Eleven Dividend Growth Companies Showering Investors With More Cash

I invest in companies that have a long track record of annual dividend increases. This is usually a result of a strong business model, that is fueled by growth in earnings over time. I try to build a diversified portfolio of dividend growth stocks over time, and try to avoid overpaying for investments.

One of the ways to monitor dividend growth stocks is by checking the dividend increases. A company that has a culture of regularly raising dividends, is very likely to continue raising them. A company with a culture of regular annual dividend increases that reduces dividends is sending a signal that something has changed. Either way, it is important to monitor the fundamental position of the enterprise, in order to determine if dividends are sustainable, and if further dividend growth is probable.

During the month of September, there were several notable dividend growth stocks, which continued their winning streak of delivering higher dividend payments to shareholders. Each of the companies listed below have managed to boost dividends for at least ten consecutive years ( with the sole exception being PMI). The companies include:


McDonald’s Corporation (MCD) operates and franchises McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company raised its quarterly dividend by 5.60% to 94 cents/share. This dividend champion has been raising dividends for 41 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 17.80%/year. The stock is slightly overvalued at 20.70 times expected earnings and yields 3.30%. I view the stock as a hold, as it has been unable to grow earnings per share for the past three years. As I am maxing out my retirement accounts this year, I am essentially spending my taxable dividend income. Otherwise, I would have allocated those dividends elsewhere. Check my analysis of McDonald's for more information.

YUM! Brands, Inc. (YUM) operates fast-food restaurants in four segments: YUM China, the KFC Division, the Pizza Hut Division, and the Taco Bell Division. The company raised its quarterly dividend by 10.90% to 51 cents/share. This dividend achiever has been raising dividends for 13 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 22.90%/year. The stock is slightly overvalued at 24.50 times expected earnings and yields 2.20%. I remain bullish on this holding, mostly due to the potential of emerging markets. I am curious to see how the spin-off of Chinese operations does. As with other spin-offs, I will hold on to it.

Lockheed Martin Corporation (LMT) is a security and aerospace company, that engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company raised its quarterly dividend by 10.30% to $1.82/share. This dividend achiever has been raising dividends for 14 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 19.30%/year. The stock is slightly overvalued at 20.40 times expected earnings and yields 3%. I have been late to the defense contractors party, but never the less I view companies such as Lockheed Martin as solid long-term plays on the ever expanding need for military equipment and services. I would like this company more on dips below 20 times earnings – at 15 times earnings this company would be an even tastier candidate.

Microsoft Corporation (MSFT), a technology company, develops, licenses, and supports software products, services, and devices worldwide. The company raised its quarterly dividend by 8.30% to 39 cents/share. This dividend achiever has been raising dividends for 15 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 15%/year. The stock is fairly valued at 19.90 times expected earnings and yields 2.70%. The company is well run, but would be a better candidate on dips.

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. The company raised its quarterly dividend by 2% to $1.04/share. This dividend stock has been raising dividends for 9 years in a row. The five year rate of dividend hikes is 11.10%/year. The stock is overvalued at 21.60 times expected earnings and yields 4.30%. Given the lack of earnings growth, and the high dividend payout ratio, I do not expect high dividend growth in the near future. Given the high dividend payout ratio however, I am starting to worry a little bit about the sustainability of the dividend ( and this is despite my recent trip to Europe, where everywhere I looked people smoked, and even airports had smoking lounges). Check my analysis of Philip Morris International for more information.

Verizon Communications Inc. (VZ), through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company raised its quarterly dividend by 2.20% to 57.75 cents/share. This dividend achiever has been raising dividends for 12 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 3.30%/year. The stock is fairly valued at 13.40 times expected earnings and yields 4.40%. This is a slow and steady dividend payer, which would likely keep delivering very slow dividend growth over time. Unfortunately, the telecom industry is subject to rapid technological changes, which creates the need to constantly put money in the network. This pressures earnings, and the ability to grow the dividend. For those looking for current income, Verizon should do well for you. Check my analysis of Verizon for more information.

Realty Income Corporation (O) is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. This REIT raised its monthly dividend to 20.20 cents/share. This was an increase of 6% over the dividend paid during the same period last year. This dividend achiever has been raising dividends for 23 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 5%/year. The stock is overvalued at 23.50 times expected FFO/share and yields 3.60%. I have sold out of most of my Realty Income this year, and would only consider getting back somewhere in the mid to high $40s.

W. P. Carey Inc. (WPC) is a real estate investment trust that invests in commercial properties that are generally triple-net leased to single corporate tenants including office, warehouse, industrial, logistics, retail, hotel, R&D, and self-storage properties. This REIT raised its quarterly dividend to 98.50 cents/share. This was an increase of 3.10% over the dividend paid during the same period last year. This dividend achiever has been raising dividends for 19 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 8%/year. The stock is fairly valued at 12.90 times expected FFO/share and yields 6.10%. While I discussed before that pass through entities are at higher risk of dividend cuts in general, I think that W.P. Carey and Realty Income have defensible dividend streams, supported by long-term rental agreements with tenants. Check my analysis of W.P. Carey for more information.

Hingham Institution for Savings (HIFS) provides various financial services to individuals and small businesses. The company raised its quarterly dividend by 6.70% to 32 cents/share. This dividend achiever has been raising dividends for 20 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 4%/year. The stock is a hold at 15.40 times earnings and yields 0.90%. The company is in the habit of paying a special dividend every fourth quarter, which is equivalent to one regular quarterly payment. I bought this stock six years ago, and have done well with it, but would not really consider adding more to the position. The whole continued low interest rate environment have made me realize how little I know about the world (and realize how little everyone else knows too).

Artesian Resources Corporation (ARTNA), provides water, wastewater, and other services on the Delmarva Peninsula. The company raised its quarterly dividend to 22.83 cents/share. This was the second time in the past year that Artesian Resources managed to hike its dividend. The new distribution is 2.80% higher than the dividend paid during the same time last year. This dividend achiever has been raising dividends for 20 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 4.20%/year. The stock is overvalued at 22 times expected earnings and yields 3.20%.

CLARCOR Inc. (CLC) provides filtration products, filtration systems, and services worldwide. The company raised its quarterly dividend by 13.60% to 25 cents/share. This dividend champion has been raising dividends for 33 years in a row. Over the past decade, the company has managed to increase dividends at a rate of 12.20%/year. The stock is slightly overvalued at 25 times expected earnings and yields 1.50%.

Full Disclosure: Long MCD, YUM, LMT, PM, VZ, O, WPC, HIFS

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