There were several companies over the past week which announced their intent to raise dividends to shareholders. It is always great to see companies that are able to extend their long streaks of annual dividend increases. I find dividend increases to be a good indicator of how company executives feel about the near-term business environment. It also shows their confidence in the company’s growth prospects.
Factors that boards of directors consider when setting the dividend include future earnings expectations, payout ratio and dividend yield relative to those at peer companies, as well as returns available on other income-oriented investments.
This is why I find it very helpful to review dividend increases every week for established dividend growth companies. To be included in this list, a company should have managed to reward shareholders with a dividend hike for at least ten years in a row.
I focused on companies that can afford to grow dividends for at least a decade. I figured that a company which has managed to boost dividends during a recession and an expansion, or even longer, is better suited for further research by a long-term dividend growth investor like me.
In my previews, I look at the most recent dividend increase, and compare it to the ten year average. While there are some year-over-year fluctuations in dividend growth, it is helpful to see if dividend growth is decelerating.
In addition, it is helpful to review trends in earnings and dividends, alongside dividend payout ratios. This is another indicator of dividend safety.
Last, but not least, I also try to review the valuation behind every company. I prefer to buy future dividend income at attractive valuations; overpaying for future dividend income is not a good business decision.
Hormel Foods Corporation (HRL) produces and markets various meat and food products in the United States and internationally. The company operates through five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other.
Hormel Foods increased its quarterly dividend by 5.40% to 24.50 cents/share, marking the 55th consecutive annual dividend increase for this dividend king. Hormel Foods has managed to increase distributions at an annualized rate of 16% over the past decade.
Between 2010 and 2020, Hormel managed to triple its earnings from 73 cents/share to $1.69/share.
Analysts expect Hormel to earn $1.80/share in 2021. It looks like earnings per share have plateaued for three years in a row if analyst projections are correct.
I believe that the stock price is overvalued at 26 times forward earnings. The stock yields 2.10%. I may consider it if it dips below $36/share. Check my analysis of Hormel for more information about the company.
Becton, Dickinson and Company (BDX) develops, manufactures, and sells medical supplies, devices, laboratory equipment, and diagnostic products worldwide.
The company’s dividend eked out a small 5.10% increase to 83 cents/share. Becton Dickinson has raised its dividend for the 49th consecutive year. If BD hikes dividends in 2021, this dividend champion will be upgraded to the elite dividend king status. Over the past decade, Becton Dickinson has managed to boost dividends at an annualized rate of 8.90%.
The company earned $5.49/share in 2010 and analysts expect Becton Dickinson to earn $12.53/share in 2021.
The stock seems fairly valued at 18.15 times forward earnings and a dividend yield of 1.45%. The rate of dividend growth has slowed down, and if you want to review earnings per share, you would have to dig a little deeper into things such as purchase accounting adjustments and other items that the company deems as one-time events.
McCormick & Company, Incorporated (MKC) manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. The company operates in two segments, Consumer and Flavor Solutions.
McCormick managed to hike its quarterly dividend by 9.70% to 68 cents/share. This marks the 35th consecutive year that this dividend champion has increased its quarterly dividend. McCormick has managed to boost dividends at annualized rate of 9% over the past decade.
The company earned $2.75/share in 2010, and managed to grow this to $5.24/share in 2019.
Analysts expect that McCormick will earn $5.71/share in 2019.
Unfortunately, this great company is overvalued at 32.50 times forward earnings and yields 1.45%. Check my analysis of McCormick for more information about the company.
Hingham Institution for Savings (HIFS) provides various financial products and services to individuals and small businesses in the United States.
The company increased its quarterly dividend to 47 cents/share, which is a 4.40% increase over the dividend paid during the same time last year. This dividend champion has consistently increased regular quarterly cash dividends over the last twenty-five years. The bank also announced a special dividend in the amount of 70 cents/share. During the past decade, it has managed to increase dividends at an annualized rate of 6.10%.
The company managed to grow earnings from $4.81/share in 2010 to $17.83/share in 2019.
The stock is fairly valued at 10.80 times earnings and offers a dividend yield of 0.85%.
The York Water Company (YORW) impounds, purifies, and distributes drinking water. It also owns and operates three wastewater collection systems and two wastewater treatment systems.
The company raised its quarterly dividend by 4% to 18.74 cents/share. This is the twenty-third consecutive year that this dividend achiever has increased its dividend. During the past decade, York Water has managed to grow its distribution at an annualized rate of 3.20%.
York Water has stated that it has managed to pay dividends every year since 1816, but I have been unable to find any history on distribution payments that goes beyond 1912. If anyone from the company’s IR department is reading, I would love to see the data behind this claim.
Analysts expect the company to earn $1.25/share in 2020.
The stock is overvalued at 37.22 times forward earnings and sells at a dividend yield of 1.60%.
South Jersey Industries, Inc. (SJI) provides energy-related products and services. The company engages in the purchase, transmission, and sale of natural gas.
The company hiked its quarterly dividend by 2.50% to 30.25 cents/share. With this announcement, SJI has increased its dividend for 22 consecutive years. During the past decade, this dividend achiever has managed to boost distributions at an annualized rate of 6.90%.
Analysts expect that South Jersey Industries will generate $1.56/share in 2019.
The stock is fairly valued at 15.80 times forward earnings and offers a dividend yield of 4.90%. Sadly, the dividend payout ratio is at 78%, which means that the pace of future dividend growth will be slow at best.
Relevant Articles:
- Dividend Achievers Offer Income Growth and Capital Appreciation Potential
- Ten Companies Rewarding Investors With Dividend Hikes Last Week
- Nine Dividend Growth Stocks With Growing Yields on Cost
- Eleven Dividend Growth Stocks For Further Research
