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:
- 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