Ten Dividend Growth Stocks Working Hard For Their Owners

As part of my monitoring process, I review the list of dividend increases every week. This process is helpful in observing how my investments are performing. This process is also helpful in monitoring companies on my watchlist for a potential addition to the portfolio.

I start by focusing my attention on companies that have managed to boost distributions for at least a decade. The next step includes reviewing each company, in order to compare the latest dividend increase against the ten year performance in terms of annual dividend growth. It is helpful to see if a company is accelerating or decelerating its rate of annual dividend growth from year to year.

The next step involves reviewing trends in earnings per share. In an ideal world, we would want earnings and dividends to be rising in tandem. While there will be some differences from a period to period due to one-time items, we want those two indicators to be growing in sync. Otherwise, a growth in dividends that is not supported by growth in earnings per share would show the investor that the dividend streak may be in jeopardy. Reviewing the payout ratio is helpful, in order to determine dividend safety. I review the payout ratio as an absolute number, and also by reviewing ten year trends in this ratio.

The last step to consider involves looking at valuation. I believe that even the best company in the world is not worth overpaying for. You want to have an adequate margin of safety when investing in a solid blue chip dividend payer.

The companies that raised dividends last week include:



Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices & Diagnostics. The Board of Directors approved a 7.10% increase in the quarterly dividend to 90 cents /share. This action marked the 56th consecutive year of annual dividend increases for this dividend king. The annual dividend payment has increased by 7.40% per year over the past decade. The company has managed to deliver 4.10% average increase in annual EPS over the past decade, which was slower than the rate of dividend growth. Earnings grew from $3.63/share in 2007 to $5.41/share in 2017 (adjusted for the provisional amount of $4.94/share associated with the recent enactment of tax legislation). The company is expected to earn $8.13/share in 2018. I like Johnson & Johnson, and believe that this is a great company to own for my portfolio. It is attractively valued at 15.80 times forward earnings and yields a safe 2.80%. If I didn’t own so much Johnson & Johnson stock already, I would probably be adding whenever I have some extra cash on hand. Check my analysis of Johnson & Johnson for more information about the company.

Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas in the United States, Canada/Other Americas, Europe, Africa, Asia, and Australia/Oceania. It operates through Upstream, Downstream, and Chemical segments. The company raised its quarterly dividend by 6.50% to 82 cents/share. This dividend aristocrat has increased its annual dividend payment to shareholders for 36 consecutive years. The company has managed to hike annual dividends by 8.40%/year over the past decade. Exxon’s earnings declined over the past decade, from $7.26/share in 2007 to $4.63/share in 2017. The company is expected to earn $4.77/share in 2018. The stock sells for 16.30 times forward earnings and yields 4.10%. While rising oil prices could lead to higher earnings per share and better dividend coverage, I am unsure where oil prices will go from here. I believe that the company is well managed, and that it will maintain the dividend through most adverse conditions in the market. However, the lack of earnings growth makes it a hold for me.

W.W. Grainger, Inc. (GWW) distributes maintenance, repair, and operating supplies; and other related products and services that are used by businesses and institutions in the United States, Canada, Europe, Asia, and Latin America. The company raised its quarterly dividend by 6.30% to $1.36/share. Grainger is a dividend aristocrat, which has delivered 47 consecutive years of increased dividends. The company has managed to hike annual dividends by 14.20%/year over the past decade. The company grew earnings per share by 7.40%/year over the past decade, from $4.91/share in 2007 to $10.02/share in 2017. The company is expected to earn $14.78/share in 2018. The stock is close to fully valued at 19.20 times forward earnings and a dividend yield of 2%. I believe that W.W. Grainger is a hold at current valuations. It may be worth a second look on dips below $200/share ( 20 times 2017 earnings)

International Business Machines Corporation (IBM) operates as an integrated technology and services company worldwide. The company raised its quarterly dividend by 4.20% to $1.57/share. This is the 23rd year in a row that IBM has increased its quarterly cash dividend. The company has managed to hike annual dividends by 14.70%/year over the past decade. The company grew earnings per share by 5.30%/year over the past decade, from $7.15/share in 2007 to $11.98/share in 2017 (the 2017 figures have been adjusted for the one-time charge of $5.84/share associated with the enactment of U.S. tax reform). The company is expected to earn $13.83/share in 2018. This dividend achiever is cheap at 10.60 times forward earnings and yields a safe 4.30%. While everyone seems to be hating Big Blue at the moment, it could deliver good returns to shareholders and growing dividends from this low valuation point.

The Travelers Companies, Inc. (TRV), provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance. Travelers raised its quarterly dividend by 6.90% to 77 cents/share, marking 14 consecutive years of dividend increases for this dividend achiever. The company has managed to hike annual dividends by 9.60%/year over the past decade. The company grew earnings per share by 0.70%/year over the past decade, from $6.85/share in 2007 to $7.33/share in 2017. Readers have to be aware that Property & Casualty insurance is a very cyclical business, which is why the highs and lows do not line up perfectly in an upward moving pattern over a predetermined time frame such as a decade. The company is expected to earn $10.64/share in 2018. The stock is fairly valued at 12.50 times forward earnings and yields 2.30%. I believe that Travelers is a decent idea for long-term dividend investors, which will reward with good dividend growth over time and dependable dividend payments. Check my analysis of Travelers Companies for more information about the stock.

Costco Wholesale Corporation (COST) operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. The company raised its quarterly dividend by 14% to 57 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. The company has managed to hike annual dividends by 13.20%/year over the past decade. The company grew earnings per share by 9.90%/year over the past decade, from $2.37/share in 2007 to $6.08/share in 2017. Analysts expect Costco to earn $7.02/share in 2018. Unfortunately, this otherwise great company is overvalued at 28 times forward earnings and yields 1.20%. Costco is perennially overvalued, and has not been available for 20 times earnings for a long period of time. If it is available at $140 or lower, it may be a good entry for a small starter position in the company.

UGI Corporation (UGI) distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company raised its quarterly dividend by 4% to 26 cents/share. This marked the 31st consecutive year of increasing UGI’s dividend. The company has managed to hike annual dividends by 7.30%/year over the past decade. The company grew earnings per share by 6.90%/year over the past decade, from $1.26/share in 2007 to $2.46/share in 2017. UGI Corporation is expected to earn $2.64/share in 2018. This dividend aristocrat sells for 18.40 times forward earnings and yields 2.20%. I think that I should place it on my list for further research, because I like the earnings growth over the past decade. I am not very excited about the valuation, and the recent low dividend hike that is lower than the ten year average however.

Franklin Electric Co. Inc. (FELE) designs, manufactures, and distributes water and fuel pumping systems worldwide. It operates in three segments: Water Systems, Fuelig Systems, and Distribution. The company raised its quarterly dividend by 11.60% to 12 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion. The company has managed to hike annual dividends by 6%/year over the past decade. The company grew earnings per share by 10.30%/year over the past decade, from $0.62/share in 2007 to $1.65/share in 2017. The company is expected to earn $2.23/share in 2018. The stock sells at 18 times forward earnings and yields 1.10%. I like the growth in earnings and dividends, but I would like a better entry price of $33/share for a starter position in Franklin Electric. This is equivalent to 20 times FY 2017 earnings.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. Ameriprise operates in five segments – Advice & Wealth Management, Asset Management, Annuities, Protection and Corporate & Other. The company raised its quarterly dividend by 8.40% to 90 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. The company has managed to hike annual dividends by 19.20%/year over the past decade. The company grew earnings per share by 10.80%/year over the past decade, from $3.39/share in 2007 to $9.44/share in 2017. The stock sells for 15 times earnings and yields 2.50%. I find Ameriprise Financial to be attractively valued at the moment.

TransCanada Corporation (TRP) operates as an energy infrastructure company in North America. It operates through Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines, and Energy segments. The company raised its quarterly dividend by 10.40% to 69 cents/share (Canadian). This marked the 18th consecutive annual dividend increase for this international dividend achiever. The company has managed to hike annual dividends by 6.70%/year over the past decade. The company grew earnings per share by 4.10%/year over the past decade, from CAD$2.31/share in 2007 to CAD$3.43/share in 2017. The stock is selling for 15.90 times earnings and yields 5%. I believe that this company could be worth a second look for retirees looking for high current income today. If you are a US investor, you can avoid the 15% withholding tax on Canadian dividends by owning shares through an IRA.

Relevant Articles:

- How to determine if your dividends are safe
- Travelers Companies (TRV) Dividend Stock Analysis
- Johnson & Johnson: My Favorite Dividend King For Reliable Dividend Growth And Income
- How to value dividend stocks