Eleven Dividend Growth Stocks In The News

It is time for my weekly review of notable dividend increases from the past week. This review is part of my monitoring process. It is also a good exercise showing investors how I quickly evaluate companies, before deciding to put them aside or place them on my list for further research. In this review, I look at the companies which hiked dividends last week.

I typically look for shareholder friendly companies which generate excess cashflows and share them with stockholders. Companies which have been able to increase dividends for at least ten consecutive years make very good first impression.

Companies with increasing earnings per share earn positive scores, because they show their past dividend growth was rooted in growth in fundamentals. Future growth in earnings will provide the launching pad for further dividend increases in the future.

I’m also looking for companies with safe dividends, which have adequate margins of safety, in order to lower the likelihood of dividend cuts during the next recession. An adequate payout ratio below 60%, coupled with a relative stability in earnings throughout past economic recessions is a good first start. Of course, growing earnings per share also provide an extra cushion to an adequate dividend payout ratio. A high payout ratio may be acceptable only in the cases where companies have maintained it for a long time or they have a business model or business structure (e.g. a REIT) which is usually associated with a high payout ratio.

Last but not least, I like to focus on valuation. I believe that even the best dividend paying company in the world is not worth overpaying for. A lower entry price can provide better long-term returns to investors on average.

As a result, there are several dividend growth stocks which met these criteria. The companies in this weeks review include:

Flowers Foods, Inc. (FLO) produces and markets bakery products in the United States. The company operates through two segments, Direct-Store-Delivery and Warehouse Delivery.

The company raised its quarterly dividend by 5.60% to 19 cents/share. This marked the 18th consecutive annual dividend increase for this dividend achiever. The latest dividend increase is slower than the ten-year average of 10.80%/year. The company’s dividend yield at the new quarterly rate is at 3.30%.

Between 2009 and 2018, the company grew its earnings from 63 cents/share to 74 cents/share. Flowers Foods is expected to generate $0.97/share in 2019.

The stock is overvalued at 23.70 times forward earnings. The rate of earnings growth also seems low.

Ashland Global Holdings Inc. (ASH) provides specialty chemical solutions worldwide.

The company raised its quarterly dividend by 10% to 27.50 cents/share, which was the tenth year of consecutive annual dividend increase for Ashland. This increase was faster than the company’s ten-year average of 8.30%/year. The company’s dividend yield at the new rate is 1.50%.

Between 2009 and 2018, the company grew its earnings from $0.96/share to $1.79/share. The company is expected to earn $3.03/share in 2019. Earnings per share are difficult to evaluate, due to spin-offs and assets being sold over the past decade in an effort to focus on specialty chemicals.
The stock is also overvalued at 24.30 times forward earnings.

First Financial Corporation (THFF), through its subsidiaries, provides various financial services.
The company raised its quarterly dividend by 2% to 52 cents/share. This was slower than the ten-year average increase of 1.50%/year. The company’s dividend yield at the new quarterly rate is 5.40% today. The latest increase marked the 31st consecutive annual dividend increase for this dividend champion.

Between 2009 and 2018, the company grew its earnings from $1.73/share to $3.80/share. The company is expected to generate $3.59/share in 2019.

The stock seems attractively valued at 10.80 times forward earnings. Given the slow rate of dividend growth, I believe that the stock may be more suitable for retirees looking for high current income, and may not worry if dividend income slowly loses purchasing power to inflation.

Lennox International Inc. (LII), provides climate control solutions in North America, Europe, Russia, Turkey, the Middle East, and internationally.

The company hiked its quarterly dividend by 20.30% to 77 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend contender. Over the past decade, Lennox has been able to hike its annual dividends at a rate of 15.20%/year. The dividend yield is at 1.10% at the new quarterly rate.

Between 2009 and 2018, the company managed to boost earnings per share from 90 cents/share to $8.74/share. Lennox International is expected to earn $12.33/share in 2019. Lennox looks like a quality company to acquire at the right price.

Unfortunately, the stock is overvalued today at 22.20 times forward earnings. It may be worth a second look if it dips below 20 times earnings.

Stock Yards Bancorp, Inc. (SYBT) operates as the holding company for Stock Yards Bank & Trust Company that provides commercial and personal banking services in Louisville, Indianapolis, and Cincinnati.

The bank increased its quarterly dividend by 4% to 26 cents/share. This marked the tenth consecutive year of dividend increases for this newly minted dividend contender. During the past decade, it managed to grow the dividend at an annual rate of 7.80%/year.

Between 2009 and 2018, the companies increased earnings from 79 cents/share to $2.42/share. The company is expected to generate $2.57/share in 2019. It is amazing to see earnings per share growing very nicely for almost 30 years, with the brief exception during the Global Financial Crisis. While dividends were kept unchanged during the crisis, this is far better than the widespread dividend cuts experienced by other financial institutions. This is a company to put on my list for further research.
The stock is attractively valued at 13.50 times forward earnings and yields 3%. I would add the stock to my list for further research.

Universal Corporation (UVV) engages in the supply of leaf tobacco products worldwide. The company operates through North America, South America, Africa, Europe, Asia, Dark Air-Cured, Oriental, and Special Services segments.

Universal hiked its quarterly dividend by 1.30% to 76 cents/share. This marked the 48th year of consecutive annual dividend increases for this dividend champion. During the past decade, the company has been able to grow dividends at an annual rate of 3.70%/year.

Universal’s earnings have been flat mostly, eking out a small gain from $4.03/share in 2008 to $4.11/share in 2018. This means that the company has also been largely unable to grow earnings per share since 1998.

Universal looks cheap at 14 times earnings. The stock yields 5.30% and has a payout ratio of 74%. Given the lack of earnings growth over the past 20 years, I believe that dividend growth has a natural limit to it. I believe that the dividend is probably safe for now, but I wouldn’t expect more than token dividend increases during the next 10 years. This security may be a decent fit for retirees who need current income today, and do not care if the purchasing power of that income may decrease over time.

V.F. Corporation (VFC) engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products for men, women, and children in the Americas, Europe, and the Asia Pacific. It operates through four segments: Outdoor & Action Sports, Jeanswear, Imagewear, and Other.

V.F. Corp increased its quarterly dividend by 6.25% to 51 cents/share. This marked the 47th year of annual dividend increases for this dividend champion. Over the past decade, it has managed to boost dividends at an annual rate of 12.50%.

Between 2009 and 2018, the company managed to boost earnings from $1.29/share to $3.15/share. V.F. Corp is expected to generate $3.76/share in 2019.

Unfortunately, the stock is overvalued today at 22.30 times forward earnings and yields 2.40%. V.F. Corp may be worth a second look if it is available below 20 times earnings.

The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle, and International.
Clorox hiked its quarterly dividend by 10.40% to $1.06/share. This marked the 42nd consecutive annual dividend increase for this dividend champion. Clorox has managed to boost dividends at an annualized rate of 8% over the past decade. The dividend yield comes out to 2.80% today at the newly increased quarterly rate.

Between 2009 and 2018, Clorox managed to boost earnings from $3.79/share to $6.26/share. The company is expected to generate $6.28/share in 2019.

The stock is overvalued at 23.80 times forward earnings today. Clorox may be worth a look on dips below 20 times earnings.

Monro, Inc. (MNRO) provides automotive undercar repair, and tire sales and services in the United States.

The company hiked its quarterly dividend by 10% to 22 cents/share. This increase marked the 15th consecutive year of dividend hikes for this dividend achiever. During the past decade, it has managed to increase dividends at an annual rate of 17.20%/year. The stock yields 1.06% at the new dividend rate.

Monro has managed to grow earnings from $0.80/share in 2009 to $1.92/share in 2018. Monro is expected to generate $2.39/share in 2019.

The company’s stock is overvalued at 34.50 times forward earnings.

FactSet Research Systems Inc. (FDS) provides integrated financial information and analytical applications to the investment community in the United States, Europe, and the Asia Pacific.

The company increased its quarterly dividend by 12.50% to 72 cents/share. This marked the 21st year of annual dividend increases for this dividend achiever. Over the past decade, it has managed to grow distributions at an annualized rate of 14.20%/year. The dividend yield is low at 1% today, but this company can grow those distributions at a rate that can double them every five years.

Between 2009 and 2018, the company managed to boost its earnings from $2.97/share to $6.78/share. FactSet Research Systems is expected to earn $9.59/share in 2019.

The stock is overvalued at 29.20 times forward earnings. FactSet Research Systems may be worth a second look when it trades below 20 times earnings.

Extra Space Storage Inc. (EXR), headquartered in Salt Lake City, Utah, is a self-administered and self-managed REIT. The Company offers customers a wide selection of conveniently located and secure storage units across the country, including boat storage, RV storage and business storage.
The company raised its quarterly dividend by 4.70% to 90 cents/share. This raise is slower than the ten year average of 12.90%/year. The latest increase brings the streak of annual dividend increases to ten.

FFO/share increased from $1.18 in 2008 to $4.62 in 2018. This looks like a good growth during the past decade.

The REIT is selling at 23.10 times FFO, which seems a little high for a REIT. It yields almost 3.40% today. While I view the REIT as overvalued, it may be worth adding to the list for further research.

Relevant Articles:

- This is why we diversify
- How to determine if your dividends are safe
- 2019 Dividend Champions List
- How to avoid dividend cuts