Ten Dividend Companies Rewarding Investors With A Raise

As part of my monitoring process, I review the list of dividend increases every week. I use this list to monitor dividend increases for any companies I own, along with any pertinent news. I ause this process in an effort to check the pulse of dividend growth stocks in general, and potentially uncover hidden values.

To come up with the list today, I looked at all dividend increases over the past week.

I tried to narrow the list down to companies that have raised dividends for at least a decade.  I find it helpful to look at companies that have raised dividends for at least a decade, because this period covers a full economic cycle. This criteria also eliminates having to look at companies that achieved this streak of annual increases due to luck. A great company with a sustainable business model should be able to grow dividends for decades – therefore you do not need to buy it at the time it first initiates a dividend.

By focusing on the ten year requirement however, I excluded companies like Blackrock (BLK) from the group to discuss today. Perhaps, if they play their cards right, they will be featured next year.

I also included a short blurb about each company that fit the criteria from above, followed by pertinent information such as longevity of dividend increases and rate of annual dividend growth over the past decade. I find it helpful to review recent increases to the historical rate of dividend growth along. I also find it helpful to check whether the business is growing earnings per share, in order to determine if dividend growth is sustainable or it is running on fumes.

Last, but not least, I include a short evaluation on valuation. I look at P/E, growth in earnings and dividends, in order to come up with a rough idea whether I like a business or not. I believe that valuation is important. I look at the relationship between entry valuation and growth in determining fair value. This is how I determine if a company is worth researching further for my portfolio or not.

Without further ado, the companies that raised dividends over the past week include:


Realty Income (O), The Monthly Dividend Company, is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 5,000 real estate properties owned under long-term lease agreements with regional and national commercial tenants. The REIT hiked its monthly dividend to 21.90 cents/share, which represented a 4% over the dividend paid during the same time last year. Over the past decade, the company has managed to hike those dividends at an annual rate of 4.40%. FFO increased from $1.83/share in 2007 to $2.88/share in 2016. The REIT sells for 18.40 times FFO and yields 5%. This REIT has not been available at a 5% yield for quite some time. It may be worth a second look today.

Fastenal Company (FAST), together with its subsidiaries, engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, and internationally. It offers fasteners, and other industrial and construction supplies primarily under the Fastenal name. The company raised its quarterly dividend by 15.60% to 37 cents/share. This marked the 19th consecutive annual dividend increase for Fastenal. Over the past decade, this dividend achiever has managed to boost distributions to shareholders at an annual rate of 19.30%/year. The company has managed to grow earnings per share from $0.78 in 2007 to $1.73/share in 2016. The company is expected to earn $2.48 for 2017. Currently, the stock is selling for 21.60 times forward earnings and yields 2.80%. I view it as overpriced. If we get fresh fear about Amazon taking over Fastenal and W.W. Grainger’s lunch in 2018, we may see Fastenal in the mid $30s. That may be a good time to take a second look at the company.

A. O. Smith Corporation (AOS) manufactures and markets residential and commercial gas, gas tankless, electric water heaters, and water treatment products in North America, China, Europe, and India. The company's board of directors approved a 29 percent increase in the company's quarterly cash dividend to $0.18 per share. The annual dividend has increased for 25 consecutive years, which makes A.O. Smith a newly minted dividend champion. Over the past decade, the company has managed to grow its dividends at an annual rate of 17%/year. This strong dividend growth was supported by rapid growth in earnings per share over the past decade. A.O. Smith earned $0.47/share in 2007, and managed to grow that to $1.85/share by 2016. The company is expected to earn $2.13/share in 2017. Unfortunately, A.O. Smith is overvalued at 31.50 times forward earnings. A.O. Smith yields 2.10%. The company may be worth a closer look on dips below $42/share.

1st Source Corporation (SRCE) operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services, trust and investment management services, and insurance to individual and business clients. The company raised its quarterly dividend by 10% to 22 cents/share. This dividend champion has rewarded shareholders with a raise for 31 years in a row. The ten year dividend growth rate is 4.10%/year. The company has managed to grow earnings per share from $1.16 in 2007 to $2.22/share in 2016. The company is expected to earn $3.11 for 2018. The stock sells for 17.10 times forward earnings and yields 1.70%. It may be worth a second look on dips below $45/share.

Consolidated Edison, Inc. (ED), through its subsidiaries, engages in regulated electric, gas, and steam delivery businesses in the United States. The company raised its quarterly distribution by 3.60% to 71.50 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to grow its dividend at an annual rate of 1.80%/year. The company has managed to grow earnings per share from $3.47 in 2007 to $4.12/share in 2016. The company is expected to earn $4.09 for 2017. The stock sells for 19.10 times forward earnings and yields 3.70%. Given the slow growth in earnings and dividends per share, I view the stock as a hold at best.

Omega Healthcare Investors (OHI) is a real estate investment trust investing in and providing financing to the long-term care industry. The REIT managed to hike its quarterly distribution to 66 cents/share. The new dividend is 6.45% higher than the dividend paid during the same period last year. This dividend achiever has raised dividends to shareholders for 15 years in a row. Over the past decade, it has managed to hike those distributions at 8.90%/year. FFO has grown from $1.42/share in 2007 to an estimated $3.27/share for 2017. As a result, the stock sells for 8 times FFO. The dividend also appears well covered at an FFO payout ratio of 80.70%.The stock is cheap and yields 10%. Unfortunately, a stock yielding 10% in today’s environment is a telltale sign that the market does not believe the dividend will be maintained. Apparently, the consensus seems to be that the business will have huge headwinds going forward, that warrant a discount. The company’s tenants are skilled nursing facilities, which generate mot of their revenues from Medicare and Medicaid. Some of its tenants are having trouble paying their rent, due to government scrutinizing invoices for reasonableness. I personally hold shares in Omega Healthcare Investors, but have learned from experience that a double digit accidental yield is a sign that the dividend may be in danger.

ONEOK, Inc. (OKE), through its general partner interests in ONEOK Partners, L.P., engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. The company raised its quarterly dividend to 77 cents/share. This is a 25% increase over the dividend paid during the same time last year. ONEOK has rewarded shareholders with a dividend raise for 16 consecutive years. Over the past decade, the company has managed to hike those dividends at an annual rate of 16.10%. The stock yields 5.30%.

The Finish Line, Inc.(FINL) , together with its subsidiaries, operates as a retailer of athletic shoes, apparel, and accessories for men, women, and kids in the United States. The company offers athletic shoes, as well as an assortment of apparel and accessories of Nike, Brand Jordan, Adidas, Under Armor, Puma, and other brands. The company raised its quarterly dividend by 4.50% to 11.50 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has been able to boost its dividend at an annual rate of 24.30%. This dividend growth was achieved by increasing the dividend from a token amount of 3 cents/share to a 45 cents/share. Currently, the stock is selling for 20 times forward earnings and yields 3.50%. Earnings per share over the past decade have been erratic, swinging between gains and losses on a few occasions. In addition, the payout ratio seems high at 70%, and the valuation is at the top of the range I would have been willing to pay for. I am not interested in the company at this time.

Alliant Energy Corporation (LNT) operates as a utility holding company that provides regulated electricity and natural gas services to residential, commercial, industrial, and wholesale customers in the Midwest region of the United States. It operates through three segments: Electric, Gas, and Other. The company raised its quarterly dividend by 6.30% to 33.50 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. The ten year dividend growth is 7.10%/year. Unfortunately, earnings per share fell from $1.89 in 2007 to $1.64/share in 2016. The company is expected to earn $1.95/share in 2017. It looks like dividend growth was achieved merely by expanding the dividend payout ratio. Currently, the stock is trading at 20.20 times forward earnings and yields 3.30%.Given the lack of earnings growth and high valuation, I am not interested in the stock at this time.

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services segments. The partnership increased its quarterly distribution to limited partners to 42.50 cents/unit, which is a 3.70% increase over the distribution paid during the same time last year. The partners have been rewarded with a distribution hike every year over the past 19 years. Over the past decade, EPD has managed to hike distributions at an annual rate of 5.70%/year. The MLP yields 6%. I believe that Enterprise Products Partners is one of the best run midstream MLPs in the US.



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