The next involves reviewing each company in sufficient detail, in order to determine if dividend increases are based on solid fundamentals. This review includes looking at trends in earnings per share, dividends per share, payout ratios as good start. The goal is to determine the likelihood of future dividend increases.
The last review point includes valuation. In general, I try to avoid overpaying for companies. To me it means not paying more than 20 times earnings for a stock. Valuation is more art than science however ( as is investing in general). This is why it is important to look at relative valuations and growth in the opportunity set, not just focus on absolute numbers.
These steps keep me in fighting shape, and help me monitor as many companies in the investable dividend growth universe in advance. This helps me to be prepared when the right opportunity at the right price comes along.
Over the past week, there were three companies which raised dividends to shareholders. Each company has a minimum ten year streak of annual dividend increases under its belt. The companies include:
Raytheon Company (RTN) develops integrated products, services, and solutions for the defense and other government markets worldwide. It operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint. The company increased its dividend by 8.70% to 94.25 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. During the past decade, Raytheon has managed to grow dividends by 12%/year. Between 2008 and 2018, Raytheon managed to grow its earnings per share from $3.92 to $10.14. Repurchasing 31% of shares outstanding as of December 2008, obviously helped in earnings per share growth too.
The stock is attractively valued at 15.50 times forward earnings and yields 2.10%.
Williams-Sonoma, Inc. (WSM) operates as a multi-channel specialty retailer of various products for home. It operates through two segments, E-commerce and Retail. The retailer boosted its quarterly dividend by 11.60% to 48 cents/share. This marked the 14th year of annual dividend increases for this dividend achiever. During the past decade, Williams-Sonoma has managed to grow its dividends by 13.50%/year.
Between 2008 and 2019, Williams-Sonoma managed to grow earnings from $1.76/share to $4.09/share. The company is expected to earn $4.33/share in 2019.
The stock is attractively valued at 13.20 times forward earnings and offers a dividend yield of 3.40%.
International Bancshares Corporation (IBOC) is a financial holding company, which provides commercial and retail banking services. The company increased its dividend by 19.05% to 50 cents/share. This marked the tenth year of annual dividend increases for the company. International Bancshares Corporation did cut its dividends during the financial crisis. However, it has been a decade since this event occurred, leaving enough time to recover and establish a ten year streak of annual dividend increases. Nevertheless, over the past decade, this bank has managed to grow dividends by 1.30%/year.
The company managed to grow earnings from $1.92/share in 2008 to $3.24/share in 2018.
The stock is attractively valued at 11.40 times earnings and offers a dividend yield of 5.40%.
Relevant Articles:
- Three Dividend Increases In Focus
- How to invest when the market is at all time highs?
- How to value dividend stocks
Relevant Articles:
- Three Dividend Increases In Focus
- How to invest when the market is at all time highs?
- How to value dividend stocks
