As part of my investment review process, I monitor the list of dividend increases every week. This exercise allows me to see any recent dividend increases for companies I own, and check if the rate of dividend growth is steady. I also use this process as a tool to help me identify dividend growth stocks for further research.
When reviewing companies that raised dividends last week, I focused on the ones that have a minimum history of at least ten consecutive annual raises under their belt. This is just to reduce the number of companies to a more manageable level and remove any companies which did not have the business strength to grow distributions for a decently long period of time. As an astute reader pointed out to me however, with the effects of the financial crisis being ten years ago, we are now seeing companies that cut dividends in 2007 – 2009 being added to the dividend achievers lists. This is a good reminder to always try and go above and beyond in your analysis, and stress test assumptions.
In my individual security review, I look for growth in earnings per share, in order to evaluate the likelihood of future dividend growth. I do not want to see a company where earnings per share have hit a high plateau, while all dividend growth happens through the increase in the payout ratio.
I also like to review valuation, in conjunction with growth in earnings per share, dividend per share and dividend yields. When I analyze individual companies I also look at dividend safety by looking at the dividend payout ratio. However, I also evaluate dividend safety by requiring growth in earnings per share as well.
Over the past week, there were several companies which announced dividend increases for their shareholders. The companies include:
The Hershey Company (HSY) manufactures and sells confectionery products. The company operates through two segments, North America; and International and Other.
The company increased its quarterly dividend by 7.10% to 77.30 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 8.80%/year.
Between 2009 and 2018, earnings increased from $1.90/share to $5.58/share. Hershey is expected to generate $5.75/share in 2019.
The stock is overvalued at 26.50 times forward earnings and yields 2%. Hershey may be worth a look on dips below $115/share.
Kellogg Company (K) manufactures and markets ready-to-eat cereal and convenience foods. The company operates through U.S. Snacks, U.S. Morning Foods, U.S. Specialty Channels, North America Other, Europe, Latin America, and Asia Pacific segments.
The company raised its quarterly dividend by 2% to 57 cents/share. This marked the 16th year of annual dividend increases for this dividend achiever. The last increase is smaller than the ten-year average of 5.40%/year.
Between 2009 and 2018, earnings grew from $3.16/share to $3.83/share. Kellogg is expected to generate $3.83/share in 2019.
The stock is attractively valued at 15.30 times forward earnings and yields 3.90%. Given the slow growth in earnings, I view the stock as hold.
The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. It operates in four segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Away From Home. The company raised its quarterly dividend by 3.50% to 88 cents/share. This represented the Company's eighteenth consecutive year of dividend growth. The latest dividend increase was smaller than the ten year average of 10%/year.
Between 2009 and 2018, the company managed to grow earnings from $4.15 to $4.52/share. These figures are not adjusted for one-time items such as amortization charges related to acquisitions. J.M. Smucker is expected to generate $7.12/share in 2019.
The stock is attractively valued at 16.10 times forward earnings and offers a competitive dividend yield of 3.10%. Given the slow pace of latest dividend increase I would want to monitor the company more closely before deciding if I want to add to my position.
Republic Services, Inc. (RSG) provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for small-container, large-container, municipal and residential, and energy services customers in the United States and Puerto Rico. The company raised its quarterly dividend by 8% to 40.50 cents/share. The company has managed to grow annual dividends for 16 years in a row. The raise was consistent with the ten year average of 7.30%/year.
Between 2009 and 2018, Republic Services has managed to grow earnings from $1.30/share to $3.16/share. The company is expected to generate $3.23/share in 2019.
Right now the stock is overvalued at 27.90 times forward earnings and offers a dividend yield of 1.80%. Republic Services would be worth a second look on dips below $65/share.
Union Pacific Corporation (UNP), engages in the railroad business in the United States. The company raised its quarterly dividend by 10% to 97 cents/share. This marked the thirteens consecutive annual dividend increase for this dividend achiever. During the past decade, Union Pacific has managed to grow dividends at an annualized rate of 20.70%/year.
Between 2009 and 2018, the company has managed to grow earnings per share from $1.87 to $7.91.
Union Pacific is expected to generate $8.98/share in 2019.
The stock is overvalued at 19.80 times forward earnings and yields 2.20%.
Community Trust Bancorp, Inc. (CTBI) operates as the bank holding company for Community Trust Bank, Inc. that provides commercial and personal banking services to small and mid-sized communities. The bank raised its quarterly dividend by 5.60% to 38 cents/share. This marked the 39th consecutive year of annual dividend increases for this dividend champion. The rate of dividend increases has been accelerating, and is higher than the ten year average of 2.50%/year over the past decade.
Between 2009 and 2018, the bank has managed to grow earnings from $1.50/share to $3.35/share.
The bank is expected to earn $3.52/share in 2019.
The stock is attractively valued at 11.80 times forward earnings and yields 3.70%.
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 bank raised its quarterly dividend by 10.50% to 21 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, Bank of Marin Bancorp has been able to boost dividends at an annualized rate of 8.50%.
Bank of Marin Bancorp has managed to grow earnings from $1.09/share in 2009 to $2.33/share in 2018. It is expected to generate $2.39/share in 2019.
Right now, the stock is selling at the high end of the valuation I am willing to pay for a bank. The stock is trading at 18.30 times forward earnings and offers a dividend yield of 1.90%.
UGI Corporation (UGI) distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.
The company raised its quarterly dividend by 8.30% to 32.50 cents/share. This is the second of two dividend increases announced in conjunction with the AmeriGas (APU) merger transaction. The new dividend rate represents an increase of 25% over the payment from the same time last year. UGI is a dividend champion that has paid common dividends for 135 consecutive years and raised its dividend in each of the last 32 years. The annualized rate of dividend growth over the past decade is 7.30%.
Between 2009 and 2018, UGI Corporation has managed to grow earnings from $1.57/share to $2.74/share. UGI Corporation is expected to earn $2.37/share in 2019.
Right now the stock seems overvalued at 21.70 times forward earnings and offers a dividend yield of 2.50%.
Eagle Bancorp Montana, Inc. (EBMT) operates as the bank holding company for Opportunity Bank of Montana that provides various retail banking products and services in Montana.
The bank raised its quarterly dividend by 2.70% to 9.5 cents/share. This marked the 19th year of consecutive annual dividend increases for this dividend contender. During the past decade, this company achieved annualized dividend growth of 3.40%.
Earnings per share grew from $0.52 in 2009 to $0.91 in 2018. It is expected to earn $1.59/share in 2019.
Eagle Bancorp Montana looks cheap at 10.90 times forward earnings today. The dividend yield is adequate 2.70% but the dividend growth is low at around 3%.
ONEOK, Inc. (OKE) engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. ONEOK raised its quarterly dividend to 89 cents/share, which was a 7.90% increase over the distribution paid during the same time last year. ONEOK is a dividend achiever which has rewarded shareholders with a raised for 17 years in a row. Over the past decade, ONEOK has managed to grow dividends at an annualized rate of 16.90%. Right now, ONEOK yields 5.30%.
Relevant Articles:
- Dividend Achievers versus Dividend Contenders & Champions
- Five Dividend Increases For Further Research
- Nine Companies That Love To Raise Their Dividends
- Three Dividend Achievers Distributing More Cash to Shareholders