Four Companies Rewarding Their Thankful Shareholders With a Raise

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 review these press releases as part of my monitoring process. For the purposes of this article, I narrowed the list of dividend increases down to a more manageable level.

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.

Over the shortened Thanksgiving week, we had six companies hiking distributions to their thankful shareholders. I have had these companies consistently raising dividends during Thanksgiving week for the past several years that I have been writing these review. The one notable difference is that this year, Becton Dickinson (BDX) raised dividends earlier this month, while McCormick (MKC) is on track to raise the dividend later than usual.

The companies include:

Hormel Foods Corporation (HRL) produces and markets various meat and food products to retail, foodservice, deli, and commercial customers in the United States and internationally. The company operates through four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other.

The company increased its quarterly dividend by 6.10% to $0.26/share. This was the 56th consecutive increase to the annual dividend for this dividend king. The company has managed to grow dividends at an annualized rate of 14.41% over the past decade. Future dividend growth would likely be much slower in the decade ahead, given the lack of earnings growth since 2016.

Between 2011 and 2020, the company managed to grow earnings from 87 cents/share to $1.66/share. 

The company is expected to earn $1.70/share in 2021. The issue I am having is that the company has not managed to grow earnings at all since generating $1.64/share in 2016.

The stock is selling for 27.37 times forward earnings and yields 2.40%.

South Jersey Industries, Inc (SJI) provides energy-related products and services.

The company raised the quarterly dividend by 2.50% to $0.31/share.  This marked the 23rd consecutive year of annual dividend increases for this dividend achiever. 

The company has managed to eke out a small rise in earnings, from $1.49/share in 2011 to $1.62/share in 2020.  The company is expected to earn $1.62/share in 2021.

The stock I selling for 34.90 times forward earnings and yields 5.04%.

The York Water Company (YORW) impounds, purifies, and distributes drinking water. It owns and operates two wastewater collection systems; five wastewater collection and treatment systems; and two reservoirs.

York Water increased the quarterly dividend by 4% to $0.1949/share. This is the 25th year of consecutive annual dividend increases for this newly minted dividend champion.

York Water has managed to grow earnings at a slow but steady clip, from 71 cents/share in 2011 to $1.27/share in 2020. The company is expected to earn $1.28/share in 2021.

The stock is selling at 38.08 times forward earnings and yields 1.61%.

Hingham Institution for Savings (HIFS) provides various financial products and services to individuals and businesses in the United States.

The company increased its quarterly dividend to $0.55/share. This is a 3.77% increase over the previous quarterly dividend and a 17% raise versus the dividend paid during the same time last year. The bank has increased dividends for 26 years in a row.

The bank would also be paying a special dividend of 75 cents/share. It has paid a special dividend in the fourth quarter for 27 consecutive years.

Hingham Institution for Savings grew earnings from $5.67/share in 2011 to $23.25/share in 2020.

The stock is selling at 12.69 times earnings and yields 0.56%.

Relevant Articles:

- Ten Dividend Growth Stocks Rewarding Owners With A Raise

- Twelve Companies Rewarding Shareholders With Regular Dividend Increases

- Five Dividend Growth Stocks Delivering Raises To Shareholders

- Six Dividend Growth Stocks Rewarding Shareholders With Raises

- Fourteen Cash Machines Hiking Dividends Last Week

Fourteen Cash Machines Hiking Dividends Last Week

I review the list of dividend increases every week, as part of my review process. I focus my attention on companies that raised dividends in the current week, and have at least a ten-year track record of annual dividend increases.

Only a company with a strong cash flow generating business can afford to grow dividends for a long period of time. Therefore, a business growing dividends for at least a decade is worth looking at for further research.

There were nine companies that fit the criteria. You can view the five companies in the table below:

Company	Symbol	New Dividend  Payment	Old Dividend Payment	Raise	Years Annual Dividend  Raises	Ten Year Annualized  Dividend    Growth	Forward P/E	Dividend Yield
Aflac	AFL	0.4	0.33	21.21%	39	6.99%	9.47	2.86%
Agilent	A	0.21	0.194	8.25%	11	11.02%	37.6	0.52%	*
Brady	BRC	0.225	0.22	2.27%	37	2.15%	15.98	1.80%
Brown-Forman	BF.B	0.1885	0.1795	5.01%	38	7.72%	42.58	0.99%
City Holding	CHCO	0.6	0.58	3.45%	10	5.30%	14.81	2.88%
Griffon	GFF	0.09	0.08	12.50%	11	9.86%	15.24	1.41%	*
HP	HPQ	0.25	0.19	31.58%	12	16.67%	8.42	3.18%
Matthews	MATW	0.22	0.21	4.76%	27	11.29%	12.68	2.28%
Motorola Solutions	MSI	0.79	0.71	11.27%	12	11.61%	28.44	1.23%	*
Nike	NKE	0.305	0.275	10.91%	20	13.35%	48.62	0.71%
Realty Income	O	0.246	0.236	4.24%	27	4.93%	20.58	4.16%
Royal Gold	RGLD	0.35	0.3	16.67%	21	12.02%	25.43	1.31%
United Bankshares	UBSI	0.36	0.35	2.86%	48	1.55%	13.34	3.66%
Unity Bancorp	UNTY	0.1	0.09	11.11%	10	17.08%	8.14	1.48%	*

This is a list of companies for further review. Most seem attractive as businesses, but that doesn’t mean that they should be invested in at any price, regardless of valuation.

Relevant Articles:

- Ten Dividend Growth Stocks Rewarding Owners With A Raise

- Twelve Companies Rewarding Shareholders With Regular Dividend Increases

- Five Dividend Growth Stocks Delivering Raises To Shareholders

- Six Dividend Growth Stocks Rewarding Shareholders With Raises

- Five Dividend Growth Stocks In the News

Dividend Initiators: A Fertile Ground For Research

As part of my Dividend Growth Investing strategy, I have always looked to invest in companies that have managed to grow dividends for at least a certain number of years. The logic is that only a company with a certain type of business can afford to grow dividends over a full business cycle.

Historically, a business cycle lasted five years or so. I always looked for companies that can potentially grow dividends for years, if not decades down the road. I am the type of investor who wants to assemble a portfolio of quality dividend growth stocks that grow earnings, dividends and intrinsic values over time, and then sit back and let the power of compounding do the heavy lifting for me. I do not like to trade in and out of stocks, and I do want to focus on companies in industries with slow rate of change that can afford to grow for years, without having to tinker. I am a long-term investor, who plans to hold forever. That is, until the dividends are cut, or the company is acquired.

The argument against waiting for 10 or 25 years of consecutive annual dividend increases is that I may be potentially leaving a lot of money on the line.

That being said, over the past 15 years or so, I have observed a lot of good companies with lower dividend streaks reward shareholders fantastically well. A lot of these companies are the types that I knew, and I understood. 

A few notable dividend initiators include:

Apple (AAPL), which declared a dividend on July 24, 2012, but first announced it in March 2012.. The stock has done ok since then.

Starbucks (SBUX), which declared its first dividend in March 2010. 

Tractor Supply (TSCO), which declared its first dividend in March 2010. Check my analysis of Tractor Supply here.

Visa (V), which initiated a dividend in August 2008.

Microsoft (MSFT), which initiated a dividend in early 2003, right after the dot-com bubble collapsed

Of course, this is not a method that would be right 100% of the time. If you bought Gilead Sciences (GILD) when it initiated a dividend, you would have lost money.

I believe that a good screening process could involve looking for new dividend initiators, and then monitoring financials. When the dividend is increased for the first time, it may be time to review financials and valuation, before determining if the business makes sense.

That being said, when investing in companies that have only raised dividends for an year or so, I would expect a higher turnover rate. In other words, companies that just recently start paying dividends may end up cutting them if they turn out to be more cyclical than previously believed. They may also be more likely to not care as much about growing dividends in the future. It would be hard to know in advance how serious management is about building a streak of annual increases in advance. On the other hand, some of these companies may end up being taken over too.

I do believe however that these dividend initiators may offer a very good opportunity to make above average total returns and very high yields on cost. These are businesses that have grown for a long time, and finally realize that they are making more than what they can reinvest. This shows that management is prudent and self-aware. In quite a lot of these cases, management is still deploying a lot of capital for future growth projects, and the growth trajectory is far from over. Just as I mentioned above however, be aware that most of these businesses may not be able to grow dividends for a long time, versus what I would expect from a dividend achiever or an aristocrat. For some of them however, they could realistically grow that dividend for decades. These rare companies would likely generate a lot of profits and probably compensate for many mistakes along the way from the ones that fizzle out.

Relevant Articles:

- Seven Dividend Stocks in the News

- Should dividend investors care about Apple’s Dividend?

- S&P 500 companies with the fastest dividend growth over the past decade

- World's Largest Dividend Payers

Seven companies committed to growing dividends

I review the list of dividend increases each week. This is part of my process to review existing holdings and identify companies for further review. This is also a good exercise to review fundamental trends in earnings, revenues, dividends, payout ratios etc, and look at valuations. Quite often, the dividend increase announcement comes along with an annual or quarterly earnings release. Other times, it is a reminder to review the latest financial figures. 

Regular readers know that I usually focus on the companies with a ten year track record of annual dividend increases for this review. I also like reviewing the tone of the press releases, and try to evaluate how committed management is to prudent capital allocation that allows companies to raise dividends over time. Over the past week there were several companies that announced dividend raises. I have included a brief overview of each, along with management comments about the dividend increase:

Automatic Data Processing, Inc. (ADP) provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO).

Automatic Data Processing increased its quarterly dividend by 12% to $1.04/share. The increased cash dividend marks the 47th consecutive year in which ADP, a dividend aristocrat, has raised its quarterly dividend. It has increased dividends at an annualized rate of 11.80% over the past decade.

"This 12% increase in our quarterly dividend represents a strong signal of the board's confidence in ADP's prospects for this fiscal year and beyond. Our dividend is a cornerstone to our long-standing commitment to shareholder-friendly actions, and we are pleased to increase it for a 47th consecutive year," said Carlos Rodriguez.

Between 2012 and 2021, ADP managed to grow earnings from $2.82/share to $6.07/share. The company is expected to earn $6.76/share in 2022.

The stock is selling for 34.15 times forward earnings and yields 1.80%.

Atmos Energy Corporation (ATO) engages in the regulated natural gas distribution, and pipeline and storage businesses in the United States. It operates in two segments, Distribution, and Pipeline and Storage.

Atmos Energy increased its quarterly dividend by 8.80% to 68 cents/share. This is the 38th consecutive year of annual dividend increases for this dividend aristocrat. It has increased dividends at an annualized rate of 5.70% over the past decade.

Between 2011 and 2020, Atmos managed to grow earnings from $2.27/share to $4.89/share. The company is expected to earn $5.43/share.

The stock is selling for 17.57 times forward earnings and yields 2.85%.

Lancaster Colony Corporation (LANC) manufactures and markets food products for the retail and foodservice markets in the United States. The company operates in two segments, Retail and Foodservice.

Lancaster Colony increased the quarterly dividend by 6.70% to 80 cents/share. This is the 59 straight years of regular cash dividend increases for this dividend king. It has increased dividends at an annualized rate of 8.80% over the past decade.

CEO David A. Ciesinski said, "The increased regular cash dividend reflects the company's continued strong financial position and will be the 234th consecutive quarterly cash dividend paid by the company since September 1963."  He noted that the indicated annual payout for the current fiscal year ending June 30, 2022 is $3.15 per share, up from the $2.95 per share paid in fiscal 2021.

Between 2012 and 2021, Lancaster Colony managed to grow earnings from $3.51/share to $5.16/share. The company is expected to earn $5.88/share in 2022.

The stock is selling for 27.80 times forward earnings and yields 1.96%

Roper Technologies, Inc. (ROP) designs and develops software, and engineered products and solutions.

The company raised its quarterly dividend by 10.20% to 62 cents/share. This is the 29th consecutive annual dividend increase for this dividend aristocrat. It has increased dividends at an annualized rate of 18.40% over the past decade.

Between 2011 and 2020, Roper managed to grow earnings from $4.34/share to $8.98/share. The company is expected to earn $14.46/year

The stock is selling for 33.74 times forward earnings and yields 0.51%.

Assurant, Inc. (AIZ) together with its subsidiaries, provides lifestyle and housing solutions that support, protect, and connect consumer purchases in North America, Latin America, Europe, and the Asia Pacific. The company operates through three segments: Global Lifestyle, Global Housing, and Global Preneed.

Assurant raised its quarterly dividend by 3% to 68 cents/share. This marked the 17th year of consecutive annual dividend increase for this dividend achiever.  It has increased dividends at an annualized rate of 15% over the past decade.

“Our disciplined capital management, driven by robust cash generation in our market-leading lifestyle and housing businesses, has always been a key differentiator for Assurant,” said Alan Colberg, CEO, Assurant. “That has allowed us flexibility to invest in our growth businesses and return capital to shareholders, including the recent completion of our three-year $1.35 billion capital return objective. Looking ahead, we are increasing the dividend 3 percent, marking the 17th consecutive dividend raise since our initial public offering and reaffirming the strength and ongoing visibility of Assurant’s future cash flow generation.”

Between 2011 to 2020, the company managed to grow earnings from $5.51/share to $6.99/share. The company is expected to earn $9.20/share in 2021.

The stock is selling for 17.41 times forward earnings and yields 1.70%.

Cabot Corporation (CBT) operates as a specialty chemicals and performance materials company. It operates through three segments: Reinforcement Materials, Performance Chemicals, and Purification Solutions.

Cabot increased its quarterly dividend by 5.70% to 37 cents/share. This was the tenth consecutive annual dividend increase for this newly minted dividend achiever. It has increased dividends at an annualized rate of 6.90% over the past decade.

“Our longstanding history of consistently paying dividends for over 50 years is a source of great pride for us, and this decision further affirms our continued commitment to provide value to our shareholders,” said Sean Keohane, President and Chief Executive Officer of Cabot Corporation. “The decision to increase the dividend demonstrates the Board’s confidence in our ability to generate strong cash flow to fund high confidence growth investments and return cash to shareholders through a competitive dividend.”

The company is expected to earn $5.42/share in 2021. For reference, Cabot earned $3.57/share in 2011, but lost $4.21/share in 2020.

The stock is selling for 10.75 times forward earnings and yields 2.54%.

MDU Resources Group, Inc. (MDU) engages in the regulated energy delivery, and construction materials and services businesses in the United States.

MDU resources raised its quarterly dividend by 2.40% to 21.75 cents/share. This is the 31st consecutive year that this dividend champion has increased its common stock dividend. It has increased dividends at an annualized rate of 2.80% over the past decade.

"We remain committed to paying dividends to our shareholders as part of the total value they receive from their investment in MDU Resources," said Dennis W. Johnson, chair of the board. "We also are proud of our long tradition of annually increasing those dividends."

MDU Resources grew earnings from $1.12/share in 2011 to $1.95/share in 2020.  The company is expected to earn $2.02/share in 2021.

The stock sells for 14.33 times forward earnings and yields 3%.

Relevant Articles:

- Ten Dividend Growth Stocks Rewarding Owners With A Raise

- Twelve Companies Rewarding Shareholders With Regular Dividend Increases

- Five Dividend Growth Stocks Delivering Raises To Shareholders

- Six Dividend Growth Stocks Rewarding Shareholders With Raises

- Five Dividend Growth Stocks In the News