As part of my dividend growth plan, I invest in companies which consistently raise dividends. This would hopefully result in financial independence at my dividend crossover point, where dividends exceeds expenses. Before I purchase shares in a dividend paying company, I analyze it thoroughly and try to gauge whether it has what it takes to increase future profits, which are the fuel behind future dividend growth. This is a particularly difficult endeavor, since the environment that we see today would be much more different five, ten, twenty years from now. Nevertheless, I always enjoy when a company I have purchased, continues its streak of regular dividend increases that are fueled by improved operating performance. The rising stream of cold hard cash deposited in my brokerage account validates my investment thesis.
The following dividend stalwarts rewarded their long term investors with higher distributions over the past week:
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company raised quarterly distributions by 18.20% to 47 cents/share. This marked the 39th consecutive annual increase for this dividend champion. Over the past decade, Wal-Mart Stores has managed to boost dividends by 18.10%/year. Wal-Mart is one of the stocks where I want to increase my position, since it is rarely trading at the right yield. Currently, the company is very attractively valued at 14.50 times earnings and yields 2.70%. Average analyst estimates call for EPS of $5.37 in 2013 and $5.94 in 2014. I would consider adding to my position as soon as I have available funds. Check my analysis of the stock for more information.
The Coca-Cola Company (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company raised quarterly distributions by 9.80% to 28 cents/share. This marked the 51st consecutive annual increase for this dividend king. Incidentally, Coca-Cola’s ten year average annual dividend growth rate is 9.80% as well. I recently added to my position in the stock on the weakness last week. Analysts expect EPS to reach $2.14 in 2013 and $2.33 by 2014. Earnings per share increased from 89 cents in 2003 to $1.97 in 2012. Unfortunately, the stock is fully valued at the moment at 19.50 times earnings, although the yield is 2.90%. Check my analysis of the stock for more information.
Kimberly-Clark Corporation (KMB), together with its subsidiaries, engages in manufacturing and marketing health care products worldwide. The company raised quarterly distributions by 9.50% to 81 cents/share. This marked the 41st consecutive annual increase for this dividend champion. Over the past decade, Kimberly-Clark has managed to boost dividends by 9.50%/year. I like the fact that the company has managed to increase earnings from $3.22/share in 2002 to $4.74/share in 2012. I also like forward earnings of $5.59/share in 2014 and $5.98 by 2014. Unfortunately, despite the good current yield of 3.40%, the stock is fully valued at 19.90 times earnings. Check my analysis of the stock for more information.
NextEra Energy, Inc. (NEE), through its subsidiaries, engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. The company raised quarterly distributions by10% to 66 cents/share. This marked the 19th consecutive annual increase for this dividend achiever. The stock is trading at 16 times earnings, and yields 3.60%. I like the ten year dividend growth rate of 7.50%/year. I also like the fact that the company has managed to boost earnings from $2/share in 2002 to $4.56 in 2012. I would initiate a position in the stock in the next few months, subject to availability of funds. Check my analysis of the stock for more details.
Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada, and Mexico. This dividend king extended its long streak of distribution hikes to 57, as it raised quarterly payments by 8.60% to 53.75 cents/share. I have looked at Genuine Parts for a couple of years, but always had other opportunities take priority over this one. The stock is attractive at 17.50 times earnings and yields a sustainable 3.10%. If I have extra cash, I might actually end up initiating a position in this stock in 2013.
Analog Devices, Inc. (ADI) engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits for use in industrial, automotive, consumer, and communication markets worldwide. The company raised quarterly distributions by 13.30% to 34 cents/share. This dividend achiever has raised distributions for 11 years in a row. It is slightly overvalued at 21.30 times earnings right now, although it yields 3%. I like the fact that the company has raised earnings from 0.82/share in 2003 to $2.18/share by 2012. I am very skeptical about technology companies in general, but would give ADI the benefit of the doubt, and thus analyze it in a future article.
Full Disclosure: Long WMT, KO, KMB
Relevant Articles:
- My Dividend Retirement Plan
- Dividend Champions Index – Five Year Total Returns
- The World’s Best Dividend Portfolio
- Warren Buffett’s Dividend Stock Strategy