Three Companies Rewarding Shareholders With a Raise

As dividend growth investors we are trying to identify quality companies with an established track record of annual dividend dividend increases, which are growing earnings, have sustainable dividends, and are available at an attractive valuation. If we identify enough such companies to add to our portfolio, we will be able to generate a sufficient stream of income to live off in retirement.

I identify such companies as part of my screening process, and as part of my monitoring process.

As part of my monitoring process, I review the list of dividend increases every week. I go through this exercise, in order to check if the companies I own are going to pay me more for owning them. I also use it to uncover hidden dividend gems for further research. Most importantly, this exercise is helpful as an educational tool, used best to reiterate what we are really looking for as investors.

The companies that recently announced their intention to reward shareholders with a raise include Honeywell International (HON), RPM International (RPM) and Northwest Natural Gas Company (NWN).

RPM International Inc. (RPM) manufactures, markets, and sells specialty chemical products for industrial, specialty, and consumer markets worldwide.The company raised its quarterly dividend by 6.70% to 32 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion.

Over the past decade, RPM International has been able to hike dividends at a rate of 5.60%/year. A $1,000 investment a decade ago, would be generating $57.50/year in dividend income, assuming all dividends were spent and never reinvested.The company has managed to grow its earnings from $1.64/share in 2007 to $2.47/share in 2017. The 2017 figures are adjusted for one-time expenses. RPM International is expected to earn $2.87/share in 2017. Currently, the stock is slightly overpriced at 20.30 times earnings and yields 2.10%. Depending on how conservative you want to be, it may be worth a look below $57/share using projected earnings or on dips below $49/share using last years earnings.

I especially liked the following passage from their latest annual report: Paying a dividend and increasing it annually, which we have done for 43 consecutive years, is a key to the impressive total return we have been able to deliver to our shareholders. Very few companies can boast of such a record. In fact, less than half of one percent of all 19,000 publicly traded companies have paid an increasing cash dividend for this period of time or longer, according to the Mergent Handbook of Dividend Achievers. We last increased the dividend on October 6, 2016, by 9.1 percent to $1.20 per share annually. It is a track record of which we are very proud and intend to continue, rewarding our long-term shareholders for their loyalty.

Honeywell International Inc. (HON) operates as a diversified technology and manufacturing company worldwide. It operates through four segments: Aerospace; Home and Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions.
The company raised its quarterly dividend by 12% to 74.50 cents/share. This marked the 8th consecutive annual dividend increase for this dividend contender.

Over the past decade, Honeywell has been able to hike dividends at a rate of 10.40%/year. A $1,000 investment a decade ago, would be generating $48//year in dividend income, assuming all dividends were spent and never reinvested. The company has managed to grow its earnings from $3.16/share in 2007 to $6.20/share in 2016. Honeywell is expected to earn $7.09/share in 2017. Currently, the stock is slightly overpriced at 20.30 times earnings and yields 2.10%. Depending on how conservative you want to be, it may be worth a look on dips below $142/share using projected earnings or on dips below $124/share using last years earnings.

Northwest Natural Gas Company (NWN) stores and distributes natural gas in the United States. The company operates in two segments, Local Gas Distribution and Gas Storage. The company raised its quarterly dividend by 0.50% to 47.25 cents/share. The current yield is 2.90%. This marked the 62nd consecutive annual dividend increase for this dividend king. Unfortunately, the company's dividend increases are very measly. Over the past decade, it managed to hike them at a rate of 3%/year. A $1,000 investment a decade ago, would be generating $40/year in dividend income, assuming all dividends were spent and never reinvested. However, the rate of dividend growth has been decelerating since from at already low figure over the past 1, 3 and 5 years. Earnings per share declined from $2.76/share in 2007 to $2.12/share in 2016. The company is expected to earn $2.17/share in 2017. In addition, the dividend payout ratio is high at 87%. The lack of earnings growth and the high dividend payout ratio explain the reasons behind the slow rate of annual dividend growth. Dividend increases are running on fumes for Northwest Natural Gas Company. Right now, this stock is overvalued at 29.90 times forward earnings. I would not consider this company right now, because it is overvalued, has a very high dividend payout ratio and has almost no dividend growth.

Relevant Articles:

- Dividend Yield or Dividend Growth:My Experience With Both
- How I Manage to Monitor So Many Companies
- Financial Independence Is Easier to Model with Dividends
- Rising Earnings – The Source of Future Dividend Growth