The 10 largest Dividend Growth Companies in the US

Dividend Growth Companies are businesses that have managed to increase annual dividends for several years in a row. Typically, established dividend growth companies need at least 10 years of annual dividend increases before they could be added to the dividend achievers list. If they have at least a 25 year track record, they are added either to the list of dividend aristocrats (if they are members of S&P 500) or the dividend champions list. Some folks also use a 5 year track record to establish presence in the dividend growth investing universe, believing that they can potentially identify future stars earlier than everyone else.

I wanted to take a look at the ten largest Dividend Growth Companies in the US, in order to look for value. I narrowed the list down to the largest publicly traded companies in the US, which have managed to increase dividends for at least 10 years in a row.

These are well-known, established and highly followed and widely owned companies. If you had bought them a decade ago, you would have locked in good starting valuations, and enjoyed a decade of solid dividend growth and total returns. All of those were driven by growth in earnings per share over the past decade.

The question of course is whether they are worth adding to today. Let's take a look at them:

Frankly, those companies all look expensive to me. Perhaps J.P. Morgan Chase is the one that looks close to fairly valued today, albeit 15 times for a financial and a dividend yield below 2% may be a stretch too.

I love the dividend growth stats for Microsoft, Broadcom, Eli Lilly, Visa, Mastercard and Costco. However, those multiples are pretty steep if you ask me. I would not pay more than 25 forward for these growth stories, in order to get some margin of safety in case growth slows down and to take into consideration the risk I am taking. It is quite possible that a lost decade where P/E multiples shrink could cause low returns, even if growth turns out to be reliable and durable (which it is not always the case). If I start out with a low yield in the first place, I may not be paid much to wait either. Either way, I love those companies and would love to buy/add to them at the right price. 

In the case of Apple, I dislike the high valuation and the slowdown in dividend growth. Plus, the dividend yield is low. Hence if earnings stagnate from here there is low margin of safety and I am not paid much to wait.

Wal-Mart is expensive as well, given their slow dividend growth and low yield. The company is trying to transform its business to better compete with online retailing, which has taken out some capital from dividend growth initiatives. They are starting to crank up dividend growth again, but the valuation is still rich for a large company like that. I would love to buy more at the right valuation.

As for Exxon Mobil, it is optically cheap at a 16 times forward earnings and a dividend yield of 3.67%. This is a company that has paid dividends for decades, and increased them for 42. They didn't cut dividends during the past decade, which was very hard on the energy sector, amidst glut of production, disruptions, and negative prices at one point in 2020. Hence I have a high degree of confidence (as much as you can have confidence of course) that this dividend is important to management and shareholders, and won't be just cut on a whim. However, dividend growth has been very slow in the past decade. The business was not easy in the past decade however, and a lot of competitors ended up cutting or suspending dividends at least once in the past decade. Hence, that slow growth in dividends is actually a win.

Well, there you have it, my opinion on the largest dividend growth companies in the US. Note, they are weighted heavily in several popular dividend growth funds in the US. Unfortunately, those valuations are high, which could weigh on future returns.

The other fun fact to consider is that the ten largest dividend growth companies of 2035 mey turn out to be a list that is much different than this list above.

Just for reference, the ten largest dividend growth companies in 2015 were:

Wal-Mart, Johnson & Johnson, Coca-Cola, PepsiCo, Qualcomm, Exxon Mobil, CVS Health, IBM, 3M and United Technologies.

Either way, the way to succeed is to find good quality dividend growers, but acquire them at a good valuation.

Seven Dividend Growth Stocks Raising Dividends Last Week

I review the list of dividend increases every single week, as part of my monitoring process. This exercise helps me to monitor existing holdings. It also helps me potentially identify companies for further research.

I typically focus my attention on the companies with a ten year track record of annual dividend increases. 

Over the past week, there were seven companies that both raised dividends to shareholders and also have a ten year streak of consecutive annual dividend increases. I have included a short summary behind each company, the raise, and the type of fundamental and valuation information I use to quickly decide if a company should be placed on my list for research or not.

The nine companies are listed below:

Community Financial 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, institutional, and municipal customers. It operates through three segments: Banking, Employee Benefit Services, and All Other. 

The company raised quarterly dividends by 2.2% to $0.47/share. This is the 33rd consecutive year of dividend increases for this dividend champion. The annualized dividend growth rate over the past decade is 4.73%.

The company managed to grow earnings from $2.21/share in 2015 to $3.45/share in 2024.

The company is expected to earn $4.08/share in 2025.

The stock sells at 14.33 times forward earnings and has a dividend yield of 3.15%.

Cummins Inc. (CMI) offers various power solutions worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and Accelera. 

The company raised quarterly dividends by 9.90% to $2/share. This is the 20th consecutive year of dividend increases for this dividend achiever. The annualized dividend growth rate over the past decade is 9.56%.

The company managed to grow earnings from $7.86/share in 2015 to $28.55/share in 2024.

The company is expected to earn $21.05/share in 2025.

The stock sells at 16.54 times forward earnings and has a dividend yield of 2.30%.

Duke Energy Corporation (DUK) operates as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I); and Gas Utilities and Infrastructure (GU&I).

The company raised quarterly dividends by 1.90% to $1.065/share. This is the 21st consecutive annual dividend increase for this dividend achiever. The annualized dividend growth rate over the past decade is 2.77%.

The company managed to grow earnings from $4.06/share in 2015 to $5.70/share in 2024.

The company is expected to earn $6.32/share in 2025.

The stock sells at 18.59 times forward earnings and has a dividend yield of 3.63%.

NNN REIT (NNN) invests in high-quality properties subject generally to long-term, net leases with minimal ongoing capital expenditures. 

This REIT increased the quarterly dividend by 3.40% to $0.60/share. This dividend champion has increased its annual dividend for 36 consecutive years. The annualized dividend growth rate over the past decade is 3.33%.

NNN REIT managed to grow FFO fom $2.22/share in 2015 to $3.32/share in 2024.

The company is expected to generate $3.38/share in FFO in 2025.

The stock sells at 12.64 times forward FFO and has a dividend yield of 5.62%.

PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials in the United States, Canada, the Asia Pacific, Latin America, Europe, the Middle East, and Africa. It operates through three segments: Global Architectural Coatings, Performance Coatings, and Industrial Coatings. 

The company raised quarterly dividends by 4.40% to $0.71/share. This is the 54th consecutive annual dividend increase for this dividend king. The annualized dividend growth rate over the past decade is 7.34%.

The company's earnings went from $5.18/share in 2015 to $4.77/share in 2024.

The company is expected to earn $7.86/share in 2025.

The stock sells at 14.77 times forward earnings and has a dividend yield of 2.34%.

The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. The company operates through four segments: U.S. Retail Coffee, U.S. Retail Frozen Handheld and Spreads, U.S. Retail Pet Foods, and Sweet Baked Snacks.

The company increased the quarterly dividend by 1.90% to $1.10/share. This is the 28th consecutive annual dividend increase for this dividend champion. The annualized dividend growth rate over the past decade is 5.78%.

The company's earnings went from $5.77/share in 2015 to a loss of $11.57/share in 2024, driven by one-time charges.

The company is expected to earn $9.22/share in 2025.

The stock sells at 11.82 times forward earnings and has a dividend yield of 3.97%.

Union Pacific Corporation (UNP) Union Pacific Railroad Company, operates in the railroad business in the United States.

The company announced a 3% dividend increase to the quarterly dividends to $1.38/share. This dividend achiever has managed to increase annual dividends for 19 years in a row. The annualized dividend growth rate over the past decade is 11.33%.

The company's earnings went from $5.51/share in 2015 to $11.10/share in 2024.

The company is expected to earn $11.58/share in 2025.

The stock sells at 19.64 times forward earnings and has a dividend yield of 2.36%.

Relevant Articles:

- Four Dividend Growth Stocks Increasing Dividends Last Week

- Nine Dividend Achiever Banks Raising Dividends After Passing the Fed's Stress Tests

- Three Dividend Growth Companies Raising Dividends Last Week

- Seven Dividend Growth Companies Raising Dividends Last Week

Four Dividend Growth Stocks Increasing Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing companies, and also potentially identify companies for further research.

In my reviews, I focus on companies that have managed to increase dividends for at least ten consecutive years. I also drill down on understanding whether dividend growth was supported by rising earnings per share. In addition, I want to compare the most recent dividend increase to the historical average.

Last but not least, I want to look at valuation. Valuation is part art, part science. It takes into consideration the current P/E, and dividend yield, along with growth in earnings and dividends, and then making an extrapolation about the future.

During the past week, there were four companies that announced increases in their quarterly dividends, which also have a ten year minimum streak of consistent annual dividend increases. The companies include:

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. It operates in four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services.

Enterprise Products Partners raised its quarterly distribution to $0.545/unit. This is a 3.80% increase over the distribution paid during the same time last year. This dividend champion has increased annual distributions to partners since 1998.

Over the past decade, EPD has managed to boost distributions at an annualized rate of 3.73%.

The partnership yields 6.80%. 

Marsh & McLennan Companies, Inc. (MMC) is a professional services company, which provides advisory services and insurance solutions to clients in the areas of risk, strategy, and people worldwide. It operates through Risk and Insurance Services, and Consulting segments. 

The company raised quarterly dividends by 10.40% to $0.90/share. This is the 16th year of consecutive annual dividend increases for this dividend achiever. The company has managed to boost dividends at an annualized rate of 11.28% over the past decade.

Between 2015 and 2024, earnings per share increased from $3.01 to $8.25.

The company is expected to earn $9.58/share in 2025.

The stock sells for 22.40 times forward earnings and yields 1.70%.

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

Ryder raised its quarterly dividends by 12.30% to $0.91/share. This is the 21st consecutive year of dividend increases for this dividend achiever. The company has managed to boost dividends at an annualized rate of 8.15% over the past decade.

Between 2015 and 2024, earnings per share increased from $5.75 to $11.28.

The company is expected to earn $12.88/share in 2025.

The stock sells for 13.70 times forward earnings and yields 1.84%.

Unum Group (UNM) provides financial protection benefit solutions in the United States, the United Kingdom, and Poland. It operates through Unum US, Unum International, Colonial Life, and Closed Block segment.

The company raised quarterly dividends by 9.5% to $0.46/share. This is the 17th consecutive annual dividend increase for this dividend achiever.  The company has managed to boost dividends at an annualized rate of 9.79% over the past decade.

Between 2015 and 2024, earnings per share increased from $3.51 to $9.49.

The company is expected to earn $8.90/share in 2025.

The stock sells for 9 times forward earnings and yields 2.30%.

Relevant Articles:

- Nine Dividend Achiever Banks Raising Dividends After Passing the Fed's Stress Tests

- Three Dividend Growth Companies Raising Dividends Last Week

- Two Dividend Achievers Increasing Dividends Last Week

- Nine Companies Raising Dividends Last Week

Consumer Staples Have Some Value Left

There is some news around the consumer staples, which is a popular bread and butter sector for many dividend growth investors. It looks like the sector has some value, that could be unlocked by private buyers or spin-offs.

Last week, Ferrero Group announced that it will acquire WK Kellogg (KLG) for $23/share.

Back in 2023, Kellogg's split into WK Kellogg (KLG) and Kellanova (K). Kellanova itself is in the process of being acquired by Mars Inc

Today, Kraft Heinz is rumored to be planning to split off its grocery business, from its sauce and spreads business. In effect splitting into a Kraft and a Heinz. That could unlock some value, and potentially get someone else to bid up for those separate companies.

Looks like there is some value left in consumer staple brands after all. Perhaps those deals are a sign that public market valuations are lower than what the intrinsic values to a private buyer would be.

For those who like to play the relative performance game, the consumer staples sector (XLP) has lagged the averages in the past 15 years.

Of course, it really did much better in the lost decade of the 2000s and then some.

Those companies have managed to weather many storms, and succeed in a slow and steady fashion.

It's fascinating to look under the hood on the staples etf. 

The two largest companies, Costco (COST) and Walmart (WMT),  are not what many of us would consider to be a consumer staple. 

These sector classifications are indeed something, arent' they?

There is some untapped value there I think, in the traditional consumer staples space however. These companies can weather storms well, but also deliver returns when things are good too. 

There are some risks to some companies in the sector, though these companies have also been known to manage a ton of risks and obstacles over the decades, and overcome them. 

These strong brands have some pricing power left too, along with some loyal customer following. Yes, consumers are squeezed, and yes there is always the risk of generics and probably other risks as well     ( Ozempic for some). But these companies have also managed to overcome those risks in the past, so perhaps they'd pull another trick from up their sleeves.

There's probably a reason why there are so many consumer staples in the list of the best performing companies over the past half a century or so..

Even an average return can compound to a lot of wealth if left uninterrupted for a long time..

That being said, one should always use the type of logical evaluation of each company, before investing in my opinion. On my end this means requiring a long history of dividend increases, that is supported by growth in earnings per share. I also want an adequate dividend payout ratio as well as a good valuation.  This provides some margin of safety for the diversified dividend growth investor.

Warren Buffett's investment in Coca-Cola

Warren Buffett's investment in Coca-Cola (KO) is really fascinating.

He started buying it in 1988 after the 1987 Stock Market crash.

Buffett built his position in Coca-Cola by the end of 1994, and his average cost is $3.25/share. 

The stock sold for a P/E of 12 - 15 in 1988.

However, it grew EPS from $0.153 in 1987 to $0.495 in 1994 (adj for splits). Then it grew again to $0.82/share in 1997, before hitting a short-term snag.

You can view the trends in earnings per share, share price and dividends between 1984 and 2003

The 1990s were are great time for US multi-national branded companies, as a lot of new markets opened for them. Demand increased as well, while they also maintained pricing power too.

In the meantime, the company's "quality" was re-descovered and investors bid it up to much higher P/E ratios.

In hindsight, one could argue that Warren Buffett should have sold out of Coca-Cola in 1997 - 1998, when it sold at a P/E above 30. 

The problem with this thinking is that it wreaks of hindsight bias. It's easy to see the top, and apply "criteria" after the fact when you have perfect hindsight.

The reality of making such rash decisions in real-time is much more complicated. For example, Coca-Cola stock was equally overvalued in 1991, selling above 30 times earnings as well. If you had sold back then at a high price of $10.22/share, you would have missed out on all the upside from 1991 to 1998, when it reached over $44/share. And not including dividends even. Valuation based timing only works perfectly with the benefit of hindsight, but rarely in real time.

Of course, selling would have also triggered steep corporate taxes of 35% or so. So if they sold at close to the all-time-highs at $43.25/share in 1998, they'd have realized a gain of $40/share. The IRS would have taken away $14/share in taxes. Of course, it is impossible to sell at the very top. It is also impossible to just sell 400 Million shares just like that, which represents a very high percentage ownership of the float. This sale by Buffett would have depressed the share price, so they would have had to sell at a lower price, even if they knew where the top and bottom would be (which is impossible) on top of losing a steep amount of value in taxes on capital gains.

As a corporation, Berkshire Hathaway does not get a preferential tax rate on realized capital gains. They do get a preferential tax rate on dividends, due to the dividends received deduction. 

Because of those taxes, it seems like selling Coca-Cola stock in 1997 - 1998 and investing in a diversified basket of equity investments would have been a moot point (due to the 35% tax on gains, the fact that Buffett's sales would have depressed the stock price and the fact that he would have missed out on all those dividends over the decades).

The best part of course is that Buffett never reinvested those Coca-Cola dividends that were received over the years. I calculate that since 1994, Berkshire has received over $29/share in dividends for Coca-Cola.

Even better is the fact that dividends are taxed at preferential rates for Berkshire Hathaway, because of the dividend received deduction.  Capital gains are taxed at worse tax rates for Berkshire Hathaway than dividends, because Berkshire is a corporation.

That dividend money has been invested at high rates of returns that Buffett has achieved interally into others stocks and businesses. Which means that market timing was not really necessary.

Today, Coca-Cola's growth has slowed down, as the company is expected to earn $2.97/share. But it's not out yet.

The company pays an annual dividend of $2.04/share, which represents an yield on cost of 62.76% for Berkshire. This means that every 18 months, Buffett's holding company gets its original cost back in dividends alone. Dividends are a return on investment and a return of investment.

Plus, at $69.48/share, Buffett is sitting at a nice unrealized gain of $666.23 per share (reminder his cost is $3.25/share)

The nice thing is that since 1994, he has received $29.27 in dividends per each share he owns.

Today, this investment is worth almost $28 Billion and generates $816 million in annual dividends.

That dividend money has been deployed by Buffett into the best opportunities he could find, at the ROI he requires.