised quarterly dividends by 3.20% to $0.32/share. This was the 10th year of consecutive annual dividend increases for this newly minted dividend achiever.

The stock sells for 9.46 times forward earnings and yields 3.99%.

PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials worldwide. 

The company increased quarterly dividends by 5.10% to $0.62/share. This event marks the 51 consecutive years of annual increases for this dividend king. Over the past decade, it has managed to grow distributions at an annualized rate of 7.20%.

The stock sells for 17.70 times forward earnings and yields 1.92%. Check my analysis of PPG Industries for more information about the company,

Regions Financial Corporation (RF) is a financial holding company that provides banking and bank-related services to individual and corporate customers. It operates through three segments: Corporate Bank, Consumer Bank, and Wealth Management. 

The company increased quarterly dividends by 17.60% to $0.20/share. This is the tenth consecutive year of annual dividend increases for this newly minted dividend achiever. The company cut dividends during the Global Financial Crisis, which explains the 31.80% annualized pace of dividend growth over the past decade. The dividend is still below the 2008 level of $0.38/share however.

The stock sells for 9.05 times forward earnings and yields 3.95%.

1st Source Corporation (SRCE) operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services, trust and wealth advisory services, and insurance products to individual and business clients.

The bank raised its quarterly dividend by 3.20% to $0.32/share. This was the 35th year of annual dividend increases for this dividend champion. Over the past decade, the company managed to grow dividends at an annualized rate of 7.60%.

The stock sells for 10.40 times forward earnings and yields 2.75%

Stanley Black & Decker, Inc. (SWK) engages in the tools and storage and industrial businesses in the United States, Canada, rest of Americas, France, rest of Europe, and Asia. 

The company increased quarterly dividends by 1.30% to $0.80/share. This marks the 55th consecutive annual dividend increase for this dividend king. Over the past decade, the company had managed to grow dividends at an annualized rate of 6.20%.

The stock sells for 11.89 times forward earnings and yields 2.73%. Check my analysis of Stanley Black & Decker from here.

Relevant Articles:

- Dividend Champions List for 2022

- Dividend Kings List for 2022

- Dividend Achievers Offer Income Growth and Capital Appreciation

- How to read my weekly dividend increase reports

Eight Dividend Growth Companies Rewarding Owners With a Raise Last Week

As part of my monitoring process, I review the list of dividend increases every week This activity helps me to monitor the business performance of any companies I am invested in. It also helps me to identify any hidden dividend gems, and place them on my list for further research.

My reviews are an example of the quick way I use to evaluate companies, before deciding if they are worth a second look later or not.

The companies in today’s article have managed to grow dividends for at least ten years in a row. These companies also announced a dividend increase during the past week. The companies include:

The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. It operates through four segments: Health and Wellness, Household, Lifestyle, and International.

The company raised quarterly dividends by 1.70% to $1.18/share. This marked the 45th year of annual dividend increases for this dividend aristocrat.

Over the past decade, the company has managed to grow dividends at an annualized rate of 6.81%, which is lower than the five year rate of 7.71%

The stock sells for 35.57 times forward earnings and yields 3.15%.

Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and New Power. 

The company raised quarterly dividends by 8.30% to $1.57/share. This was the 17th consecutive annual dividend increase for this dividend achiever.

Over the past decade, the company has managed to boost dividends at an annualized rate of 15.50%. The five year rate is 7%.

The stock sells for 11.10 times forward earnings and yields 2.98%.

Hingham Institution for Savings (HIFS) provides various financial products and services to individuals and businesses in the United States. 

The company raised quarterly dividends by 4% to $0.59/share. This was an 11% increase in the dividend over the payment in September 2021. The bank has increased dividends for 27 years in a row.

The stock sells for 10.23 times earnings and yields 0.70%.

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. 

The company raised its quarterly dividend by 10.30% to $0.59/share. This was the 16th consecutive annual dividend increases for this dividend achiever. The company has managed to grow dividends at an annualized rate of 8.80% over the past decade.

The stock sells for 21.90 times forward earnings and yields 1.45%.

National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long-term, net leases. 

This REIT hiked quarterly dividends by 3.80% to $0.55/share. This marks the 33rd consecutive annual dividend increase for this dividend champion.

Over the past decade, the REIT managed to boost dividends at an annualized rate of 3.25%.

The REIT sells for 13.95 times forward FFO and yields 4.93%.

Ryder System, Inc. (R) operates as a logistics and transportation company worldwide. The company operates through three segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS). 

The company raised quarterly dividends by 6.90% to $0.62/share. This is the 18th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to increase distributions at an annualized rate of 7.40%.

The stock sells for 5 times forward earnings and yields 3.27%

The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. It operates in three segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods.

The company raised its quarterly dividend by 3% to $1.02/share. This marked the 25th consecutive year of dividend increases for this newly minted dividend champion. Over the past decade, the company has managed to grow dividends at an annualized rate of 7.50%. The five year rate of dividend growth is around 5.90%.

The stock sells for 16.32 times forward earnings and yields 3%.

Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and beauty retail company. It operates through two segments, the United States and International. 

The company increased quarterly dividends by 0.50% to $0.48/share. This marked the 47th consecutive year of dividend increases for this dividend aristocrat.

Over the past decade, the company has managed to grow dividends at an annualized rate of 7.81%. The 3 year rate is at 2.76% however, while the five year rate is 4.95%.

The stock sells for 7.31 times forward earnings and yields 5.18%.

Relevant Articles:

- How dividends protect income from inflation

- Three Notable Recent Dividend Increases

- If you didn't get an 8.60% pay increase, you received a pay cut

- Are Dividend Increases Beating Inflation in 2022?

Dividend Stock Analysis of Kroger (KR)

The Kroger Co. (KR) operates as a retailer in the United States. The company operates supermarkets, multi-department stores, marketplace stores, and price impact warehouse stores. 

Kroger is a dividend achiever, which recently hiked quarterly dividends by 23.80% to 26 cents/share. This marked the 16th consecutive year of annual dividend increases for the company.

Warren Buffett has also been slowly building up a position in Kroger.

During the past decade, Kroger has managed to grow dividends at an annualized rate of 13.80%.

Kroger managed to grow earnings per share from 95 cents/share in 2009 to $2.17/share in 2022. The 2018 numbers are adjusted to exclude the gain on sale of Kroger’s convenience store business. The company is expected to generate $3.91/share in 2023 and $4.04/share in 2024.

Last year was a nice bump in earnings, given the fact that earnings per share had gone nowhere since 2015. That was due to investments in the company’s business going forward. It appears that earnings went lower in 2021 as fewer consumers stock up on goods like they did at the beginning of the pandemic.

Kroger's financial strategy is to use its free cash flow to drive growth while also maintaining its current investment grade debt rating and returning capital to shareholders. The company actively balances the use of its cash flow to achieve these goals.

The grocery business is highly competitive, with Kroger competing against the likes of Wal-Mart and Target, as well as mom and pop grocery stores, as well as the likes of Amazon. The company needs to continuously invest in stores, drive efficient operations, new products and innovation ( such as online, and delivery/pick up). Kroger does have the scale of operations to effectively compete, and also has attractive store locations. This allows it to be able to do online purchase and pick up at 57% of its stores and home delivery for 91% of customers. Back in 2018, Kroger invested in Ocado, which is its exclusive grocery delivery partner in the US. Ocado delivers groceries in Europe. Kroger has also made investments in new warehouses, store optimization, expanding its own private label brands and digital, in an effort to drive long-term sales growth. Same store sales growth and cost reductions are the drivers that will propel earnings per share growth over time.

Kroger is also competing by offering a large variety of private label brands that it owns and manufactures internally. This allows it to generate very good profit margins on these items relative to branded products.

Kroger also competes by including pharmacies in order three-quarters of its stores and a gas station in over half of its locations. Customers who fill in a prescription by getting in the store are also likely to make another purchase or two. The same goes for customers who would appreciate the convenience of shopping for gas, filling prescriptions and doing their grocery shopping.

Kroger is also planning to develop alternative revenue streams using the data it collects on shoppers, targeting personal finance products and media ad revenues. The company collects a lot of date on customers that shop there, which can also be used as a tool to provide a more personalized shopping experience. Another alternative revenue stream is the Home Chef meal delivery service, which provides ingredients for meals in 48 states in the United States. Kroger acquired Home Chef in 2018, and the meal kits are available at Kroger locations, including a few Walgreen’s stores.

Kroger has rewarded shareholders handsomely with dividends and share buybacks. Between 2009 and 2022, the number of shares outstanding has gone down from 1.31 billion shares to 754 million shares. This means that shareholders from 2009, who stayed invested in Kroger, increased their ownership in the company by two-thirds without doing anything.

The dividend payout ratio increased from 17.90% in 2009 to 36% in 2022.  A lower payout ratio provides an adequate margin of safety in the dividend payment, which can provide protection against short-term turbulence in earnings per share. There is room for increase in the payout ratio from here. Future dividend growth can be helped by a gradual increase in the payout ratio. If Kroger is unable to jump start earnings growth however, there will be a natural limit to further dividend growth. I would get worried if earnings are not growing, but dividends are, and the payout ratio exceeds 60%. 

Currently the stock is attractively valued at 12.18 times forward earnings and offer an attractive dividend yield of 1.76%.

Relevant Articles:

- Three Dividend Achievers Distributing More Cash to Shareholders
- Does Paying a Dividend Reduce a Company’s Value?
- Attractively Valued Dividend Contenders To Consider
- Supervalu (SVU) Dividend Stock Analysis

Three Notable Recent Dividend Increases

Once I invest in a Dividend Growth Stock, I do very little, and delegate the management of the business to management. I like the passive nature of dividend growth investing, where companies work tirelessly to grow revenues, earnings and reward shareholders with dividend increases. I do occasionally check in to see how they are doing, but would hold on to a security, for as long as the dividend is not cut. Adding money to a security is a more complex process for me, as I review valuations, growth expectations, payout sustainability, portfolio weights etc.

I have been away for the past three weeks, and just now getting into the weeds of dividend increases since then. I saw a few companies that raised dividends during that time. I decided to focus on three that are more widely held amongst dividend growth investors. 

The companies include:

The Kroger Co. (KR) operates as a retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. 

The company raised quarterly dividends by 23.8% to $0.26/share. This marks the 16th consecutive year of dividend increases for this dividend achiever. The company continues to expect, subject to board approval, an increasing dividend over time.

"This dividend increase reflects the Board of Directors' confidence in our strategy of Leading with Fresh, Accelerating with Digital," said Rodney McMullen, Kroger's Chairman and CEO. "Our business continues to generate strong and consistent free cash flow and has proven to be resilient in a variety of operating environments. The strength of our balance sheet provides significant financial flexibility to continue to invest in our business to drive growth. Looking ahead, we are well positioned to deliver total shareholder returns of 8 – 11% over time."

Over the past decade, Kroger has managed to increase dividends at an annualized rate of 13.80%.

The stock is selling for 12.29 times forward earnings and yields 2.17%. Check my analysis of Kroger for more information about the company.

General Mills, Inc. (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. 

The company raised its quarterly dividend by 5.90% to $0.54/share, underlining its commitment to driving strong returns for General Mills shareholders over the long term. General Mills and its predecessor company have paid dividends without interruption for 123 years.

The company lost its status of a dividend achiever in 2019, after failing to increase dividends. It raised dividends again in late 2020, didn't raise them in 2021 and is raising them in 2022. That being said, it's annual dividends are set to increase for third year in a row in 2022. Despite that, General Mills has managed to grow dividends at an annualized  rate of 5.22% over the past decade.

The stock is selling for 18.92 times forward earnings and yields 2.86%.

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. 

This master limited partnership raised its quarterly distribution by 2.20% to $0.475/unit. This distribution represents a 5.6 percent increase over the distribution declared with regard to the second quarter of 2021. This distribution increase is the partnership’s 74th distribution increase since its initial public offering in 1998. This year will be the 24th consecutive year of distribution growth for this dividend achiever. 

Enterprise Product Partners has managed to grow distributions at an annualized rate of 4% over the past decade. This dividend achiever has managed to boost distributions at least once per year since 1999.

The partnership yields 7.61% today.

Relevant Articles:

- If you didn't get an 8.60% pay increase, you received a pay cut

- Seven Dividend Growth Stocks Rewarding Shareholders With Raises

- Eleven Companies Rewarding Shareholders With Raises Last Week

- Ten Dividend Growth Stocks Rewarding Shareholders With a Raise

Dividend Investors: Stay The Course

The past month has been difficult for many investors. It is during times like these that you see who really is a long-term investor, and who is just a pretender. When you are a long-term buy and hold investor, you stand the best chances to take maximum advantage of the power of compounding, and end up with the probability for the highest dividend income and capital gains. These are the times where having a disciplined approach to investing pays off. These are the times when the ability to allocate capital to use in quality dividend stocks would seem stupid in the short-term, but potentially really brilliant 10 – 20 years down the road. When stock prices fall, there is an urge in the investor to protect their nest eggs from further price impairment.

This is a dangerous situation to be in because:

1) Noone knows in advance today when this correction is going to run out of steam or what its ultimate severity will be. So when you act on short-term noise, you are actually shooting yourself and those who will depend on you in the foot.

2) Therefore, if you act based on short-term price fluctuations, you are speculating and have essentially thrown out your edge of being a long-term investor. It is extremely difficult to win in investing as a short-term speculator – you will be in an out of stocks and paying taxes and commissions through the nose. Your main edge in the stock market lies in the ability to hold on to your stocks through thick and thin for decades, and cashing in those growing dividend checks ( or reinvesting them in the accumulation phase)

3) If you are in the accumulation phase, you should be praying for lower prices, because you are buying shares to provide for you in 20 – 30 years. A 200 point decline on the S&P 500 decline will likely look just like a blip on the charts 20 – 30 years from now. If you don’t believe me, check the 1987 crash. A lower entry price results in more future dividend income for you.

4) If you are in the retirement phase, you already have a plan to live off your assets. You are likely spending those dividends, and hopefully those dividends are coming from a diversified portfolio of dividend growth stocks. You are likely getting social security and possibly a pension. As long as there is some margin of safety in financial independence, and the dividend portfolio mostly consists of quality blue chips, the investor should be just cashing in their dividend checks and enjoy the fruits of their lifetime of labor.

I know that seeing unrealized capital losses hurts. However, the important thing is to just stick to your plan and stay the course. This is why I have chosen to be a dividend growth investor. When the stock market is going up, everyone is a total return investor and chases hot growth stocks and talks about how much capital gains they have made.

However, when the stock market starts going down in price, those capital gains could quickly turn into losses. Imagine having to sell chunks of your portfolio for living expenses when the stock market is going lower. You will eat your principal quickly, and increase your chances of panicking and doing the wrong thing of selling everything out. When your dividends cover your living expenses however, it is much easier to ignore those stock price fluctuations. As long as those dividends are coming from a diversified portfolio of quality blue chip stocks that are dependable, the investor has nothing to worry about. In fact, receiving cash dividends when the stock prices are going down is very reassuring, and provides the investor with positive reinforcement to just stay the course.

There is a reason why stocks have done much better than bonds in the long-run – they are riskier. With stocks, there is always the chance that there will be violent fluctuations in the price. You can have steep downturns, which can have many weak hands scrambling for the exits. When stock prices go down, many investors assume that something is wrong, they panic and sell. They forget that your upside potential in terms of dividends and capital gains is virtually unlimited. Some companies you own will ultimately cut dividends and sell at levels that were lower than what you paid for. Other companies in your portfolio will do well enough in the long term that will more than compensate for the failures you have experienced.

The issue with stocks of course is that the amount and timing of future capital gains is largely unknown in advance. This is why people panic when prices start going down – they project the recent past onto the future indefinitely. They forget that stocks are not just some pieces of paper or blips on a computer screen, but real businesses that sell real goods and services to consumers who are willing to exchange the fruits of their labor for those goods and services. Over time, those businesses as group will likely learn ways to sell more, charge more, earn more and reward their shareholders. No matter the turbulence we will experience in the US and Global stock markets and economies in the short-run, I believe that things will be better for all of us ten years from now. And as investors, we invest for the long term, not for the next 5 years or 5 months.

With bonds, you get limited upside mostly in terms of the interest payment you receive, and then hopefully a guaranteed return on investment after a set period of time. So while a portfolio of bank CD’s will not be quoted every day, providing an illusion that the money is safe, it is difficult to live off the small yields we see today. Even if inflation returns to its normal course of 3%/year, those bank CD’s will likely be unable to keep up purchasing power.

Holding on to stocks pays in the long term better than holding bonds precisely due to their “riskier” nature. If you stay the course of regularly adding money to your accounts, you will be able to buy more shares of quality companies at a discount. After the dust settles, you will be ending up with more valuable pieces of real businesses than before. It intuitively makes sense that if one share of Altria (MO) will sell for $500 in 30 years, you will be better off buying the company at $40/share as opposed to $75/share. It also intuitively makes sense that if you reinvest your dividends when prices are low, you will end up with more shares and more dividend income over time.

Again, in order to benefit from all of this, you need to stay the course. This means saving money every month, putting money to work regularly, and not getting scared away. Perhaps if you are concerned about prices and you are in the accumulation phase, it may make sense to just start reinvesting dividends automatically. Or alternatively, it may make sense to automatically invest a portion of your paycheck through your 401 (k).


Relevant Articles:

- Successful Dividend Investing Requires Patience
- Fixed Income for dividend investors
- Dividend income is more stable than capital gains
- How to think like a long term dividend investor
- Long Term Dividend Growth Investing