As part of my monitoring process, I review the list of dividend increases every week. I typically focus on the companies that have at least a ten year streak of annual dividend increases. I then dig further by reviewing the trends in fundamentals over the past decade, in order to determine how safe is the dividend and whether the company is growing dividends on borrowed time. This occurs when management is expanding the dividend payout ratio, as it grows the dividend faster than earnings. In general, we want earnings and dividends to grow in lockstep. I also review valuation as part of my process. When I read the press releases announcing dividend increases, I also like to note what management says about rewarding shareholders with their excess cash. For the companies, whose executives were proud in discussing their dividend increases, I added a short citation.
The companies that raised dividends last week, that also met my criteria for inclusion for this article include:
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’s Board of Directors approved a cash dividend of $0.25 per common share, up 31.58% from the $0.19 per common share declared a year ago, and up 4.17% from the $0.24 per common share in the prior quarter. 1st Source Corporation is a dividend champion which has a 31 year streak of consecutive annual dividend increases. Over the past decade, the company has managed to grow annual dividends by 4.10%/year.
The company managed to grow earnings per share between 2008 and 2017 from $1.25 to $2.60. Analysts expect 2018 earnings to hit $3.31/share.
Currently, the stock is fairly valued at 17.40 times forward earnings and yields 1.70%.
PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials in the United States and internationally. It operates through Performance Coatings and Industrial Coatings segments. Last week, the company raised its quarterly dividend by 6.70% to 48 cents/share. The company has raised its annual dividend payout for 46 consecutive years and paid uninterrupted annual dividends since 1899.
“This 7-percent increase in our per-share quarterly dividend is a reflection of the strong cash generation of our business portfolio and reaffirms our commitment to reward our shareholders with sustainable dividend increases,” said Vince Morales, PPG senior vice president and chief financial officer.
In the past decade, PPG Industries has managed to increase annual dividends at a rate of 5.20%/year. Earnings grew from $1.63/share in 2008 to $5.31/share in 2017. This dividend champion is expected to earn $6.31/share in 2018.
The stock is attractively valued at 16.60 times forward earnings and yields 1.80%.
Stanley Black & Decker, Inc. (SWK) provides tools and storage, engineered fastening and infrastructure, and security solutions worldwide. The company raised its quarterly dividend by 4.80% to 66 cents/share. This marks the 51st consecutive annual dividend increase for this dividend king. This is slower than the ten year dividend growth rate of 7.10%/annum.
Stanley Black & Decker's President and CEO, James M. Loree, commented, "A strong and growing dividend reflects the continued cash generation potential of the company and is a key element of our shareholder value proposition. I am pleased to continue this trend of consecutive increases, which maintains our compelling dividend payout."
Between 2008 and 2017, the company grew earnings per share from $2.74 to $8.04. The company is expected to generate $8.38/share in 2018.
Right now, the stocks is attractively valued at 17.20 times forward earnings and yields 2.20%.
National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long-term, net leases. As of March 31, 2018, the company owned 2,800 properties in 48 states with a gross leasable area of approximately 29.1 million square feet and with a weighted average remaining lease term of 11.4 years.
The real estate investment trust raised its quarterly dividend by 5.30% to 50 cents/share. This marks the 29th consecutive annual dividend increase for this dividend aristocrat. The latest increase is higher than the ten year average of 2.90%/annum.
The REIT grew FFO/share from 1.91 in 2008 to $2.40 in 2017.
Currently, the REIT sells for 18.6 times FFO and yields 4.50%.
AptarGroup, Inc. (ATR) provides a range of packaging, dispensing, and sealing solutions, primarily for the beauty, personal care, home care, prescription drug, consumer health care, injectable, and food and beverage markets. The company operates in three segments: Beauty + Home, Pharma, and Food + Beverage. AptarGroup raised its quarterly dividend by 6.25% to 34 cents/share.
Stephan Tanda, President and CEO, commented, “Our dividend is an element of our balanced capital allocation strategy and with our strong balance sheet and confidence in our future, we are returning value to our shareholders with this increased dividend. This year will mark our 25th consecutive year of paying a higher annual dividend than was paid in the previous year.”
Over the past decade, this newly minted dividend champion has managed to boost distributions at an annual rate of 9.90%/year.
The company managed to grow earnings per share from $2.18 in 2008 to $3.41 in 2017. AptarGroup is expected to earn $3.79/share in 2018.
Currently, the stock is overvalued at 25.30 times forward earnings. The current dividend yield is 1.40%.
Unum Group (UNM) provides financial protection benefit solutions in the United States, the United Kingdom, and internationally. It operates through Unum US, Unum UK, Colonial Life, and Closed Block segments. The company raised its quarterly dividend by 13% to 26 cents/share. This marked the 10th consecutive annual dividend increase for this newly minted dividend contender. The company has managed to grow dividends at an annual rate of 11.10%/year over the past decade. Between 2008 and 2017, Unum managed to boost its earnings per share from $1.62 to $4.37. Analysts expect Unum Group to earn $5.08/share in 2018. Right now the stock is attractively valued at 7.50 times forward earnings and yields 2.70%.
Ryder System, Inc. (R) provides transportation and supply chain management solutions worldwide. The company operates through three segments: Fleet Management Solutions (FMS), Dedicated Transportation Solutions (DTS), and Supply Chain Solutions (SCS). The company raised its quarterly dividend by 3.80% to 54 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. This is also the second dividend increase this year, after the company raised its distribution by 13% in February 2018. The company has managed to grow dividends at an annual rate of 7.90%/year over the past decade. The company earned $4.51/share in 2008, and managed to grow them slightly to $4.12/share in 2017 (excluding the one-time benefit from the 2017 tax reform). Analysts expect Ryder to earn $5.60/share in 2018. The stock looks cheap at 13.50 times forward earnings and yields 2.90%. Given the flat trend in earnings per share over the past decade, I am going to give the company a pass.
Relevant Articles:
- Dividend Champions List For June 2018
- Dividend Achievers Offer Income Growth and Capital Appreciation
- Five Companies Committed to Increasing Returns To Shareholders
- Three Dividend Growth Stocks Rewarding Shareholders With A Raise