26 Dividend Champions for Further Research

I generate investment ideas from different sources. 

• I look at the list of weekly dividend increases. 
• I also try to identify companies for research based on my everyday spending patterns. In other words, I try to unleash my inner Peter Lynch. 
• I also review the list of dividend achievers/champions/aristocrats for bargains. 
• From time to time, I also try to apply different screening parameters to identify companies for further research.

Today, I decided to do just that. My screening criteria were as followed:

1) A company has increased dividends for 25 years in a row

2) A company yields at least 2% today

3) The company has a 10 year annualized dividend growth of at least 6%/year

4) The company has a 1, 3 and 5 year annualized dividend growth of at least 6%/year

Ticker	Company	Dividend Streak	Dividend Yield	10 year Dividend Growth
AFL	Aflac Incorporated	40	2.89%	7.94%
AOS	A. O. Smith Corporation	28	2.05%	21.60%
APD	Air Products and Chemicals, Inc.	40	2.69%	10.11%
ATO	Atmos Energy Corporation	38	2.43%	6.47%
CNI	Canadian National Railway Company	27	2.06%	11.59%
CSVI	Computer Services, Inc.	50	2.92%	16.04%
ENB	Enbridge Inc.	26	6.38%	10.48%
ERIE	Erie Indemnity Company	32	2.31%	7.23%
FFMR	First Farmers Financial Corporation	32	2.80%	15.39%
GD	General Dynamics Corporation	31	2.28%	9.82%
GRC	The Gorman-Rupp Company	49	2.40%	8.41%
ITW	Illinois Tool Works Inc.	47	2.68%	12.89%
LANC	Lancaster Colony Corporation	59	2.48%	8.49%
LOW	Lowe's Companies, Inc.	60	2.40%	18.80%
MDT	Medtronic plc	45	3.03%	9.98%
NEE	NextEra Energy, Inc.	28	2.19%	10.84%
NJR	New Jersey Resources Corporation	26	3.26%	6.57%
PEP	PepsiCo, Inc.	50	2.76%	7.74%
PH	Parker-Hannifin Corporation	66	2.16%	10.75%
PPG	PPG Industries, Inc.	50	2.06%	7.18%
PSBQ	PSB Holdings, Inc.	29	2.13%	7.14%
SJW	SJW Group	55	2.31%	7.02%
SRCE	1st Source Corporation	34	2.73%	7.60%
TGT	Target Corporation	55	3.06%	11.13%
TROW	T. Rowe Price Group, Inc.	36	4.22%	13.29%
WTRG	Essential Utilities, Inc.	29	2.34%	7.49%

This is a list for further research, not an automatic buy recommendation of course. 

As part of my initial review, I would look at each company individually first. 

I look for:

1) A minimum streak of annual dividend increases

2) Growth in earnings per share over the past decade

3) Growth in dividends per share over the past decade

4) Trends in the dividend payout ratio

5) Business model and determining if company can grow the bottom line in the future

After a business passes through these filters, I would then have to determine the right valuation to invest at. 

That's the fun part, because it is dependent on various factors as well. It depends on interest rates, growth in earnings, dependability of the earnings stream, overall valuations etc. Other factors such as existing portfolio weights can also affect my decision to invest in companies. For example, I may decide against buying a stock yielding 2%, selling at a P/E of 15 and growing dividends at 7%, but may buy another stock that may appear more expensive because I want to diversify and manage risk.

You may check my analysis of General Dynamics (GD) for more information on what I look for when I review a company.

The above list was inspired by the fact that a company that yields 2% today but grows dividends at 6%/year would generate a higher dividend income over time, than a company that yields 4% today but doesn't grow dividends at more than 2% - 3%/year. This effect is particularly noticeable if you start reinvesting those dividends too.  Of course, investing is the intersection between yield and growth, purchased at the right entry price too. Life is full of trade-offs, and investing and portfolio construction are not exceptions.

In my portfolio, I try to hold companies with different yield/growth characteristics. As a result, it is a mixture of:

1) Companies that have higher yield, but I expect slower dividend growth

2) Companies in the sweet spot, which have average yields but the expectation is for an average dividend growth

3) Companies that have lower yields today, but are expected to deliver higher dividend growth over time.

Relevant Articles:

- Types of dividend growth stocks

- How to value dividend stocks

- My screening criteria for dividend growth stocks

- Why Investors Should Look Beyond Typical Dividend Growth Screens

Nine Dividend Growth Stocks Rewarding Shareholders With a Raise

I review the list of dividend increases as part of my monitoring process.

I review the most recent dividend increase, and compare it to the ten year average to gauge it. While I generally prefer a stable rate of dividend growth that is close to the average, I also understand that businesses face different short-term cycles as well.

I also review the growth in earnings, and payout ratios, in order to determine the likelihood of future dividend increases. A company that grows earnings and maintains a stable payout ratio will be more likely to continue growing that future dividend income stream to investors. On the other hand, a company with a stagnant earnings per share can only be able to grow dividends through an expansion to the payout ratio, which is unsustainable.

Last but not least, I also look at current valuation factors such as P/E ratio and dividend yield, while also taking into consideration the past growth and future growth prospects for each enterprise.

Community Bank System, Inc. (CBU) operates as the bank holding company for Community Bank, N.A. that provides various banking and other financial services to retail, commercial, and municipal customers. It operates through three segments: Banking, Employee Benefit Services, and All Other. 

The company hiked quarterly dividends by 2.30% to $0.44/share. This was the 30th consecutive year of dividend increases for this dividend champion. Over the past decade, CBU has managed to grow dividends at an annualized rate of 5.40%.

The stock sells for 18.71 times forward earnings and yields 2.61%.

Computer Services, Inc. (CSVI) provides core processing, digital banking, managed services, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate entities in the United States. 

The company raised its quarterly dividend by 7.40% to $0.29/share. According to the company's press release, this cash dividend marks the 51st consecutive annual increase in CSI’s cash dividends paid to shareholders. Over the past decade, Computer Services has managed to grow dividends at an annualized rate of 16%.

The stock sells for 16.80 times earnings and yields 3%.

Chesapeake Financial Shares, Inc. (CPKF) operates as the bank holding company for Chesapeake Bank that provides various banking products and services in Virginia.

The company increased quarterly dividends by 7.10% to $0.15/share. This was the 29th year of consecutive annual dividend increases for this dividend champion. Over the past decade, Chesapeake Financial Shares has managed to grow dividends at an annualized rate of 6.80%.

The stock sells for 8.72 times earnings and yields 2.40%.

Landstar System, Inc. (LSTR) provides integrated transportation management solutions in the United States, Canada, Mexico, and internationally. The company operates through two segments: Transportation Logistics, and Insurance. 

The company boosted quarterly dividends by 20% to $0.30/share. This was the 17th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, Landstar System has managed to grow dividends at an annualized rate of 15.90%.

The stock sells for 12.73 times forward earnings and yields 0.65%.

Mercantile Bank Corporation (MBWM) operates as the bank holding company for Mercantile Bank of Michigan that provides commercial and retail banking services to small- to medium-sized businesses and individuals in the United States.

The company raised quarterly dividends by 3.20% to $0.32/share. This was the 10th year of consecutive annual dividend increases for this newly minted dividend achiever.

The stock sells for 9.46 times forward earnings and yields 3.99%.

PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials worldwide. 

The company increased quarterly dividends by 5.10% to $0.62/share. This event marks the 51 consecutive years of annual increases for this dividend king. Over the past decade, it has managed to grow distributions at an annualized rate of 7.20%.

The stock sells for 17.70 times forward earnings and yields 1.92%. Check my analysis of PPG Industries for more information about the company,

Regions Financial Corporation (RF) is a financial holding company that provides banking and bank-related services to individual and corporate customers. It operates through three segments: Corporate Bank, Consumer Bank, and Wealth Management. 

The company increased quarterly dividends by 17.60% to $0.20/share. This is the tenth consecutive year of annual dividend increases for this newly minted dividend achiever. The company cut dividends during the Global Financial Crisis, which explains the 31.80% annualized pace of dividend growth over the past decade. The dividend is still below the 2008 level of $0.38/share however.

The stock sells for 9.05 times forward earnings and yields 3.95%.

1st Source Corporation (SRCE) operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services, trust and wealth advisory services, and insurance products to individual and business clients.

The bank raised its quarterly dividend by 3.20% to $0.32/share. This was the 35th year of annual dividend increases for this dividend champion. Over the past decade, the company managed to grow dividends at an annualized rate of 7.60%.

The stock sells for 10.40 times forward earnings and yields 2.75%

Stanley Black & Decker, Inc. (SWK) engages in the tools and storage and industrial businesses in the United States, Canada, rest of Americas, France, rest of Europe, and Asia. 

The company increased quarterly dividends by 1.30% to $0.80/share. This marks the 55th consecutive annual dividend increase for this dividend king. Over the past decade, the company had managed to grow dividends at an annualized rate of 6.20%.

The stock sells for 11.89 times forward earnings and yields 2.73%. Check my analysis of Stanley Black & Decker from here.

Relevant Articles:

- Dividend Champions List for 2022

- Dividend Kings List for 2022

- Dividend Achievers Offer Income Growth and Capital Appreciation

- How to read my weekly dividend increase reports

Eight Dividend Growth Companies Rewarding Owners With a Raise Last Week

As part of my monitoring process, I review the list of dividend increases every week This activity helps me to monitor the business performance of any companies I am invested in. It also helps me to identify any hidden dividend gems, and place them on my list for further research.

My reviews are an example of the quick way I use to evaluate companies, before deciding if they are worth a second look later or not.

The companies in today’s article have managed to grow dividends for at least ten years in a row. These companies also announced a dividend increase during the past week. The companies include:

The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. It operates through four segments: Health and Wellness, Household, Lifestyle, and International.

The company raised quarterly dividends by 1.70% to $1.18/share. This marked the 45th year of annual dividend increases for this dividend aristocrat.

Over the past decade, the company has managed to grow dividends at an annualized rate of 6.81%, which is lower than the five year rate of 7.71%

The stock sells for 35.57 times forward earnings and yields 3.15%.

Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and New Power. 

The company raised quarterly dividends by 8.30% to $1.57/share. This was the 17th consecutive annual dividend increase for this dividend achiever.

Over the past decade, the company has managed to boost dividends at an annualized rate of 15.50%. The five year rate is 7%.

The stock sells for 11.10 times forward earnings and yields 2.98%.

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

The company raised quarterly dividends by 4% to $0.59/share. This was an 11% increase in the dividend over the payment in September 2021. The bank has increased dividends for 27 years in a row.

The stock sells for 10.23 times earnings and yields 0.70%.

Marsh & McLennan Companies, Inc. (MMC) is a professional services company, provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. It operates in two segments, Risk and Insurance Services, and Consulting. 

The company raised its quarterly dividend by 10.30% to $0.59/share. This was the 16th consecutive annual dividend increases for this dividend achiever. The company has managed to grow dividends at an annualized rate of 8.80% over the past decade.

The stock sells for 21.90 times forward earnings and yields 1.45%.

National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long-term, net leases. 

This REIT hiked quarterly dividends by 3.80% to $0.55/share. This marks the 33rd consecutive annual dividend increase for this dividend champion.

Over the past decade, the REIT managed to boost dividends at an annualized rate of 3.25%.

The REIT sells for 13.95 times forward FFO and yields 4.93%.

Ryder System, Inc. (R) operates as a logistics and transportation company worldwide. The company operates through three segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS). 

The company raised quarterly dividends by 6.90% to $0.62/share. This is the 18th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, the company has managed to increase distributions at an annualized rate of 7.40%.

The stock sells for 5 times forward earnings and yields 3.27%

The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. It operates in three segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods.

The company raised its quarterly dividend by 3% to $1.02/share. This marked the 25th consecutive year of dividend increases for this newly minted dividend champion. Over the past decade, the company has managed to grow dividends at an annualized rate of 7.50%. The five year rate of dividend growth is around 5.90%.

The stock sells for 16.32 times forward earnings and yields 3%.

Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and beauty retail company. It operates through two segments, the United States and International. 

The company increased quarterly dividends by 0.50% to $0.48/share. This marked the 47th consecutive year of dividend increases for this dividend aristocrat.

Over the past decade, the company has managed to grow dividends at an annualized rate of 7.81%. The 3 year rate is at 2.76% however, while the five year rate is 4.95%.

The stock sells for 7.31 times forward earnings and yields 5.18%.

Relevant Articles:

- How dividends protect income from inflation

- Three Notable Recent Dividend Increases

- If you didn't get an 8.60% pay increase, you received a pay cut

- Are Dividend Increases Beating Inflation in 2022?

Dividend Stock Analysis of Kroger (KR)

The Kroger Co. (KR) operates as a retailer in the United States. The company operates supermarkets, multi-department stores, marketplace stores, and price impact warehouse stores. 

Kroger is a dividend achiever, which recently hiked quarterly dividends by 23.80% to 26 cents/share. This marked the 16th consecutive year of annual dividend increases for the company.

Warren Buffett has also been slowly building up a position in Kroger.

During the past decade, Kroger has managed to grow dividends at an annualized rate of 13.80%.

Kroger managed to grow earnings per share from 95 cents/share in 2009 to $2.17/share in 2022. The 2018 numbers are adjusted to exclude the gain on sale of Kroger’s convenience store business. The company is expected to generate $3.91/share in 2023 and $4.04/share in 2024.

Last year was a nice bump in earnings, given the fact that earnings per share had gone nowhere since 2015. That was due to investments in the company’s business going forward. It appears that earnings went lower in 2021 as fewer consumers stock up on goods like they did at the beginning of the pandemic.

Kroger's financial strategy is to use its free cash flow to drive growth while also maintaining its current investment grade debt rating and returning capital to shareholders. The company actively balances the use of its cash flow to achieve these goals.

The grocery business is highly competitive, with Kroger competing against the likes of Wal-Mart and Target, as well as mom and pop grocery stores, as well as the likes of Amazon. The company needs to continuously invest in stores, drive efficient operations, new products and innovation ( such as online, and delivery/pick up). Kroger does have the scale of operations to effectively compete, and also has attractive store locations. This allows it to be able to do online purchase and pick up at 57% of its stores and home delivery for 91% of customers. Back in 2018, Kroger invested in Ocado, which is its exclusive grocery delivery partner in the US. Ocado delivers groceries in Europe. Kroger has also made investments in new warehouses, store optimization, expanding its own private label brands and digital, in an effort to drive long-term sales growth. Same store sales growth and cost reductions are the drivers that will propel earnings per share growth over time.

Kroger is also competing by offering a large variety of private label brands that it owns and manufactures internally. This allows it to generate very good profit margins on these items relative to branded products.

Kroger also competes by including pharmacies in order three-quarters of its stores and a gas station in over half of its locations. Customers who fill in a prescription by getting in the store are also likely to make another purchase or two. The same goes for customers who would appreciate the convenience of shopping for gas, filling prescriptions and doing their grocery shopping.

Kroger is also planning to develop alternative revenue streams using the data it collects on shoppers, targeting personal finance products and media ad revenues. The company collects a lot of date on customers that shop there, which can also be used as a tool to provide a more personalized shopping experience. Another alternative revenue stream is the Home Chef meal delivery service, which provides ingredients for meals in 48 states in the United States. Kroger acquired Home Chef in 2018, and the meal kits are available at Kroger locations, including a few Walgreen’s stores.

Kroger has rewarded shareholders handsomely with dividends and share buybacks. Between 2009 and 2022, the number of shares outstanding has gone down from 1.31 billion shares to 754 million shares. This means that shareholders from 2009, who stayed invested in Kroger, increased their ownership in the company by two-thirds without doing anything.

The dividend payout ratio increased from 17.90% in 2009 to 36% in 2022.  A lower payout ratio provides an adequate margin of safety in the dividend payment, which can provide protection against short-term turbulence in earnings per share. There is room for increase in the payout ratio from here. Future dividend growth can be helped by a gradual increase in the payout ratio. If Kroger is unable to jump start earnings growth however, there will be a natural limit to further dividend growth. I would get worried if earnings are not growing, but dividends are, and the payout ratio exceeds 60%. 

Currently the stock is attractively valued at 12.18 times forward earnings and offer an attractive dividend yield of 1.76%.

Relevant Articles:

- Three Dividend Achievers Distributing More Cash to Shareholders
- Does Paying a Dividend Reduce a Company’s Value?
- Attractively Valued Dividend Contenders To Consider
- Supervalu (SVU) Dividend Stock Analysis