Ten Dividend Increases For December 16 - 20, 2019

During the past week, there were several dividend increases from companies with at least a ten year history of annual dividend increases. I reviewed each company's latest dividend increase relative to the ten year average.In addition, I also reviewed trends in earnings per share, in order to determine if the dividend increases are rooted in fundamental growth. Without earnings growth, future dividend increases and growth in intrinsic value will be limited.

Last but not least, I also reviewed each company's valuation. I was not very impressed with the companies listed below.  There were a few that I find interesting, but unfortunately they are sold at high valuations.

A dividend increase is a testament to a company's commitment to returning capital to shareholders. A dividend increase reflects a company's continued confidence in the business and in its growth opportunities. It also reinforces the idea that its focus on creating meaningful value for clients benefits all stakeholders.

The companies for today's review include:

The Ensign Group, Inc. (ENSG) provides health care services in the post-acute care continuum and other ancillary businesses. The company operates in three segments: Transitional and Skilled Services; Assisted and Independent Living Services; and Home Health and Hospice Services.

The company increased its quarterly dividend by 12.60% to 5 cents/share. This marked the eleventh year of annual dividend increases for this dividend achiever. During the past decade, it has managed to boost distributions at an annualized rate of 14.95%.

Between 2008 and 2018, earnings per share increased from 67 cents/share to $1.70/share. Between 2011 and 2017, earnings went nowhere, until the rose in 2018. Ensign is expected to earn $2.19/share in 2019.

The stock is overvalued at 20.85 times forward earnings and yields half a percent.

HEICO Corporation (HEI) designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally.

The company raised its semi-annual dividend by 14.30% to 8 cents/share. This marked the twelfth consecutive annual dividend increase for this dividend achiever. Over the past decade, Heico has managed to boost dividends at an annualized rate of 17.40%.

Between 2009 and 2019, Heico has managed to increase earnings from 35 cents/share to $2.39/share.

The company is expected to earn $2.69/share in 2020.

The stock is overvalued at 43.40 times forward earnings and offers a low yield of 0.15%. Investors who buy this stock do it for the future growth and capital appreciation potential, not so much for future dividend income. Even if you bought a decade ago, your yield on cost would be under 2%, but you would be sitting on a ten-bagger.

I find the following snippets from the company's press release interesting:

This increased cash dividend reflects our Board of Directors’ unwavering belief in, and support of, HEICO's long-term growth objectives and financial outlook. We are honored to lead the talented group of professionals at HEICO and we look forward to the future.

A $100,000 investment in HEICO shares in 1990 become worth approximately $50.3 million as of the close of trading on December 13, 2019, representing a compound annual growth rate of 24%

Norwood Financial Corp.(NWFL) operates as the bank holding company for Wayne Bank that provides various banking products and services.

The company raised its quarterly dividend by 4.20% to 25 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever. During the past decade, it has managed to boost dividends at an annualized rate of 3.80%.

The bank was unable to grow earnings by much between 2008 and 2017, and it is only because of earnings hitting $2.17/share in 2018 that earnings increased during the past decade.

The stock sells at 18.10 times earnings, yields 2.50%, but is unimpressive due to the slow earnings and dividends growth.

The Andersons, Inc. (ANDE) is an agriculture company, operates in the grain, ethanol, plant nutrient, and rail sectors in the United States and internationally.

The company raised its quarterly dividend by 2.90% to 17.50 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Over the past decade, Andersons has managed to grow distributions at an annualized rate of 11.80%.

Between 2008 and 2018, earnings rose from $1.19 to $1.46/share.

The company is expected to earn $1.14/share in 2019.

At 22.50 times forward earnings, the stock is overvalued. The dividend yield is adequate at 2.70%, and it is adequately covered. The lack of meaningful earnings growth over the past decade, coupled with the slow raise last week makes me unexcited about this company.

Waste Management, Inc. (WM), provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.

The company hiked its quarterly dividend by 6.35% to 54.50 cents/share. This action marks the 17th consecutive year of dividend increases for Waste Management. During the past decade, it has managed to boost distributions at an annualized rate of 5.60%.

Waste Management grew its earnings from $2.19/share in 2008 to $4.45/share in 2018.

Waste Management is expected to generate $4.34/share in 2019.

The stock is overvalued at 26.10 times forward earnings and yields 1.90%. While it has a dependable business model, I would not want to own it at any price. I reviewed Waste Management in 2010, but passed on the stock because its earnings had gone nowhere for several years. Between 2008 and 2015, earnings per share didn't increase at all.

I found the following snippet from the company's press release to be fairly fascinating:

“Dividends remain our top priority for capital allocation after we invest in the business to drive long-term profitable growth,” said Jim Fish, President and Chief Executive Officer of Waste Management, Inc. “Our business continues to generate strong and consistent free cash flow,(a) and we are pleased to be increasing our planned quarterly dividend rate for the seventeenth consecutive year.”

W. P. Carey (WPC) ranks among the largest net lease REITs with an enterprise value of approximately $21 billion and a diversified portfolio of operationally-critical commercial real estate that includes 1,204 net lease properties covering approximately 138 million square feet. For over four decades, the company has invested in high-quality single-tenant industrial, warehouse, office, retail and self-storage properties subject to long-term net leases with built-in rent escalators. Its portfolio is located primarily in the U.S. and Northern and Western Europe and is well-diversified by tenant, property type, geographic location and tenant industry.

The REIT managed to boost its distribution to $1.038/share, which is less than 1% from its distribution paid during the same time last year. Over the past decade, it has managed to grow dividends by 7.70%/year annualized. Dividend growth has been slowing down substantially however. This dividend achiever has managed to grow annual dividends for 21 years in a row.

W.P. Carey has managed to grow AFFO/share from $3.09 in 2008 to $5.39 in 2018. The REIT is expecing AFFO/share of $4.95 in 2019.

The REIT is adequately valued at 15.85 times forward AFFO/share, and yields 5.30%. The distribution growth is slowing down, which is something I need to monitor.

This is my favorite statement from their press release:

"We are extremely proud of our more than 20-year history of annual dividend increases, reflecting our commitment to providing rising income and building long-term value for our shareholders."

Urstadt Biddle Properties Inc. (UBA) is a self-administered equity real estate investment trust which owns or has equity interests in 83 properties containing approximately 5.3 million square feet of space.

The REIT boosted its quarterly dividend by 1.80% to 28 cents/share, marking the 26th consecutive annual dividend increase. Over the past decade, this dividend champion has managed to boost distributions at an annualized rate of 1.29%.

The REIT is selling for 17.40 times FFO and yields 4.70%.

ABM Industries Incorporated (ABM) provides integrated facility solutions in the United States and internationally. It operates through Business & Industry, Aviation, Technology & Manufacturing, Education, Technical Solutions, and Healthcare segments.

The company increased its quarterly dividend by 2.80% to 18.50 cents/share, marking the 53rd consecutive annual dividend increase for this dividend king. Over the past decade, it has managed to increase distributions at an annualized rate of 3.40%.

Between 2009 and 2019, ABM managed to boost earnings from $1.05/share to $1.90/share.

The company is expected to generate $2.02/share.

The stock is fully valued at 19.20 times forward earnings, offers low dividend yield of 1.90%, and has a low dividend growth rate. I would view it as a hold at best.

Balchem Corporation (BCPC) develops, manufactures, and markets specialty performance ingredients and products for the food, nutritional, feed, pharmaceutical, medical sterilization, and industrial markets in the United States and internationally.

The company increased its quarterly dividend by 10.60% to 52 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. During the past decade Belchem has managed to hike dividends at an annualized rate of 19.10%.

Balchem grew earnings from $0.67/share in 2008 to $2.42/share in 2018. Balchem Corporation is expected to generate $3.17/share in 2019.

I found the following snippets from the company's press release to be fascinating:

“Balchem has a long-standing commitment to an annual dividend and we are pleased to announce the continuation of that commitment. This dividend represents the tenth consecutive increase in our annual dividend, reflecting both the consistently outstanding financial performance the company has delivered and the Board’s continued confidence in our long-term strategies.”

The stock is overvalued at 32 times forward earnings and yields 2%. Sadly, the companies growing earnings and distributions at a decent clip today are only available at inflated valuations.

Calvin B. Taylor Bankshares, Inc. (TYCB) operates as the holding company for Calvin B. Taylor Banking Company that provides commercial banking products and services for individuals, small-to medium-sized businesses, associations, and governmental entities.

The bank raised its quarterly dividend by 24% to 25 cents/share. This is the 29th year that the board of directors has increased the regular annual cash dividend.

Over the past decade, this dividend champion has managed to increase distributions at an annualized rate of 1.50%.

The slow dividend growth rate makes sense, since earnings per share went from $2.33 in 2007, through a long and painful decline that ended in 2014, before recovering to $2.64/share in 2018.

At 13.40 times earnings and a dividend yield of 2.80%, the stock is fairly valued. Without growth in earnings however, future dividend growth will be unexciting.

Farmers & Merchants Bancorp, Inc. (FMAO) operates as the bank holding company for The Farmers & Merchants State Bank that provides commercial banking, retail banking, and other financial products and services to individuals and small businesses in northwest Ohio and northeast Indiana.

Farmers & Merchants Bancorp declared a quarterly dividend of 16 cents/share, which was a 6.70% increase over the prior dividend of 15 cents/share. This action represents the 25th consecutive annual increase in the Company’s regular dividend payment since 1994. This dividend champion  has managed to increase distributions by 5%/year over the past decade.

The company managed to grow earnings from 69 cents/share in 2008 to $1.61/share in 2018.

The stock is overvalued at 19.25 times earnings, and offers a dividend yield of less than 2%.


Thank you for reading!

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