Twelve Companies Rewarding Shareholders With a Raise

As part of my research, I monitor the list of dividend increases every week. I use this exercise to obtain updates for companies I own. I also use this exercise in order to identify potential ideas for further research. For my blog readers, I use this exercise to show the mental framework I go through, in order to quickly decide if a company is worth researching today, or should be placed on the backburner for now.

Long-time readers know that I look for a ten year streak of annual dividend increases, in order to identify companies that have withstood a decently long test of time. I also like to see companies that are growing their earnings per share. This shows me that these companies have the ability to continue growing that dividend income stream for shareholders.

I like to review the rate of the most recent dividend increase, and compare it to the five or ten year average. I have found that the most recent dividend increase to be a telling sign of how confident management teams are in the near-term prospects of their business. A slowdown in dividend growth gives me some caution. Too rapid growth all of a sudden can be a turning point towards better business conditions.

Last but not least, I also review valuation. Just like investing is part art, part science, so is the valuation piece. Certain companies have low P/E ratios due to the industry they are in, while others have high P/E ratios due to their growth. I hate overpaying for a decade of future growth for companies, which is why I have the guideline to never pay more than 20 times forward earnings for a security. While I may miss on some future gains, I may also miss overpaying dearly for a pumped-up security that fails to deliver to the hype.

The companies that raised dividends last week include:

California Water Service Group (CWT) provides water utility and other related services in California, Washington, New Mexico, and Hawaii. The company raised its quarterly dividend by 5.30% to 19.75 cents/share. This represents the company's 52nd consecutive annual dividend increase. Over the past decade, this dividend king has managed to grow dividends by 2.20%/year. Between 2008 and 2017, this utility managed to grow earnings from 95 cents/share to $1.40/share. The company is expected to earn $1.22/share in 2018. Right now the stock is overvalued at 40 times forward earnings and yields 1.60%.

Chevron Corporation (CVX) engages in integrated energy, chemicals, and petroleum operations worldwide. The company operates in two segments, Upstream and Downstream. The company raised its quarterly dividend by 6.25% to $1.19/share. This increase puts Chevron on track to make 2019 the 32nd consecutive year with an increase in annual dividend payout. Over the past decade, the company has managed to boost dividends at a rate of 6.70%/year. Earnings per share decreased from $11.67 in 2008 to $4.85/share in 2017. The company is expected to generate $7.88/share in 2018. This dividend champion looks fairly valued at 15 times forward earnings and yields 4%. The main reason I am not so happy about energy companies in general is the lack of earnings growth over the past decade. Of course, if oil prices grow over the next decade, earnings per share will follow and we will have a nice dividend paid to hold on to the shares. Cyclical companies are notoriously difficult to analyze, because their earnings look best when we are close to the top of the economic cycle; their earnings look worst when we are close to the bottom of the economic cycle.

First Interstate BancSystem, Inc. (FIBK) operates as the bank holding company for First Interstate Bank that provides range of banking products and services in the United States. The company raised its dividends by 10.70% to 31 cents/share. This marked the tenth year of consecutive annual dividend increases for this dividend achiever. Over the past five years, the bank has been able to grow dividends at a rate of 14.90%/year. The company’s earnings went from $2.10/share in 2008 to $2.05/share in 2017. First Interstate BancSystem is expected to earn $2.82/share in 2018. The stock looks attractively valued at 13.90 times forward earnings and yields 3.20%. This bank may be worth adding to my list for further review.

Landmark Bancorp, Inc. (LARK) operates as the bank holding company for Landmark National Bank that provides various financial and banking services. The company raised its quarterly dividend by 5% to 20 cents/share. This marked the 18th year of annual dividend increases for this dividend achiever. Over the past decade, this company has been able to grow distributions by 5%/year. Landmark Bancorp managed to grow earnings from $1.16/share in 2008 to $2.39/share in 2018. The stock is attractively valued at 9.70 times earnings and yields 3.40%. I will add the stock to my list for further research.

MarketAxess Holdings Inc. (MKTX) operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. The company raised its quarterly dividend by 21.40% to 51 cents/share. This marked the 11th year of annual dividend increases for this dividend achiever. Over the past five years, MarketAxess has been able to grow dividends by 24.60%/year. The company just announced that it earned $4.57/share in 2018. This is a big step up from the 30 cents/share it earned in 2007. The stock is richly valued at 46.70 times forward earnings and yields 1%. This is definitely the type of company that can generate outstanding returns over time – however it is often richly valued.

S&P Global Inc. (SPGI) provides independent ratings, benchmarks, analytics, and data to the capital and commodity markets worldwide. It operates through three segments: Ratings, Market and Commodities Intelligence, and S&P Dow Jones Indices.  The company raised its quarterly dividend by 14% to 57 cents/share.

"Increasing the dividend demonstrates our confidence and optimism in the continued strength of our cash flow generation and financial position," said Douglas L. Peterson, President and CEO of S&P Global. "Returning cash to shareholders remains a cornerstone of our shareholder value proposition. In 2018, we returned $2.2 billion to shareholders in the form of dividends and share repurchases."

S&P Global has paid a dividend each year since 1937 and is one of fewer than 25 companies in the S&P 500 that has increased its dividend annually for at least the last 46 years. It is a member of the Dividend Aristocrats Index.

In the past decade, it has been able to grow dividends by 7.20%/year. S&P Global managed to grow its earnings from $2.51/share in 2008 to $5.78/share in 2017. The company is expected to earn $8.47/share in 2018. Right now the stock is overvalued at 22.90 times forward earnings and yields 1.20%. S&P Global may be worth a look below $170/share.

Bank of Marin Bancorp (BMRC) operates as the holding company for Bank of Marin that provides a range of financial services primarily to professionals, small and middle-market businesses, individuals, and not-for-profit organizations in California, the United States. The company raised its quarterly dividend by 8.60% to 19 cents/share. This marked the 15th year of annual dividend increases for this dividend achiever. Over the past decade, the bank has been able to boost dividends at an annual rate of 8.20%. This was supported by growth in earnings per share between 2008 and 2018 from $1.16 to $2.33. The stock is selling for 18.80 times earnings, which is a little high for a bank holding company. The stock yields 1.80%. The underlying company is doing well, but the stock may be a better deal on weakness.

SJW Group (SJW) provides water utility services in the United States. It engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. The company raised its quarterly dividend by 7.10% to 30 cents/share. This was the 51st year of annual dividend increases for this dividend king. Over the past decade, the company has managed to boost its dividend at a rate of 3.70%/year. SJW Group managed to grow earnings from 65 cents/share in 2008 to 87 cents/share in 2017. The company is expected to earn $2.01/share in 2018. The stock is overvalued at 29.40 times forward earnings and yields 2%.

Commerce Bancshares, Inc. (CBSH) operates as the holding company for Commerce Bank that provides retail, mortgage banking, corporate, investment, trust, and asset management products and services to individuals and businesses. It operates through three segments: Consumer, Commercial, and Wealth. Commerce Bancshares boosted its quarterly dividend by 10.60% to 26 cents/share. This increase marks the 51st consecutive year that the Company has increased its regular cash dividend per share. The 10-year dividend growth is 4.90%/year. Between 2008 and 2017 earnings per share increased from $1.52 to $2.75. The company is expected to earn $3.80/share in 2019. The stock is selling for 15.80 times forward earnings and yields 1.70%.

Aflac Incorporated, (AFL) American Family Life Assurance Company of Columbus, provides voluntary supplemental health and life insurance products. It operates through two segments, Aflac Japan and Aflac U.S. Aflac raised its quarterly dividend by 3.80% to 27 cents/share. This was the 36th consecutive year of dividend increases for this dividend champion. The rate of the latest increase is much slower than the 8.10% annual increase over the past decade. It is much smaller than the 15.60% annual dividend increase from last year. Earnings per share have grown by 7.30% per year. Analysts expect Aflac to earn $4.08 per share in 2018 and $4.16 per share in 2019. In comparison Aflac earned $3.35/share in 2017

The stock is attractively valued at 11.70 times forward earnings and yields 2.30%.

Cincinnati Financial Corporation (CINF) provides property casualty insurance products in the United States. The company operates in five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The company announced a 5.70% increase in its quarterly dividend to 56 cents/share. This dividend king has rewarded shareholders with a raise for 59 years in a row. Over the past decade, it has managed to grow dividends by 3.20%/year. Between 2008 and 2017, the company has managed to grow its earnings from $2.62/share to $3.31/share. The company is expected to earn $3.22/share in 2018. The stock is overvalued at 25.30 times forward earnings. The yield is 2.70%.

Polaris Industries Inc. (PII) designs, engineers, manufactures, and markets power sports vehicles worldwide. The company raised its dividend by 1.70% to 61 cents/share last week. This increase represents the 24th consecutive year of Polaris increasing its dividend. The increase is also below the ten-year average raise of 12.20% year. Between 2008 and 2018, the company managed to grow earnings per share from $1.75 to $5.24. The stock looks attractively valued at 16.50 times earnings. It yields a safe 2.80%. I would need to research this company further, because the slowdown in dividend growth could be indicative of the business being in short-term trouble. On the other hand, this could be a good time to pick up shares of a great company which is experiencing short-term turbulence in its business.

Relevant Articles:

- Two Wide Moat Dividend Stocks to Consider on Dips
- Not all P/E ratios are created equal
- Why do I use a P/E below 20
- Why I don’t do discounted cash flow analysis on dividend stocks
- How to read my stock analysis reports