Five Dividend Growth Companies Raising Dividends Last Week

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

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

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

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

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

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

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

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

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

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

This REIT raised monthly dividends by 1.20% to $0.25/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 6%.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Relevant Articles:

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

- Four Dividend Achievers Rewarding Shareholders With Raises

- Five Dividend Growth Companies Increasing Dividends Last Week

- The Return of the Dividend

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

 The Procter & Gamble Company (PG) provides branded consumer packaged goods worldwide. It operates through five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Procter & Gamble is a member of the elite dividend kings list, which includes companies that have managed to raise annual dividends for at least 50 years in a row. That's not a small feat.

The company increased quarterly dividends by 7% to $1.0065/share yesterday. This dividend increase marked the 68th consecutive year that P&G has increased its dividend and the 134th consecutive year that P&G has paid a dividend since its incorporation in 1890. (Source)

Management states that this dividend increase reinforces their commitment to return cash to shareholders, many of whom rely on the steady, reliable income earned with their investment in P&G.

The table below shows the year that the company raised dividends, the new increased quarterly dividend payment for that year, and the rate of dividend increase for the year. It focuses on the past 35 years of dividend increases for Procter & Gamble:

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

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

That being said, the core business is very stable, which means that long-term earnings power should not be affected. However, earnings per share have not grown by much over the past decade. The slowdown in dividend growth is a direct result of the slowdown in earnings per share growth. 

In the past decade, the dividend payout ratio increased from 58% in 2014 to 61% in 2023. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Based on forward earnings, it appears that the forward dividend payout ratio is at 62%, which means that the dividend is sustainable.

The number of shares outstanding has been decreasing gradually over the past decade too.

It is interesting to look at the company's performance over the past decade for perspective. The stock sold for approximately $81/share a decade ago, earned $4.19/share and paid a quarterly dividend of 60.15 cents/share, for an annual dividend yield of 2.97%. The P/E was at 19.33.

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

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

Relevant Articles:

- Dividend Aristocrats Raises in 2023

- Four Notable Dividend Increases From Last Week

- Procter & Gamble (PG) Increases Dividends for 67th Consecutive Year

- 36 Dividend Aristocrats for further research

The Illusion of Choice in Consumer Goods

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

You can view this chart from here:

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

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

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

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

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

1) A track record of annual dividend increases

2) Growth in earnings per share over the past decade

3) Growth in dividends per share over the past decade

4) Dividend sustainability

5) Good entry valuation

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

The companies included in the chart are:

Company	Ticker	Years Annual Dividend Increases	10 Year Dividend Growth	P/E	Dividend Yield
Nestle	NSRGY	29	4.00%	18.00	3.21%
PepsiCo	PEP	51	8.10%	20.74	2.99%
Procter & Gamble	PG	67	4.70%	24.33	2.41%
Unilever	UL	0	2.60%	16.87	3.83%
Coca-Cola	KO	62	5.10%	21.14	3.26%
Mondelez	MDLZ	12	11.30%	19.33	2.50%
Danone	DANOY	2	3.80%	16.31	3.48%
Kraft Heinz	KHC	0	-2.45%	12.19	4.30%
General Mills	GIS	4	4.60%	15.50	3.38%
Associated British Foods	ASBFY	3	4.15%	13.80	2.52%
Colgate-Palmolive	CL	60	3.70%	25.18	2.28%

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Relevant Articles:

- Strong Brands Grow Dividends

- Buying Quality Companies at a Reasonable Price is Very Important

- Rising Earnings – The Source of Future Dividend Growth

- What makes Consumer Staples the Perfect Dividend Growth Companies?

Happy Coca-Cola Dividend Day Warren Buffett

Warren Buffett’s Berkshire Hathaway just received a  dividend check for $194 million dollars from Coca-Cola.

Berkshire Hathaway owns 400 million shares of Coca-Cola (KO), which are projected to generate $736 million in annual dividend income. 

This comes out to roughly $2.155 million in dividend income per day, $89,805 dollars in dividend income per hour, $1,497 dollars in dividend income for Berkshire Hathaway every minute, or almost $24.95 every single second. 

Those shares have a cost basis of $1.29 billion dollars, and were acquired between 1988 – 1994. This comes out to $3.25/share. The annual dividend payment produces an yield on cost of over 59.69%. This means that Berkshire receives its original cost back every other year in dividends alone, while still retaining full ownership of its shares. This is why I believe that Warren Buffett is a closet dividend investor.

Since 1994, Buffett has received $26.795/share in total dividend income from Coca-Cola.

That is $10.718 billion in dividend income, against a total cost of $1.299 billion, which was allocated to buy stakes in other businesses and shares.

His Coca-Cola stock is worth $24.472 billion. Given the fact that Coca-Cola has also repurchased stock over the years, it also means that his ownership in Coca-Cola has increased over time, without adding a single dime.

This is a testament to the power of long-term dividend investing, where time in market is the investors best ally, not timing the market. If you can select a business which is run by able and honest management, which has solid competitive advantages, and which is available at a good price today, one needs to only sit and let the power of compounding do the heavy lifting for them. As Buffett likes to say, time is a great ally for the good business. In the case of Coca-Cola, the past 33 years have been a great time to buy and hold the stock. The company has been able to tap emerging markets in Eastern Europe, Asia, Africa and Latin America like never before. As a result, it has been able to receive a higher share of the worldwide drinks market, which has also been expanding as well. If you add in strategic acquisitions, new product development, cost containment initiatives and streamlining of operations, you have a very powerful force for delivering solid shareholder returns. With dividend investing your are rewarded for smart decisions you have made years before.

If they closed the stock market for a period of 10 years, Buffett would still be earning steady cashflow from his investment in Coca-Cola. This is because ten years from now, the company would likely be earning more than what it is earning today, and would likely be distributing more in dividend income than it is paying to shareholders today. Receiving a huge dividend check every three months is a reminder that you are a shareholder in a real company with real products that are consumed by billions of consumers worldwide. The stock is not a lottery ticket but a partial ownership in a company, which entitles you to a share of the profits being paid out to you as a shareholder in the form of dividends.

At the end of the day, if you identify a solid business, that has lasting power for the next 20 – 30 years, the job of the investor is to purchase shares at attractive values, and hold on to it. This slow and steady approach might seem unexciting initially, but just like with the story of the slow-moving tortoise beating the fast moving hare, the power of compounding would work miracles for the patient dividend investor.

In the case of Warren Buffett's investment in Coca-Cola, he is able to recover his original purchase price in dividends alone, every two years. Even if Coca-Cola goes to zero tomorrow, he has generates a substantial returns from dividends alone, which have flown to Berkshire's coffers, and have been invested in a variety of businesses that will benefit Berkshire Hathaway's shareholders for generations to come.

Currently, Coca-Cola is selling for 21.73 times forward earnings and yields 3.17%. This dividend king has managed to increase dividends for 61 years in a row.  

There were only 47 companies in the US, which have gained membership into the exclusive list of dividend kings, as of early 2024. 

Over the past decade, Coca-Cola has managed to increase dividends by 5.10%/year.  This is much better than the raises I have received at work over the past decade, despite the fact that I have routinely spent 55 - 60 hour weeks at the office.


Relevant Articles:

- Coca-Cola: A wide-moat dividend growth stock to buy and hold
- Warren Buffett Investing Resource Page
- Seven wide-moat dividends stocks to consider
- Warren Buffett’s Dividend Stock Strategy
- The importance of yield on cost

Dollar Cost Averaging Versus Lump Sum Investing

Dollar cost averaging is a process, where the same amount of funds is allocated to preset investment/s at regular intervals of time. It is widely believed that investors who choose to systemically allocate funds towards their investments are reducing their risk of investing their whole amount at the top of the price range.

Most individuals use dollar cost averaging to purchase investments. The reason behind these actions is the fact that most individuals are able to allocate funds for investing once a month or every two weeks for example, depending on the frequency with which they are able to save money. If our investor is able to save 15% of their illustrative $1000 monthly salary, which is paid every two weeks or twice/month, they would be able to allocate anywhere between $150 - $225 every month towards their retirement investments. The $225/month is derived for the situation where a person who is paid bi-weekly ends up receiving three paychecks instead of three. Either way, the typical 401 (k) investor would purchase the same funds whenever they get paid. The typical dividend investor would likely accumulate new contributions with any distributions from their portfolios, before they make their stock investments. Depending on portfolio sizes, minimum amount of purchases and amount of distributions per month, dividend investors end up purchasing different dividend stocks on a regular basis, which closely mimics the practice of dollar cost averaging.

Unfortunately, few investors have large amounts of cash simply sitting around, that they need to dollar cost average. For those lucky enough to have this happen to them, dollar cost averaging can be a tool to minimize risk of purchasing at the top. It would also help them in gaining more experience in the markets, particularly if they had none whatsoever previously. For lottery winners or those lucky individuals who happen to obtain a lump sum of cash, dollar cost averaging might be a great way to handle the bounty.

In order to test whether dollar cost averaging gives investors an advantage over lump sum investing, I obtained monthly data for the Vanguard S&P 500 mutual fund (VFINX) between 1986 and 2023. In order to calculate dollar cost averaging results for a given year, I would put $100 in investment every month beginning in the last day of the last month of the previous year, up until the last day of November for the next year. For lump-sum amounts, I would put a theoretical $1200 investment either at the closing prices for the previous year. I would then multiply the number of shares accumulated for both dollar cost averaging and lump sum investing times the ending prices by the end of the current year. Next, I would then compare which strategy delivered better results for the given year.

Overall, lump-sum investing performed better in 31 out of 38 years. Dollar cost averaging performed better in only 7 out of 38 years. Not surprisingly, these were the years when the stock market was either flat or declined. As a result, dollar cost averaging reduces investor’s risk when things were difficult, but at the expense of foregone gains when things went well. Because stocks have a historical tendency to move up over time, investors who practice dollar cost averaging might be at a disadvantage. Of course, for those who practice dollar cost averaging because they didn’t have the lump-sum in the first place, this is still the best way to accumulate a sizeable nest egg.

In this exercise we did not look at other key components of investment which deals with investment selection, analysis, valuation and purchase. We assumed that these decisions have already been made. In reality however, there could be a situation where our investor might not find any potential assets that have sufficient low valuation to merit investment in them. Most index investors or savers in a 401 (k) invest regardless of overall valuations.

Relevant Articles:

- How to accumulate your nest egg
- How to retire in 10 years with dividend stocks
- Optimal Cash Allocation for Dividend Investors
- How to Generate an 11% Yield on Cost in 6 Years
- How to be a successful dividend investor