I also post these updates on this site to share with you how I quickly evaluate companies and either put them on the list for further research or immediately discard them for the time being. Since our time is limited, we want to focus it on the best opportunities, available at the best prices today, and place the rest of opportunities on hold.
For this weekly review, I focused on the dividend companies whose boards approved a dividend increase over the past week. All of these companies have managed to reward shareholders with an annual raise for at least a decade.
The companies include:
C.H. Robinson Worldwide, Inc. (CHRW), a third party logistics company, provides freight transportation services and logistics solutions to companies in various industries worldwide. The company operates through North American Surface Transportation, Global Forwarding, and Robinson Fresh segments. The company raised its quarterly dividend by 2.20% to 46 cents/share. The new yield is 2.10%. This marked the 20th consecutive annual dividend increase for this dividend achiever. The dividend has grown at an annual rate of 12.80%/year over the past decade. This was supported in earnings per share growth between 2007 and 2016 from $1.86 to $3.59. The company is expected to earn $3.30/share in 2017, which brings the forward dividend payout ratio to 55.80%, which is sustainable. I find the stock to be overvalued at 26 times forward earnings. It may be worth a second look on dips below $66/share.
Ecolab Inc. (ECL) provides water, hygiene, and energy technologies and services for customers worldwide. The company operates in three segments: Global Industrial, Global Institutional, and Global Energy. The company raised its quarterly dividend by 10.80% to 41.50 cents/share. The new yield is 1.20%. This marked the 26th consecutive annual dividend increase for this dividend champion. The dividend has grown at an annual rate of 13.30%/year over the past decade. This was supported in earnings per share growth between 2007 and 2016 from $1.70 to $4.14. The company is expected to earn $4.70/share in 2017, which brings the forward dividend payout ratio to 35.30%, which is sustainable. I find the stock to be overvalued at 28.80 times forward earnings. It may be worth a second look on dips below $94/share. The company has not sold at a P/E of 20 for five years however, so you may need to have a lot of patience.
Edison International (EIX) through its subsidiaries, engages in the generation, transmission, and distribution of electricity in the United States. The company raised its quarterly dividend by 11.10% to 60.50 cents/share. The new yield is 3.40%. This marked the 15th consecutive annual dividend increase for this dividend achiever. The dividend has grown at an annual rate of 5.90%/year over the past decade. This was supported in earnings per share growth between 2007 and 2016 from $3.32 to $3.94. The company is expected to earn $4.32/share in 2017, which brings the forward dividend payout ratio to 56%, which is sustainable. I find the stock to be fairly valued at 16.60 times forward earnings.
The Hanover Insurance Group, Inc. (THG), through its subsidiaries, provides various property and casualty insurance products and services in the United States and internationally. It operates through four segments: Commercial Lines, Personal Lines, Chaucer, and Other. The company raised its quarterly dividend by 8% to 54 cents/share. The new yield is 2%. This marked the 13th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to boost dividends at an annual rate of 20.10%/year. The company’s earnings per share declined between 2007 and 2016 from $4.83 to $3.59. The Hanover Insurance Group is expected to earn $4.59/share in 2017, which brings the forward dividend payout ratio to a sustainable 47%. The property-casualty insurance business is very cyclical, as earnings swing rapidly from year to year. That being said, the valuation does not make sense to me today at 23 times forward earnings. The fact that earnings have not grown, despite buying back a fifth of shares outstanding over the past decade doesn’t excite me either.
Nucor Corporation (NUE) manufactures and sells steel and steel products in the United States and internationally. It operates in three segments: Steel Mills, Steel Products, and Raw Materials. The company raised its quarterly dividend by 0.70% to 38 cents/share. The new yield is 2.60%. This marked the 55th consecutive annual dividend increase for this dividend champion. The dividend has grown at an annual rate of 0.70%/year over the five years. That’s not surprising, given the fact that earnings per share dropped from $4.94 in 2007 to $2.48 in 2016. Nucor is expected to earn $3.70/share in 2017, which brings the forward dividend payout ratio to a dependable 41%. That being said, the cyclical nature of the business and lack of earnings growth make it a hold at best, despite selling at 16 times forward earnings.
Stryker Corporation (SYK) is a medical technology company that operates through three segments: Orthopaedics; MedSurg; and Neurotechnology and Spine. The company announced that its Board of Directors has declared a quarterly dividend of $0.47 per, representing an increase of approximately 11% versus the prior year. The new yield is 1.20%.
“Our financial strength is reflected in the 11% increase in our dividend for 2018 as we continue to execute on our capital allocation strategy,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “With strong organic sales growth and leveraged adjusted earnings gains, we believe we are well positioned to continue to deliver dividend increases in line with our adjusted earnings growth.”
This marked the 25th consecutive annual dividend increase for Stryker. Over the past decade, this dividend champion has managed to boost dividends at an annual rate of 30%/year. The company managed to grow its earnings per share from $2.37 in 2007 to $4.35 in 2016. Forward earnings estimates are at $6.48/share, bringing the forward dividend payout ratio to 29%. The high dividend growth was possible because the company started paying out a larger portion of earnings as dividends ( in other words, they expanded the dividend payout ratio). The stock is a little overvalued at 23.40 times forward earnings. It may be worth a second look on dips below $130/share.
Universal Health Realty Income Trust (UHT) is a REIT which invests in the health care and human service related facilities including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub-acute facilities, surgery centers, childcare centers, and medical office buildings.
It raised its quarterly distribution to 66.50 cents/share, which is a 1.50% increase over the distribution paid during the same time last year. It was also the second distribution hike over the past year. This marked the 31st consecutive annual dividend increase for Universal Health Realty Income Trust. This dividend champion has managed to grow its annual dividend at a rate of 1.50%/year over the past decade. The stock yields 3.60%. %. At FFO of $3.09/share, the REIT is selling for 23.60 times FFO and has an FFO/Payout of 86%. I find the FFO payout to be high and the valuation to be excessive. I used to own UHT, and sold it a few years ago.
WEC Energy Group, Inc. (WEC), through its subsidiaries, generates and distributes electric energy. The company operates through Wisconsin, Illinois, Other States, Electric Transmission, We Power, and Corporate and Other segments. The company raised its quarterly dividend by 6.25% to 55.25 cents/share. The new yield is 3.20%. This marked the 15th consecutive annual dividend increase for this dividend achiever. The dividend has grown at an annual rate of 15.70%/year over the past decade. Earnings per share rose from $1.42 in 2007 to $2.96 in 2016. The company is expected to further grow earnings in 2017 to $3.10/share. At this rate, the forward dividend payout ratio is at 71%, which is high but adequate for a utility company. The stock is selling at 22.20 times forward earnings however, which is a very high multiple for a utility, albeit one with a growing stream of earnings. This company may be worth a look at roughly 16 times forward earnings to me.
W. P. Carey Inc. (WPC) is an independent equity real estate investment trust which 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.
The REIT raised its quarterly distribution to $1.01/share. This REIT is a dividend achiever which has a 20 year record of annual dividend increases. The ten year dividend growth rate is 8.10%/year. W.P. Carey typically raises its distribution every quarter. The stock yields 5.70%. At FFO of $4.86/share, the REIT is selling for 14.60 times FFO and has an FFO/Payout of 83%.While the payout is a little high, the FFO multiple looks attractive today.
Relevant Articles:
- How I Manage to Monitor So Many Companies
- How to value dividend stocks
- How to become a successful dividend investor
- Dividend Champions - The Best List for Dividend Investors
