For the past several years, I have monitored the weekly breadth of dividend increases. Changes in dividend rates provide a clear indication of what is happening at a business. A company can only afford to increase dividends when top management has a positive outlook for the business for the next two to five years. As a result, the firms listed below are showing that their management is bullish on their operations. In this article, I have highlighted the companies that have managed to regularly raise dividends for at least ten years in a row. Just because a company raises dividends however, that is not an automatic buy signal. Before committing any money in a stock, investors need to analyze it thoroughly, and build their position slowly and only as part of a diversified basket of securities. In the past week, the following dividend paying stocks boosted distributions to shareholders:
Family Dollar Stores, Inc. (FDO) operates a chain of self-service retail discount stores primarily for low- and middle-income consumers in the United States. The company boosted quarterly distributions by 23.80% to 26 cents/share. This dividend champion has consistently raised distributions for 38 years in a row. Over the past decade, the company has managed to boost dividends by 12.70%/year. Currently, the stock trades at 16.40 times/earnings and yields 1.80%.
The company has managed to boost earnings per share from $1.44 in 2003 to $3.61 in 2012. Analysts’ expectations favor in growth in earnings to $3.98/share in 2013 and $4.46/share by 2014. I am very bullish on this company and its long-term prospects. In addition, I find it to be trading at an attractive valuation at the moment. Unfortunately, the current yield has always been low for Family Dollar. The high dividend growth more than compensates for the low yield however. When I first bought Family Dollar in 2008 at $24.99/share, my yield was 2%. Fast forward five years and now my yield on cost is 4.16%. I recently added a half lot to my position in Family Dollar. Check my analysis of Family Dollar.
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company boosted quarterly distributions by 9.70% to 68 cents/share. This dividend champion has consistently raised distributions for 50 years in a row. Over the past decade, the company has managed to boost dividends by 13%/year. Currently, the stock trades at 22.50 times/earnings and yields 2.40%.
The company has managed to boost earnings per share from $2.33 in 2002 to $5.15 in 2012. Analysts’ expectations favor in growth in earnings to $5.73/share in 2013 and $6.34/share by 2014. I like the growth prospects for Colgate-Palmolive, but the valuation is too rich for me. I would consider adding to my position in the company on dips below $109. Check my analysis of Colgate-Palmolive.
General Dynamics Corporation (GD), an aerospace and defense company, provides business aviation; combat vehicles, weapons systems, and munitions; military and commercial shipbuilding; and communications and information technology products and services worldwide. The company boosted quarterly distributions by 9.80% to 56 cents/share. This dividend achiever has consistently raised distributions for 22 years in a row. Over the past decade, the company has managed to boost dividends by 13%/year. Currently, the stock trades at 10.20 times forward earnings and yields 3.30%.
The company has managed to boost earnings per share from $2.28 in 2002 to $6.76 in 2011. Analysts’ expectations favor in growth in earnings to $6.76/share in 2013 and $7.17/share by 2014. While the company boasts an impressive record of earnings and dividend growth, I am skeptical about future growth given the large deficits of the US government, which is a big spender on Defense. However, the low P/E and above average yield make this stock worthy of consideration at current levels, especially in comparison to other dividend paying stocks. Check my analysis of General Dynamics.
Piedmont Natural Gas Company, Inc. (PNY), an energy services company, engages in the distribution of natural gas to residential, commercial, industrial, and power generation customers in portions of North Carolina, South Carolina, and Tennessee. The company boosted quarterly distributions by 3.30% to 31 cents/share. This dividend champion has consistently raised distributions for 35 years in a row. Over the past decade, the company has managed to boost dividends by 4.10%/year. Currently, the stock trades at 20 times/earnings and yields 3.80%.
The company has managed to boost earnings per share from $1.12 in 2003 to $1.67 in 2012. Analysts’ expectations favor in growth in earnings to $1.74/share in 2013 and $1.81/share by 2014. Given the high P/E ratio and the slow dividend growth, I view Piedmont Natural Gas as a hold. Utilities are good for current income, but unfortunately the slow earnings and dividends growth over time make it imperative that investors only enter a position at advantageous prices. The current environment that is characterized by yield hungry investors does not represent such an environment.
MOCON, Inc. (MOCO) develops, manufactures, and markets measurement, analytical, monitoring, and consulting products and services worldwide. The company boosted quarterly distributions by 4.80% to 11 cents/share. This dividend champion has consistently raised distributions for 11 years in a row. Over the past decade, the company has managed to boost dividends by 5.60%/year. Currently, the stock trades at 31.80 times/earnings and yields 1.80%. Given the slow dividend growth and low yield, I do not plan on researching the firm further at this time.
Full Disclosure: Long CL and FDO
Relevant Articles:
- Dividend Investors Should Focus on Valuation, not just dividend yield
- Dividend Champions - The Best List for Dividend Investors
- Pure Dividend Growth Stocks I wish I owned
- Six Exciting Dividend Increases for Long-term income investors