I review the list of dividend increases as part of my monitoring process. This is one of the exercises I use that helps me to monitor existing holdings and potentially uncover new companies for further research. I do focus on companies with at least a ten year track record of annual dividend increases, in order to filter out companies that are unable to establish a track record due to their business being cyclical for example.
Companies that are committed to a philosophy of intelligent capital allocation tend to reinvest in the opportunities with higher returns for expanding the business. Paying out a dividend forces management to focus on the opportunities with the highest return on investment. That's the secret sauce that drives shareholder returns. They return any excess cashflows to shareholders over time in the form of dividends and dividend increases.
Dividend increases are a strong signaling mechanism to evaluate management's assessment of how their business is doing. That's because management teams tend to review the business environment, the business needs, its plans for growth or expansion, competitors, and then decide how much excess cashflows they are going to distribute to shareholders. Thus, a dividend increase is a pretty good proxy for the near term prospects of the business. A long history of dividend increases is a testament to a company with a strong business model, and ability to generate a growing stream of cashflows over time.
Over the past week, there were four companies that increased dividends to shareholders and which also have a ten year track record of annual dividend increases. The companies include:
American Financial Group, Inc. (AFG), an insurance holding company, provides specialty property and casualty insurance products in the United States.
The company raised quarterly dividends by 12.70% to $0.71/share. This is the 18th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to increase distributions at an annualized rate of 12.40%.
Between 2013 and 2022, the company managed to grow earnings per share from $5.27 to $10.55.
The company is expected to earn $10.96/share in 2023.
The stock sells for 10.26 times forward earnings and yields 2.52%.
Bank OZK (OZK) provides various retail and commercial banking services.
The bank increased quarterly dividends to $0.37/share. This was a 2.80% increase over the previous quarterly dividend. It also represents a 12.12% increase over the dividend paid during the same time last year. This dividend champion has increased distributions for 26 consecutive years. Over the past decade, it has managed to increase distributions at an annualized rate of 17.60%.
Between 2013 and 2022, the company increased earnings from $1.27/share to $4.55/share. The company is expected to earn $5.77/share in 2023.
The stock sells for 6.35 times forward earnings and yields 4.04%.
Lockheed Martin Corporation (LMT) is a security and aerospace company, which engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.
The company increased quarterly dividends by 5% to $3.15/share. This marks the 21st consecutive year of dividend increases for this dividend achiever. Over the past decade, it has managed to increase distributions at an annualized rate of 10.60%.
Between 2013 and 2022, the company grew earnings from $9.29/share to $21.74/share.
The company is expected to earn $27.12 in 2023.
The stock sells for 14.78 times forward earnings and yields 3.15%.
McDonald's Corporation (MCD) operates and franchises McDonald's restaurants in the United States and internationally.
The company increased quarterly dividends by 10% to $1.67/share. McDonald's is a dividend aristocrat with a strong history of returning capital to its shareholders. The company has raised its dividend for 47 consecutive years since paying its first dividend in 1976. Over the past decade, it has managed to increase distributions at an annualized rate of 7%.
Between 2013 and 2022, the company grew earnings from $5.59/share to $8.39/share.
The company is expected to earn $11.58 in 2023.
The stock sells for 21.44 times forward earnings and yields 2.69%.
RPM International Inc. (RPM) manufactures and sells specialty chemicals for the industrial, specialty, and consumer markets worldwide.
The company raised its quarterly dividends by 10% to $0.46/share. This is the 50th consecutive year the company has increased its cash dividend. Over the past decade, the company managed to increase dividends at an annualized rate of 6.40%.
Between 2013 and 2022, the company grew earnings from $2.20/share to $3.74/share.
The company is expected to earn $4.98/share in 2023.
The stock sells for 19.70 times forward earnings and yields 1.87%.
