Dividend growth investing is a simple but effective strategy. It is widely misunderstood too.
As a Dividend Growth Investor, I look for companies with a long history of annual dividend increases.
A long streak of consecutive annual dividend increases is typically an indication of a business with strong competitive advantages, good growth prospects, high returns on invested capital, and strong and recurring cash flows. A long streak of annual dividend increases is typical for companies with wide moats, which have tended to grow earnings per share for decades. As a long-term dividend investor, my goal is to identify such a business early in the game, buy it at an attractive price, and ride the economic trend for as long as possible. In other words, I am after companies that can grow earnings and dividends over time. I buy and hold forever, or in my case, for as long as they do not cut dividends.
Before doing so of course, I always review the company, its fundamentals and check the qualitative aspect of the business as well. Once I initiate a position, I also monitor the company for any major developments. But as part of my risk management process, I keep portfolio weights in check, and I very rarely would sell an existing position. I may not add to it if it stops meeting my entry criteria, which is guaranteeing a low allocation, as I build positions slowly and over time.
One of my favorite monitoring exercises is to check the list of dividend increases every week. That way, I get to see if my existing investments continue raising dividends, and if my thesis is still working. I also get to identify companies for future research through this exercise. In addition, I get to read the press releases and gauge managements sentiment towards the near-term prospects of the business.
My weekly review focuses on companies that have increased distributions for at least ten years in a row. During the past week, the three companies that raised dividends include:
EastGroup Properties, Inc (EGP) is a self-administered equity real estate investment trust focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States
Eastgroup properties hiked its quarterly dividend by 13.90% to 90 cents/share. This marked the tenth year of consecutive annual dividend increases for this newly minted dividend achiever. Over the past decade, the company has managed to boost dividends at an annualized rate of 3.90%.
The REIT is expecting to generate $5.87/share in FFO in 2021.
The REIT is selling for 29.14 times forward FFO and yields 2.10%.
Altria Group, Inc. (MO) manufactures and sells cigarettes, oral tobacco products, and wine in the United States.
Altria increased its quarterly dividend by 4.70% to 90 cents/share.
This marked the 52nd year of consecutive annual dividend increases for this dividend king.
Over the past decade, Altria has managed to increase dividends at an annualized rate of 9.10%. The pace of annual dividend growth has slowed down in the past two – three years however.
The company is expecting to earn $4.62/share in 2021.
The stock is selling for 10.55 times forward earnings and yields 7.38%. Check my analysis of Altria for more information about the company.
Extra Space Storage Inc. (EXR) is a self-administered and self-managed REIT. The company owned and/or operated 1,906 self-storage stores in 40 states, Washington, D.C. and Puerto Rico.
Extra Space Storage hiked its quarterly dividend by 25% to $1.25/share. This REIT has increased dividends for 11 years in a row. It has a ten year annualized dividend growth of 24.60%, which is very high. The five year annualized growth is 10% and the three year annualized growth is 4.90%.
The REIT is expected to earn $6.57/share in 2021.
The stock sells for 27.51 times forward FFO and yields 2.75%.