As part of my monitoring process, I review the list of dividend increases every week. This is helpful in checking developments for companies I own, as well as companies I am considering. Quite often, dividend increases are announced alongside the release of quarterly or annual results. It is helpful to pay attention to major developments, but it is equally important not to read too much into it, and end up micromanaging your portfolio by increasing trading activity. In general, this exercise helps me to see if my original thesis is working. If I see developments that show me that I was wrong, I will stop adding to my positions. In the case of a dividend cut, I will sell. Otherwise, I will hold on, and just allocate dividends elsewhere.
I share an article about dividend increases weekly with you, in order to show you how I go about quickly reviewing companies, and how I screen for them on the go. I am hopeful that this exercise shows readers the qualities I look for in companies, before I put them on my list for further research.
In general, I look for:
1) Minimum streak of annual dividend increases. Usually more than 10 years in a row.
2) A valuation below 20 times earnings. However, I am not as big of a stickler for it as I once were.
3) A dividend payout ratio below 60%. The obvious exceptions are companies which have a history of high payout ratios, while also raising dividends for long period of time. Companies in the Utilities, Telecom and Real Estate sectors are prime suspects off the top of my mind.
3) Earnings growth over the past decade, whether is more likely to continue and fuel future dividend increases
4) Dividend growth over the past decade exceeding inflation. I am on the lookout for acceleration or deceleration in dividend growth. When management slows down on dividend growth, this tells me that there are some headwinds along the way.
Inter Parfums, Inc., (IPAR) manufactures, markets, and distributes a range of fragrances and fragrance related products. The company operates in two segments, European Based Operations and United States Based Operations.
The company raised its quarterly dividend by 20% to 33 cents/share. This is in line with the ten year average of 20.20%/ year.
Between 2008 and 2018, the company managed to grow earnings from 77 cents/share to $1.71/share. Inter Parfums is expected to earn $1.90/share in 2019.
The stock is overvalued at 40 times forward earnings. It yields 1.70%.
Assurant, Inc. (AIZ) provides risk management solutions for housing and lifestyle markets in North America, Latin America, Europe, and the Asia Pacific. The company operates through three segments: Global Housing, Global Lifestyle, and Global Preneed.
The company raised its quarterly dividend by 5% to 63 cents/share. This marked the 16th year of annual dividend increases for this dividend achiever. During the past decade, Assurant has managed to boost distributions at an annualized rate of 1%
Between 2008 and 2018, the company managed to grow earnings from 3.76 cents/share to $3.98/share. Assurant is expected to generate $8.69/share in 2019.
The stock is fairly/ valued at 15 times forward earnings and offers a well-covered dividend yield of 1.90%. It may be worth researching further.
Snap-on Incorporated (SNA) manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial and Industrial Group, Snap-on Tools Group, and Repair Systems & Information Group segments.
Snap On declared $1.08/share quarterly dividend, which is a 13.7% increase from prior dividend of $0.95. This is the tenth consecutive annual dividend increase for this newly minted dividend achiever. During the past decade, Snap-On has managed to boost distributions at an annualized rate of 11%/year.
Over the past decade, Snap-On has managed to grow earnings from $4.07/share to $11.87/share. The company is expected to generate $12.26/share in 2019.
The stock is fairly valued at 13.60 times forward earnings and offers a well covered dividend yield of 2.60%. It may be worth following for further research.
Aaron's, Inc. (AAN) operates as an omnichannel provider of lease-purchase solutions to underserved and credit-challenged customers. It operates in three segments: Progressive Leasing, Aaron's Business, and DAMI.
The company raised its quarterly distribution by 14.30% to 4 cents/share. This marked the 17th year of annual dividend increases for this dividend achiever. Over the past decade, Aaron’s has managed to boost distributions at an annualized rate of 10.90%/year.
Between 2008 and 2018, earnings per share increased from $1.11 to $2.78. Aaron’s is expected to generate $3.93/share.
The stock is attractively valued at 14.80 times forward earnings. It yields 0.30%, but offers the opportunity for faster dividend growth and potentially higher total returns. It may be a good idea for younger investors to research.
Emerson Electric Co. (EMR) is a technology and engineering company, that provides solutions to industrial, commercial, and consumer markets worldwide.
Emerson Electric hiked its quarterly dividend by 2% to 50 cents/share. As a result, this dividend king achieved 63 consecutive years of increased dividends per share. The company has managed to hike distributions at an annualized rate of 4.70% over the past decade.
Between 2008 and 2018, Emerson Electric has managed to grow earnings from $3.06/share to $3.46/share. The company is expected to generate $3.67/share in 2019. In other words, earnings per share have been flat for over a decade. Dividend growth has been running on fumes, as evidenced by the slowdown in distributions growth. There is some pushback from activist investors, so I am hopeful that they can reinvigorate the company. Otherwise, it may be forced to end its streak of annual dividend increases in the near future.
The stock is also overvalued at 20.40 times forward earnings. While it offers a decent yield at 2.70%, its dividends are growing slowly due to stagnation in earnings per share and the higher payout ratio. I view the stock as a hold today, with dividends being allocated elsewhere.
Utah Medical Products, Inc. (UTMD) develops, manufactures, and distributes medical devices for the healthcare industry in the United States, Europe, and internationally.
The company raised its quarterly dividend by 1.80% to 27.50 cents/share. It has managed to increase dividends by 1.80%/year over the past decade. Utah Medical Products is a dividend achiever which has managed to increase distributions for 17 years in a row.
Between 2008 and 2018, Utah Medical Products has managed to boost earnings from $1.86 to $4.95/share.
The stock is slightly overvalued at 21 times earnings. Utah Medical Products yields 1.10%, but offers a very slow rate of annual dividend increases. I like the potential for capital gains, but the slow rate of dividend increases is putting me off a little bit.
KLA Corporation (KLAC) designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide.
The company managed to increase distributions by 13.30% to 85 cents/share. It has managed to boost dividends for 10 years in a row. Over the past decade, KLA Corporation has managed to increase distributions at an annualized rate of 16.80%.
Between 2008 and 2018, this dividend achiever managed to boost earnings per share from $1.95 to $7.49. The company expects to earn $10.01/share in 2019.
KLA Corporation looks fairly valued at 17.40 times forward earnings and yields 1.95%. It may be worth researching, only to understand how this former dot-com darling managed to increase earnings and hit all-time-highs.
Evergy, Inc. (EVRG) engages in the generation, transmission, distribution, and sale of electricity in Kansas and Missouri.
Evergy increased its quarterly dividend by 6.30% to 50.50 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to increase distributions at an annualized rate of 4.30%.
Between 2008 and 2018, the company has managed to boost earnings from $1.69/share to $2.50/share. Evergy is expected to earn $2.88/share in 2019.
The stock is overvalued at 21.90 times forward earnings and yields 3.20%. It may be worth reviewing on dips.
BOK Financial Corporation (BOKF) operates as the financial holding company for BOKF, NA that provides various financial products and services in Oklahoma, Texas, New Mexico, Northwest Arkansas, Colorado, Arizona, and Kansas/Missouri. It operates through three segments: Commercial Banking, Consumer Banking, and Wealth Management.
The company hiked its quarterly distribution by 2% to 51 cents/share, bringing its track record of annual dividend increases to 15 years in row. Over the past decade, it has managed to boost distributions at an annualized rate of 8.10%.
BOK Financial managed to boost earnings per share from $2.27 to $6.63/share between 2008 and 2018. The company is expected to generate $7.35/share in 2019.
The stock is attractively valued at 11.20 times forward earnings and yields 2.50%. I like the long term trend in earnings per share, and the owner-operator behind the enterprise. The slowdown in dividend increases is giving me pause however.
WestRock Company (WRK) manufactures and sells paper and packaging solutions for the consumer and corrugated markets in North America, South America, Europe, and the Asia Pacific.
The company raised dividends by 2.20% to 46.50 cents/share. This was a much slower rate of distribution growth than the ten year average of 25.50%/year. WestRock is a dividend achiever with an 11 year record of annual dividend increases.
The company earned $1.07/share in 2008, and has managed to grow it to an estimated $3.41/share in 2019.
The stock is attractively valued at 11.80 times forward earnings and yields 4.70%. Based on the slow increase in dividends, it looks like the days of fast dividend growth are over.
Atmos Energy Corporation (ATO) engages in the regulated natural gas distribution, and pipeline and storage businesses in the United States. It operates through Distribution, and Pipeline and Storage segments.
The utility increased its quarterly distribution by 9.50% to 57.50 cents/share. This marked the 36th consecutive annual dividend increase for this dividend champion. During the past decade, it has managed to boost distributions at an annualized rate of 4.30%.
Atmos Energy earned $2/share in 2008, and is expected to earn $4.63/share in 2019.
The stock is overvalued at 23.20 times forward earnings. It yields 2.10%.
Relevant Articles:
- Six Companies Growing Dividends for Shareholders
- Best Dividend Stocks For The Long Run – 10 years later
- Evolution of the dividend kings list over the years
- Seven Dividend Paying Companies Rewarding Their Owners With a Raise