Twelve Dividend Growth Stocks Rewarding Shareholders With Raises

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

Over the past week, there were 34 companies that announced dividend increases. Twelve of those companies have managed to increase dividends for at least 10 years in a row. I usually focus on the companies that have managed to increase annual dividends for at least ten consecutive years. The companies that have raised dividends over the past week, and also have managed to increase dividends for at least ten years in a row are listed below.

The companies include:

This list is not a recommendation to buy or sell stocks. It is simply a list of companies that raised dividends last week. The companies listed have managed to grow dividends for at least ten years in a row.

The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.

This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.

Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.

Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.

Relevant Articles:

- 26 Dividend Growth Stocks Raising Dividends Last Week

- Three Dividend Growth Companies Raising Distributions Last Week

- Eight Dividend Growth Companies Rewarding Shareholders With Raises Last Week

- Five Dividend Growth Companies Raising Dividends Last Week

Living Off Dividends in Retirement vs Selling Stock

As a dividend growth investor, I invest with the end goal in mind.

My goal, from the very beginning of my journey, has been to generate a certain amount of target dividend income per year. Dividend income is more stable, reliable and easier to forecast than share prices. That's because share prices are much more volatile than dividends. Dividends are correlated with company cashflows in the short-run and long-runs, and those cashflows are much less volatile than Mr. Market's opinion of the value of those cashflows. Dividends are the only direct link between a company's financial performance and the investor. 

Share prices on the other hand represent the collective opinion of market participants, who may bid prices above any reasonable estimate of intrinsic value if they are excited about the company OR sell them off below any reasonable estimate of intrinsic value if they are gloomy about the company. Share prices tend to fluctuate much more than company cashflows. This is why even a well known company like Apple can sell at a wide range of valuation multiples, like 15 to 35 times earnings, over the course of an year.

It's much easier to forecast the dividend that a company would pay in a given year, than the share price at which it would sell over the course of a given year. For example, for a company like Apple computer, it is much easier to forecast that it would pay at least $1/share in dividends. But it's impossible to tell if the stock price would go above $230 or below $130.

Those share price fluctuations don't matter as much in the accumulation phase. However, this really matters when you get closer to your estimated retirement date and even more important when one is retired. That's because if you have to sell shares to fund your lifestyle, you are now exposing yourself to short-term price fluctuations. You are essentially betting that your portfolio will generate enough gains in the short term, year in and year out, so that you do not run out of money in retirement. You are also exposed to fluctuations, and sequence of returns risk. This basically means that your retirement outcomes will be greatly influenced if you have to sell stock when prices are low, to their potential detriment. If you are lucky, and share prices only go up however, it would be smooth sailing for you. 

To paraphrase the movie "Dirty Harry", Are you feeling lucky, punk?

If I have a diversified portfolio that generates $60,000 in annual dividend income per year, I can be reasonably certain that I would generate at least that much in the next few years. It's very likely that this portflio would generate dividend income that grows above the rate of inflation actually. That portfolio would likely have to be invested in blue chip dividend growth companies, in the dividend aristocrats, dividend champions, dividend achievers types.

If the investor needs $60,000 in annual dividend income in retirement, they are set for life. Getting there is simple, and is the end result of how much you invest, what returns you generate (dividend yield + dividend growth) and how long you invest for. For each $1,000 that you invest, you are essentially buying income. In general, depending on the yield/growth trade-off you are willing to make, you can generate probably $20 in a higher dividend growth/but lower dividend yield portfolio. Or you can generate say $30 in a medium yield/medium growth portfolio tilt. I wouldn't chase yield at this time, but it is also possible to generate $40 in a higher yield but lower growth portfolio. For the purposes of this exercise, let's assume that you can generate $30 in dividends for each $1,000 you invest.

In the accumulation phase, that dividend income gets reinvested, and those dividends increase. You also keep buying more future income, and you build that portfolio out, brick by brick.

That dividend income keeps growing, slowly at first, and then the snowball really accelerates. The neat thing about that total dividend income is that it is more stable than prices. So that dividend income keeps marching forward, year in, and year out, assuming of course diversified portfolio that is not concentrated in a single sector or two. Or even worse, concentrated in less than 20 companies. So it is important to be diversified, holding a lot of individual dividend growth companies, representative of as many sectors that make sense at the right entry price.Then to hold.

The neat thing about US dividends is that they rarely decrease. At least in the past 80 years or so, dividend income has rarely decreased for diversified US portfolios. The only exception was in 2008, when the US economy was on its knees, during the Global Financial Crisis. Even then, when those dividends fell by 20% top to bottom from 2007 to 2009, share prices fell by 60%.

So you can easily see the projected dividend rise, until it reaches the dividend crossover point. That's the point at which dividends pay your expenses. Since dividends are more stable and predictable than share prices, you know exactly where you are on your journey, during your journey. You also know exactly when you can retire. So if you retire when you reach your dividend crossover point, you are more certain that you would receive your target dividend income from your diversified dividend portfolio. Than if you were to rely on forecasting prices and selling at the right price.

On the other hand, that portfolio could be valued at any range at the marketplace. If could be priced at say $3 Million in a bull market (2% yield) or could be worth say $1.50 Million in a bear market (4% yield).

If you were reliant on share prices, you may be in for a little bit of a surprise. For example, assume you owned a portfolio and planned on selling shares to fund your lifestyle. You plan to sell 3% of your initial portfolio value, and then sell enough stock to pay expenses and increase that by rate of inflation.

That's all fine and dandy, but now you are reliant on short-term share price fluctuations for your retirement.

Of course, most people today are told that the 4% rule is safe. The 4% rule basically states that you determine how much money you have, and then you can sell an amount equal to 4% of the initial portfolio value, and also increase that with inflation. So if you retired with $1 Million in 1999, you plan to spend $40,000 in 2000, and a little more than $40,000 in 2001 (by adding inflation), etc.

If you were unlucky enough to retire at the end of 1999 on something like S&P 500, you would not have done so well (versus Dividend Aristocrats). That's mostly because stocks were very overvalued at the end of 1999, dividend yields on S&P 500 were very low so you were exposed to share price declines/sequence of returns risk. And worst of all, stock prices went nowhere for a decade, coupled with two gutwrenching 50%+ bear markets. 

Someone who retired with $1 Million at the end of 1999 in S&P 500, using the 4% rule, would have $330,000 by the end of 2023. Someone who retired with $1 Million at the end of 1999 in Dividend Aristocrats, using the 4% rule, would have over $5.25 Million by end of 2023.

What happens if share prices decrease and or forget to increase? In the past 15 years, we've only seen a bull market. However during the preceding 10 or 12 years from 2000 - 2012 we saw two large 50% declines, and the share prices largely going nowhere.

Assume now that you retire at the end of the year with $2,000,000. You plan to sell $60,000 worth of stock per year, and increase that amount annually by the rate of inflation. That's great, but by the end of the year, we are in the midst of a bear market. Share prices fall by 25%. Your $2 Million portfolio is now worth $1.5 Million. If you wanted to do a conservative withdrawal rate, you can only sell $45,000 worth of stock. But your expenses are still $60,000/year. So now you cannot retire, and have to work another year.

But somehow the next year brings a continutation of the bear market. Now your portfolio is worth $1 Million. Now your conservative 3% withdrawal would only give you $30,000. But now you actually need $61,800 per year, because of inflation.

Now you can continue waiting to retire for a few more years, until your portfolio value at a 3% withdrawal rate exceeds your expenses. The scenario is discussed is probably influenced by what I saw during the 2000 - 2012 long bear market. 

If that investor had relied on a prudent diversified dividend growth portfolio for their retirement, they would have generated that $60,000 in annual dividend income in year one, then probably enjoyed some dividend growth that exceeded the 3% inflation and continued with their retirement. For as long as you have built that portfolio on a strong base, that's well diversified, and selected good companies at attractive values to hold for the long run, the price fluctuations can be largely ignored.

These are a few thoughts I have based on my experience following investing matters for the past few years, decades etc. 

26 Dividend Growth Stocks Raising Dividends Last Week

I review the list of dividend increases every single week, as part of my monitoring process. A long history of dividend increases is an indication of a quality company with a competitive advantage in its industry. I use the combination of length of streak of consecutive annual dividend increases and dividend increases as part of my toolkit to monitor the breadth of dividend universe. It helps me be on top of existing holdings and potentially identifying companies for furher research.

This is of course an exercise that is in addition to my regular process of scanning the dividend growth investing universe, and monitoring my list. There are a few extra steps involved, such as reviewing trends earnings, dividends, and trying to understand the company. Even a great company is not worth buying however, if it doesn't sell at the right price.

Over the past week, there were 42 dividend increases in the US. I narrowed down the list by focusing only on the companies that raised dividends last week, but also have a ten year track record of consecutive annual dividend increases. The companies are listed below:

This list is not a recommendation to buy or sell stocks. It is simply a list of companies that raised dividends last week. The companies listed have managed to grow dividends for at least ten years in a row.

The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.

This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.

Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.

Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.

Relevant Articles:

- Three Dividend Growth Companies Raising Distributions Last Week

- Eight Dividend Growth Companies Rewarding Shareholders With Raises Last Week

- Five Dividend Growth Companies Raising Dividends Last Week

- Six Dividend Growth Stocks Increasing Dividends Last Week

Bets and Setups

Success in investing is easy to compute. You either make money overall over a certain period of time, or you don't.

If you do make money investing, that's the end result of the aggregate amount of profits (capital gains + dividends) on the winner side, exceeding the aggregate amount of losses on the loser side.

If we continue to break it down further, we may end up with a few more useful statistics.

It is important to understand that not every investment you make will be a successful one. 

However, if your profits on the winners exceed your profits on the losers, you will come out net positive. 

So it is important to understand how many of your positions will be profitable over time, as well as how much you make when right versus how much you lose when you are wrong.

Peter Lynch has also famously said that if you are right on 4 out of 10 investments, you can still generate a good track record. He also noted that when you invest money in a stock, the most you can lose is the amount you invested. The most you can make is roughly unlimited however.

Let's play with some numbers.

Imagine that you are a buy and hold investor. You are right 40% of the time on average.

You invest $1,000 each in 100 companies over the course of your investment career. 

This means that 60 of those companies would likely lose money for you. But 40 of those companies would make money for you.

Now, if you lose $500 per company when you are wrong, that translates into a lifetime loss of $30,000.

This means that your profitable investments need to generate a profit of $750 each on average, just so you can break even. This means that at this percentage of profitable to losing investments (40% Winning), your average gains ($750) have to be 1.5 times the amount of your average losses ($500), just so you can break even. 

It's a fascinating way to think about things. You can feel free to substitute the percentages for winning investments versus percentages for losing investments, along with the amount of dollars you make per winning investment versus amounts you lose with losing investments.

When you have the data, you can try to play more with the numbers, in order to see if you can improve your overall chances of making money.

For example, if you manage to reduce the impact of losses, your overall lifetime gains will improve. If you also manage to improve your winning percentage, your overall lifetime gains will improve. If you manage to maximize your average impact of gains, your overall lifetime gains will improve.

This of course is a lifetime calculation, but to keep it simple I ignored inflation, taxes etc. Mostly because we are discussing a basic concept, and do not want to dillute things further with more data that won't add much more to the original concept.

In the above example, we determined that each profitable investments need to generate a profit of $750 each on average, just so you can break even. 

However, if you are in the habit of simply selling when your investment doubles, your $1,000 investment turns to $2,000 and is cashed in (on the 40 investments you made). Hence, your overall profit is $1,000 times 40 minus $500 times 60 for a net overall lifetime profit of $10,000.

That's great on paper. But then we get the next logical question. What if you don't simply sell when your initial investment doubles.

I believe that for a long-term strategy, it is imperative that you let your winners run for as long as possible. The distribution of outcomes will vary. Some companies would really succeed, and pull up the average profit. Those tails will drive results.

If you let winners run, versus locking in a quick profit, you improve your chances of making more money. If letting winners run results in an average profit of say $1,250, that improves overall profitability.

In addition, if you manage to cut losses, you may also improve overall profitability. 

It's helpful to think through those scenarios, not because of precision, but because they make ask yourself to understand your strategy better. And hopefully improve from there.

For example, a long-term buy and hold strategy would not have a high percentage of investments that are right. Let's assume it is 40%, though it could be lower too. This is why you need to work to minimize losses when you are wrong, as much as possible. But it is really imperative that you simply hold for as long as possible, and milk this for as long as possible, in order to stand the maximum chance of maximum profit.

This to me is what thinking like a business owner feels like, when it comes to investing.

I went through all of those numbers and scenarios to essentially get to Set-Ups. 

A set-up is a combination of factors, or reason to invest, that lead to you taking an investment.

My setup, aka my entry criteria for dividend stocks looks like something like this:

1. A long track record of annual dividend increases

2. Earnings growth over the past decade

3. Dividend growth over the past decade

4. A payout ratio that stays in a range, and is not too high

5. A valuation that is not too excessive

This is a high level overview. If we really get into the details, you'd see I think more about trade-offs between yield and growth, interest rates and valutions, how cyclical a company's earnings stream is, as well as whether to add to an existing company versus a new one based on portfolio weights. Valuing companies is more art than science. Deciding which company to add to on my spectrum of opportunities is another type of art/science connundrum.

But let's get back to set-ups. 

For example, I have determined that if I can buy a company growing at X and a valuation of Y, I can make money. This means that I make money on average, but not every set up or every signal will result in a profit. I do need to manage to overall profits and losses, in order to make money. 

There is less emphasis on each individual company working out, because that outcome is impossible. The emphasis should be instead on the aggregate of those companies working out. This is a smarter and more sustainable approach, as it shifts your mindset from one that is overly concentrated and swings for the fences type, to a more long-term, slow and steady one.

The important thing to remember is while not every set-up will work, overall the strategy would likely work, for as long as one makes more money on winning investments overall than what they lose on losing investments overall. To tie back to the initial discussion, if you end up making 100 investments over your lifetime, each of $1,000.

Then 60% of those investments lose half of their value, you "lost" $30,000. But if the remaining 40% ended up being all tenbaggers, you made $400,000 on the winners. Overall, you made $270,000 profit.

This of course is all hypothetical, but mostly to illustrate the point to take your signals, and not miss them. Do not be discouraged that all investments won't work out, for as long as some do, you should be ok. It's also important to avoid taking "quick profits", but to let winners win for as long as possible. It's important to minimize losses as well. It's also important to monitor portfolio, and try to learn from mistakes and improve continuously and over time. Continuous learning and improvement is how one can improve their odds of success.

Three Dividend Growth Companies Raising Distributions Last Week

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

I typically focus my attention on companies that have managed to grow dividends for at least a decade. I am interested in identifying good companies to acquire at good prices and hold for decades.

The exercise of reviewing dividend increases is a very good quick overview of the process I use to review companies. I look for rising earnings per share, which are the fuel behind future dividend increases. I look for long streaks of annual dividend increases, because that's usually an indicator of a quality business with high ROIC that gushes cashflows. I also look at growth rates in dividends over time, as a gauge to how things are going. 

Over the past week, there were three companies that increased dividends in the US, which also have a ten year track record of annual dividend increases under their belts. The companies include:

Home Bancorp, Inc. (HBCP) operates as the bank holding company for Home Bank, National Association that provides various banking products and services in Louisiana, Mississippi, and Texas.

The company increased quarterly dividends by 4% to $0.26/share. This is the tenth consecutive annual dividend increase for this dividend achiever. The five year annualized dividend growth rate is 7.09%.

Between 2014 and 2023, the company managed to grow earnings from $1.51/share to $5.01/share.

The company is expected to earn $4.15/share in 2024.

The stock sells for 10.80 times forward earnings and yields 2.23%.

Lincoln Electric Holdings, Inc., (LECO) designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide. The company operates through three segments: Americas Welding, International Welding, and The Harris Products Group.

Lincold Electric increased quarterly dividends by 5.60% to $0.75/share. This is the 30th consecutive annual dividend increase for this dividend champion. The five year annualized dividend growth rate is 10.40%.

Between 2014 and 2023, the company managed to grow earnings from $3.22/share to $9.51/share.

The company is expected to earn $8.80/share in 2024.

The stock sells for 23.10 times forward earnings and yields 1.48%. I liked this company in general, but the slowdown in dividend growth rates is giving me second thoughts.

Prosperity Bancshares, Inc. (PB) operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers.

Prosperity Bancshares increased quarterly dividends by 3.60% to $0.58/share. This is the 27th consecutive annual dividend increase for this dividend achiever. The five year annualized dividend growth rate is 8.80%.

Between 2014 and 2023, the company managed to grow earnings from $4.32/share to $4.51/share.

The company is expected to earn $5.03/share in 2024.

The stock sells for 14.50 times forward earnings and yields 3.18%.

Relevant Articles:

- Eight Dividend Growth Companies Rewarding Shareholders With Raises Last Week

- Five Dividend Growth Companies Raising Dividends Last Week

- Six Dividend Growth Stocks Increasing Dividends Last Week

- Six Dividend Growth Stocks Rewarding Shareholders With Raises