Seven Dividend Growth Stocks For Further Research

Welcome to my weekly review of dividend increases. I have done this process for over eleven years on my site, in order to share with readers how I go about monitoring my portfolio. I also review the list of dividend increases every week in order to uncover any hidden dividend gems.

I start by looking at dividend increases for the past week by US listed companies. I narrow the list down to the ones with a ten year track record of annual dividend increases. This exercise provides me with the list of companies for today’s article.

The next step in my process applies my entry criteria, in order to determine if a company is worth researching today or at some lower point. A few companies are good values today, while others may be a good idea for research if they come down in price. A third group of companies are not worth researching for me for one reason or another.

The type of review I do focuses on growth in dividends per share that is fueled by growth in earnings per share. I also review recent dividend increases and compare them to the ten year average. Recent dividend increases are a good barometer for management sentiment towards their short-term business environment. I also review valuation of course, in order to determine the point at which a company may be worth researching. I always try to do the work of researching a company, before investing. That way, I have a record of the reasons why I bought in the first place, which is helpful for my education as an investor.

The companies I that made the cut for today’s review include:

The Estée Lauder Companies Inc. (EL) is one of the world’s leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products.

The company raised its quarterly dividend by 12% to 48 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past decade, the company has managed to grow distributions at an annualized rate of 19%.

Between 2009 and 2019, Estee Lauder managed to grow earnings from 55 cents/share to $4.82/share. The company is expected to generate $5.89/share in 2020.

The stock is overvalued a 31.70 times forward earnings and offers a dividend yield of 1%. Estee Lauder may be a good idea on dips below $120/share.

Rockwell Automation, Inc. (ROK) provides industrial automation and information solutions worldwide. It operates in two segments, Architecture & Software; and Control Products & Solutions.

The company raised its quarterly dividend by 5% to $1.02/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past decade, the company has managed to grow distributions at an annualized rate of 12.10%.

Between 2008 and 2018, the company managed to grow its earnings from $3.90/share to $4.21/share. It is expected to earn $8.59/share in 2019.

The stock is slightly overvalued at 20.70 times forward earnings. The stock yields 2.30. It may be worth a look on dips below $172/share.

UMB (UMBF) offers personal banking, commercial banking, healthcare services and institutional banking, which includes services to mutual funds and alternative-investment entities and registered investment advisors. UMB operates banking and wealth management centers throughout Missouri.

The company increased its quarterly dividend by 3.30% to 31 cents/share. This marked the 28th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to grow distributions at an annualized rate of 6.20%.

Between 2008 and 2018, UMB Financial has managed to increase earnings from $2.38/share to $3.93/share. UMB Financial is expected to generate $4.76/share in 2019.

The stock is fairly valued at 13.90 times forward earnings but offers a low dividend yield of 1.90%. This is a low yield for a bank. The slowing dividend growth is a concern.

Cintas Corporation (CTAS) provides corporate identity uniforms and related business services primarily in North America, Latin America, Europe, and Asia. It operates through Uniform Rental and Facility Services and First Aid and Safety Services segments.

The company increased its annual dividend by 24.40% to $2.55/share. This is the 36th consecutive year that the annual dividend has increased, which is every year since Cintas’ initial public offering in 1983. Over the past decade, this dividend champion has managed to boost distributions at an annualized rate of 16.10%.

Between 2009 and 2019, Cintas has managed to grow earnings from $1.48/share to $7.99/share.
Cintas is expected to generate $8.59/share in 2020.

The stock is overvalued at 31.30 times forward earnings. Cintas yields 0.95%. The stock may be worth a look on dips below $172/share, which may be possible if we get another decline like the one from December 2018.

Black Hills Corporation (BKH), operates as an electric and natural gas utility company in the United States. It operates through Electric Utilities, Gas Utilities, Power Generation, and Mining segments.
The company hiked its quarterly distribution by 5.90% to 53.50 cents/share. This marked the 49th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to grow distributions at an annualized rate of 3.30%.

The company managed to grow earnings from $2.75/share in 2008 to $3.54/share in 2018. The company is expected to earn $3.46/share in 2019.

The stock is overvalued at 23 times forward earnings. It offers a dividend yield of 2.70%. I like the acceleration of dividend growth in recent history relative to the ten year average, but I find the valuation to be too rich at present levels.

DTE Energy (DTE) is a Detroit-based diversified energy company involved in the development and management of energy-related businesses and services nationwide.

The company raised its quarterly dividend by 7% to $1.0125/share. This event marked the 11th consecutive annual dividend increase for this dividend achiever. During the past decade, DTE has managed to boost distributions at an annualized rate of 5.20%.

Between 2008 and 2018, the company managed to boost earnings from $3.34/share to $6.17/share.
The company is expected to generate $6.25/share in 2019.

The stock is overvalued at 20.30 times forward earnings. DTE Energy yields 3.20%. While low interest rates have pushed valuations for utilities upwards, I would like to be able to acquire shares at a lower valuation.

Mercury General Corporation (MCY), engages in writing personal automobile insurance in the United States.

The company raised its quarterly dividend by 0.40% to 63 cents/share. This marked the 33rd consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost distribution’s at an annualized rate of 0.80%.

Earnings per share have gone all over the place over the past decade, oscillating between a high of $7.32/share in 2019 to a low of -$4.42/share in 2008. The company is expected to generate $2.85/share in 2019.

Mercury General is trading at 17 times forward earnings, yields 5.20% and has a payout ratio of 88%. I am not interested in the company at this point, given the slow rate of dividend growth, high payout ratio and inconsistent earnings trend.

Relevant Articles:

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- Four Dividend Paying Companies For Further Research
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