Six Dividend Growth Stocks Working Tirelessly For Their Owners

As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to monitor performance on existing holdings, and also to uncover hidden gems for further research. When I purchase shares in a company at an attractive price, I expect trends in earnings per share and dividends per share to continue into the future. This dividend momentum is a very powerful force, because it can continue for decades, while richly rewarding shareholders with higher dividends and capital appreciation. However, it is also important to keep monitoring those holdings, in order to make sure that the business is still growing, and can afford to pay higher dividends to me.

It is always great to see companies I own continue to reward me with a raise. The amount of organic dividend increases I receive from my investments has always been higher than the raises I receive at work. And that is despite the fact that I have to spend a lot of time in the office, plus the obligatory after-hours commitment to the firm. This is the nice things about dividend growth investing - the companies work very hard for you, so that you don't have to.

In the past week, there were several companies on my watchlist, which raised their dividends to shareholders. With one exception, all of those have managed to reward shareholders with a dividend increase for at least ten years in a row. The exception is a spin-off from a dividend champion which had rewarded shareholders with a raise for over four decades.

The companies include:

Aflac Incorporated (AFL) provides supplemental health and life insurance products. It operates through two segments, Aflac Japan and Aflac U.S. The company raised its quarterly dividend by 4.70% to 45 cents/share. This marked the 35th consecutive annual dividend increase for this dividend champion. Aflac has managed to increase its annual dividend at a rate of 11.70%/year over the past decade. The company managed to grow its earnings from $3.31/share in 2007 to $6.42/share in 2016. Aflac is expected to earn $6.73/share in 2017. Dividend growth has slowed down significantly over the past five years or so, to something like 6.20%/year. The stock is attractively valued at 13 times earnings and yields 2.15%. Aflac is a nice company to own, selling at what appears to be an attractive valuation. However, dividend growth has slowed down in recent years, which shows me that management is not very upbeat about the near term growth picture in earnings. As such, I am going to hold on to my position, but not add more.

Stepan Company (SCL), produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates in three segments: Surfactants, Polymers, and Specialty Products. The company raised its quarterly dividend by 9.80% to 22.50 cents/share. This marked the 50th consecutive annual dividend increase for this newly minted dividend king. The company has managed to boost annual dividends at a rate of 6.90%/year over the past decade. Stepan managed to grow its earnings from 75 cents/share in 2007 to $3.73/share in 2016. The company is expected to earn $4.48/share in 2017. Currently, the stock is slightly overvalued at 21.10 times forward earnings and yields 1.10%. It may be worth to dig into the company and analyze it if it drops below $74/share.

AbbVie Inc. (ABBV) discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company raised its quarterly dividend by 10.90% to 71 cents/share. This is the sixth consecutive dividend increase for Abbvie since it split from legacy Abbott (ABT) in 2013. The company grew earnings per share from $2.65 in 2010 to $3.63 in 2016. Abbvie is expected to earn $5.54/share in 2017. The stock is selling at 25 times earnings and yields 3.10%. Based on forward earnings estimates the stock sells for 16.60 times estimated earnings for 2017, which is attractive. I am glad I kept Abbott and Abbvie after the spin-off in 2013. The one thing that has prevented me from adding to AbbVie is the high reliance on the drug Humira for sales and earnings, particularly as its patent was expiring in the US and internationally. It looks like those expectations of mine were wrong, and competition has been unable to slow down earnings and revenues for Humira, which has been great for Abbvie. That being said, I would like for the company to keep developing new drugs, in order to wean itself from overreliance on one particular product.

V.F. Corporation (VFC) engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products in the Americas, Europe, and the Asia Pacific. It operates through four segments: Outdoor & Action Sports, Jeanswear, Imagewear, and Sportswear. The company raised its quarterly dividend by 9.20% to 46 cents/share. This marked the 45th consecutive annual dividend increase for this dividend champion. Over the past decade, it has managed to grow its annual dividend at a rate of 12.20%/year. The company grew earnings per share from $1.35 in 2007 to $2.78 in 2016. The company is estimated to earn $3.05/share in 2017. Currently, the stock is selling for 23.40 times forward earnings and yields 2.60%. The company, which appeared on my valuation screens for a while in the past two years, may be worth a second look if it dips into $56 - $60/range, or below.

UMB Financial Corporation (UMBF) is a bank holding company, provides various banking and other financial services. It operates through three segments: Bank, Institutional Investment Management, and Asset Servicing. The company raised its quarterly dividend by 7.80% to 27.50 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to grow its annual dividend at a rate of 6.70%/year. The company grew its earnings per share from $1.77 in 2007, to $3.22 in 2016. The company is expected to earn $3.46/share in 2017. Currently, the stock is overvalued at 23.30 times earnings and yields 1.50%. It may be worth a second look if it sells for less than 15 times earnings. I am using a lower P/E ratio than 20, because most financial institutions usually sell at lower P/E in the low 10s.

Cass Information Systems, Inc. (CASS) provides payment and information processing services to manufacturing, distribution, and retail enterprises in the United States. It operates through two segments, Information Services and Banking Services. The company raised its quarterly dividend by 14.80% to 24 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow its annual dividend at a rate of 10.40%/year. The company managed to grow earnings per share from $1.57 in 2007 to $2.15 in 2016. Currently, the stock is overvalued at 30 times earnings and yields 1.50%. It may be worth to take a second look if it ever sells for 20 times forward earnings.

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