I reviewed three companies which raised dividends last week. Each of these companies has managed to boost dividends annually for at least ten years in a row. I focused on trends in earnings per share, in order to determine if there is fuel for future dividend increases. I also focused on past growth in dividends, in comparison to the latest dividend increase. Last but not least, I looked at valuation, and decided if a company is worth pursuing further, and at what price. These reviews are part of my monitoring process.
The three companies for my review include:
Westlake Chemical Corporation (WLK) manufactures and markets basic chemicals, vinyls, polymers, and building products worldwide. It operates through two segments, Olefins and Vinyls.
The company’s Board of Directors approved a 5% increase in the quarterly dividend to 26.25 cents/share. This marked the 14th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, Westlake Chemical has managed to grow distributions at an annualized rate of 24.50%.
The company managed to grow earnings from 40 cents/share in 2009 to an estimated $3.76/share in 2019.
This is a cyclical company, whose earnings tend to ebb and flow with the rise and fall of the economy. I find it to be fairly valued at 16.30 times forward earnings. The stock yields 1.70%. I am unsure about Westlake’s prospects in the future, but may monitor the company closer in a future review.
MGE Energy, Inc., (MGEE) operates as a public utility holding company primarily in Wisconsin. It operates through five segments: Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other.
The board of directors of MGE Energy, Inc. increased the regular quarterly dividend rate over 4% to 35.25 cents per share. This dividend champion has increased its dividend annually for the past 44 years and has paid cash dividends for more than 100 years.
MGE Energy has managed to grow dividends at an annualized rate of 3.30% over the past decade.
Between 2008 and 2018, the company has managed to grow earnings from $1.59/share to $2.43/share.
The stock is overvalued at 31 times earnings, offers a dividend yield of 1.90%, and grows distributions at a low rate. MGE Energy may be worth a closer look at a price that is equivalent to a 4% dividend yield, which may represent a better valuation for a company that grows at 3%/year.
Nordson Corporation (NDSN) engineers, manufactures, and markets products and systems to dispense, apply, and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids worldwide.
The company’s board of directors authorized a 9% increase in the quarterly dividend to 38 cents/share. This represents the 56th consecutive year of annual dividend increases for this dividend king.
During the past decade, Nordson has managed to grow shareholder distributions at an annualized rate of 13.10%.
The strong growth in dividends was supported by strong earnings growth. Between 2008 and 2018, Nordson managed to grow earnings from $1.71/share to $6.40/share. The company is expected to generate $6.13/share in 2019.
The stock looks slightly overvalued at 22.30 times forward earnings. Nordson yields a safe 1.10%. It may be worth a second look on dips below $122/share.
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