Nine Dividend Stocks Rewarding Shareholders With A Raise

As part of my monitoring process, I review the list of dividend increases every week. I try to narrow down this list to a more manageable level, by focusing only on companies which have managed to boost their distributions for at least a decade (with one exception listed below). I also tried to provide a brief summary on each company, citing reasons why I like or dislike at the moment. Regular readers will not be surprised that just because a company has managed to raise dividends for a decade, that doesn’t mean that it is an automatic buy. I try to review the trends in earnings, as well as valuations and dividend sustainability, in order to come up with a quick decision whether a company is worth investigating further for a potential addition to the portfolio. In general, I am looking for a company that grows earnings, grows dividends, has an adequate margin of safety in dividends, and has an attractive valuation.

The companies that boosted distributions to shareholders over the past week that met our criteria above include:

AT&T Inc. (T), which provides telecommunications and digital entertainment services. The company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility, and International. The company raised its quarterly dividend by 2% to 50 cents/share. This marked the 34th consecutive annual dividend increase for this dividend champion. The company has tended to boost its quarterly dividend rate by a penny over the past five years. This is due to the high dividend payout ratio, and the very slow growth in earnings per share. Due to the high yield however, shareholders are happy with any raise they can get. The company managed to boost earnings per share from $1.94 in 2007 to $2.10 in 2016. The company is expected to earn $2.92/share in 2017. AT&T is a popular holding for many retirees looking for current income with its 5.20% dividend yield, which is adequately supported by its 69% forward dividend payout ratio. The intense level of competition is the only thing that has stopped me from owning AT&T. The stock is cheap at 13 times forward earnings and that yield of 5.20%. If the company manages to keep the dividend, it can generate very good returns to shareholders over the next decade. Unfortunately, when companies take on too many acquisitions with debt, they have prioritized debt repayment over dividend growth. Let’s hope that this is not the case for AT&T.


Realty Income (O) is a real estate investment trust, which invests in commercial properties. The REIT owned 4,944 properties at the end of 2016, most of which were single-tenant ones. Realty Income raised its monthly dividend to 21.25 cents/month. The monthly dividend company has the habit of raising the dividend every quarter. Realty Income is a dividend achiever, which has managed to reward shareholders with a growing annual dividend in every single year since going public in 1994. The ten year dividend growth rate is 4.70%/year. The REIT yields 4.50%. Plenty of dividend growth investors love this REIT, because it has delivered FFO growth over the years. Funds from Operations increased from $1.89 in 2007 to $2.88 in 2016. At 20 times FFO however, I find Realty Income to be richly valued, leaving little margin of safety in case anything goes wrong. At a starting yield of 5% however, equivalent to a dip below $51/share, it may be a decent buying opportunity.

WD-40 Company (WDFC) develops and sells maintenance products, and homecare and cleaning products. It offers multi-purpose maintenance products, including aerosol sprays, non-aerosol trigger sprays, and in liquid form under the WD-40 Multi-Use brand for various consumer uses; and specialty maintenance products that comprise penetrants, degreasers, corrosion inhibitors, lubricants, and rust removers under the WD-40 Specialist brand name. The company raised its quarterly dividend by 10.20%, to 54 cents/share. The new yield is 1.80%. This marked the ninth consecutive annual dividend increase for WD-40 Company. Over the past decade, it has managed to boost annual dividends at a rate of 6.70%/year. The company has managed to grow earnings from $1.64/share in 2008 to $3.72/share by 2017. Analysts expect it to earn $3.85/share in 2018. Today, the stock sells for 30.80 times forward earnings. I have been monitoring this quality company for a while, but unfortunately it has been overvalued for quite some time. If WD-40 dips to $77/share or below, it may be worth considering.

Erie Indemnity Company (ERIE) operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. The company raised its quarterly dividend by 7.30% to 84 cents/share. The stock now yields 2.80%. This marked the 28th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost distributions at an annual rate of 7.30%/year. The interesting fact is that Erie has a 1, 3, 5 and 10 year average annual dividend growth rate of 7.30%/year. This company raises dividends like clockwork. Unfortunately, its earnings per share have only grown from $3.43 in 2007 to $4.01 in 2016, and an estimated $3.95 in 2017. As a result, the dividend payout ratio went from reasonable to a rather high 85%. The stock is also overvalued at 29 times forward earnings. I am not interested in Erie at this price.

Graco Inc. (GGG), together with its subsidiaries, designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide. It operates through three segments: Industrial, Process, and Contractor. The company raised its quarterly dividend by 10.40% to 13.25 cents/share. The stock yields 0.40% now. This marked the 21st consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 8.60%/year. Earnings per share rose from $2.17 in 2007 to an estimated $4.40 in 2017. This stock is overvalued at 30 times forward earnings also.

SEI Investments Company (SEIC) provides investment processing, investment management and investment operations solutions. The company raised its quarterly dividend by 7.10% to 30 cents/share. This marked the 27th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 16.30%/year, which is higher than the earnings growth over the past decade. The stock yields 0.85%. The company has been able to grow earnings from $1.28 in 2007 to $2.03 in 2016. It is estimated to earn $2.34/share in 2017. The stock is overvalued at 30 times forward earnings.

Franklin Resources, Inc. (BEN) is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. The company raised its quarterly dividend by 15% to 23 cents/share. This marked the 38th consecutive annual dividend increase for this dividend champion. The ten year dividend growth rate is 16.20%/year. The stock yields 2.10%.The company has been able to grow earnings per share from $2.22 in 2008 to $3.01 in 2017, and is expecting to earn $2.90 in 2018. While the stock spots a low multiple of 15 times forward earnings, I am dissatisfied with the decline in revenues and earnings since the peak in 2014. The company has been hit by outflows in assets under management, which has not boded well for the bottom line. If the underlying business is struggling, I pass up on the dividend growth record, because I believe it is in jeopardy. The lesson is simple – the dividend growth record gets you to my pile for further analysis. However, if the fundamentals are not promising, the business may not go to the consideration pile.

ABM Industries Incorporated (ABM) provides integrated facility solutions in the United States and internationally. The company raised its quarterly dividend by 2.90% to 17.50 cents/share. This marked the 51st consecutive annual dividend increase for this dividend king. The stock yields 1.80%. The ten year dividend growth rate is 4.10%/year. Unfortunately, earnings per share were little changed over the past year, going from $1.04 in 2007 to $1.01 in 2016. At this time, the stock looks overvalued at 37 times earnings, particularly given the lack of earnings growth over the past decade. Most of dividend growth over the past decade was achieved by expanding the dividend payout ratio, which is never sustainable.

CenterPoint Energy, Inc. (CNP) is a public utility holding company. The Company, through its subsidiaries, owns and operates electric transmission and distribution facilities, and natural gas distribution facilities. The company raised its quarterly dividend by 3.70% to 27.75 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 5.60%/year. The stock yields 3.90%. Earnings per share went from $1.17 in 2007 to $1 in 2016, and are projected to reach $1.33/share in 2017. Given the anemic dividend growth, the high forward payout ratio of 83%, and the high valuation of 21.70 times forward earnings, I view this stock as a pass.

Relevant Articles:

- Should I invest in AT&T and Verizon for high dividend income?
- Three REITs Approaching Value Territory
- How to read my weekly dividend increase reports
- Dividend Champions - The Best List for Dividend Investors