As part of my monitoring process, I review the list of dividend increases every week. I usually focus on companies that have managed to boost dividends to shareholders for at least a decade (with one exception this week). It looks like this year may be classified as the year of rebounding of dividend growth.
Over the past week, the following companies raised their dividends to shareholders:|
Company |
Ticker |
New Dividend |
Old Dividend |
Increase |
Years Dividend Increases |
P/E |
Dividend Yield |
10 year Annualized Dividend Growth |
|
Auburn National Bancorporation,
Inc. |
AUBN |
0.265 |
0.26 |
1.92% |
21 |
14.90 |
3.14% |
2.66% |
|
Brookfield Asset Management Inc. |
BAM |
0.14 |
0.13 |
7.69% |
11 |
19.86 |
0.96% |
10.07% |
|
British American Tobacco |
BTI |
£2.178 |
£2.156 |
1.02% |
25 |
9.47 |
6.46% |
5.20% |
|
Amdocs Limited |
DOX |
0.395 |
0.36 |
9.72% |
11 |
15.21 |
1.99% |
13.27% |
|
The Interpublic Group of
Companies, Inc. |
IPG |
0.29 |
0.27 |
7.41% |
10 |
13.14 |
3.32% |
16.23% |
|
Landmark Bancorp, Inc. |
LARK |
0.21 |
0.2 |
5.00% |
19 |
7.71 |
3.03% |
5.54% |
|
Moody's Corporation |
MCO |
0.7 |
0.62 |
12.90% |
13 |
26.30 |
0.84% |
16.58% |
|
3M Company |
MMM |
1.49 |
1.48 |
0.68% |
64 |
15.36 |
3.74% |
10.41% |
|
PepsiCo, Inc. |
PEP |
1.15 |
1.075 |
6.98% |
50 |
25.20 |
2.73% |
7.74% |
|
Primerica, Inc. |
PRI |
0.55 |
0.47 |
17.02% |
13 |
12.91 |
1.43% |
34.10% |
|
Robert Half International Inc. |
RHI |
0.43 |
0.38 |
13.16% |
19 |
20.01 |
1.42% |
10.50% |
|
Thomson Reuters Corporation |
TRI |
0.445 |
0.405 |
9.88% |
29 |
42.42 |
1.73% |
2.71% |
|
T. Rowe Price Group, Inc. |
TROW |
1.2 |
1.08 |
11.11% |
36 |
11.82 |
3.33% |
13.29% |
|
Utah Medical Products, Inc. |
UTMD |
0.29 |
0.285 |
1.75% |
19 |
23.41 |
1.23% |
1.89% |
|
Watsco, Inc. |
WSO |
2.2 |
1.95 |
12.82% |
9 |
22.20 |
3.35% |
13.08% |
The next step in the process would be to review trends in earnings per share, in order to determine if the dividend growth is on strong ground. Rising earnings per share provide the fuel behind future dividend increases.
This should be followed by reviewing the trends in dividend payout ratios, in order to check the health of dividend payments. A rising payout ratio over time shows that future dividend growth may be in jeopardy. There is a natural limit to dividends increasing if earnings are stagnant or if dividends grow faster than earnings.
Obtaining an understanding behind the company’s business is helpful, in order to determine how defensible the dividend will be during the next recession. Certain companies are more immune to any downside, while others follow very closely the rise and fall in the economic cycle.
Of course, valuation is important, but it is more art than science. P/E ratios are not created equal. A stock with a P/E of 10 may turn out to be more expensive than a stock with a P/E of 30, if the latter is growing earnings and the former isn’t. Plus, the low P/E stock may be in a cyclical industry whose earnings will decline during the next recession, increasing the odds of a dividend cut. The high P/E company may be in an industry where earnings are somewhat recession resistant, which means that the likelihood of dividend cuts during the next recession is lower.