I review the list of dividend increases as part of my monitoring process every week. This exercise helps me review the performance of existing holdings, and potentially identify companies for further research.
It's helpful to point out how I quickly evaluate a company, before deciding if it is worth additional research for potential inclusion in my portfolio.
When I evaluate a company I look at:
1. Trends in earnings per share over the past decade. Without growth in earnings per share, future dividend growth will be difficult. This growth can be achieved in any sort of way, but it is the fuel behind future dividend growth and increases in intrinsic value.
2. Trends in the payout ratio over the past decade. The payout ratio helps me evaluate dividend safety, and in general the lower the ratio the better. However I also want to ensure that growth in dividends is not generated through an increase in the payout ratio over time, because that has a natural limit. There is some nuance here as well, as companies in the initial phase of dividend growth can grow the payout ratio from a low base. But in general, I want to see an adequate payout ratio that is in a range.
3. I like to review the trends in dividend growth, and compare the most recent increases to it. We all want stable rate of dividend growth, but in reality the rate of change tends to fluctuate a little bit. I do not want a decelerating dividend growth, coupled with a recent streak of token dividend raises. Those signal potential trouble ahead. Dividend increases have a signaling effect.
4. I also look at the valuation as well. This takes into consideration P/E ratio, earnings growth, dividend yield, in order to come up with an estimated range of value. One needs to take into consideration how cyclical the earnings are as well. There is a fair amount of trade-offs to think through as well, mostly between yield and growth, as well as how sustainable that yield and growth really are.
5. Once a company makes it through those screens, we have to review it qualitatively as well. This is subjective, and part art, part science. The most brilliant equity analysts can pick up how a company makes money, if it has any competitive advantages, and would be able to generate high returns on investment in the future, given industry trends. However, it is important not to fall prey to narrative bias and wishful thinking and spend the time looking for qualitative factors that justify a company for which the numbers tell a different story.
With this out of the way, it's time to look at the reason for today's post - reviewing actual dividend increases from last week.
Over the past week there were six companies that managed to increase dividends, which also have at least a ten year track record of annual dividend increases. The companies include:
General Dynamics Corporation (GD) operates as an aerospace and defense company worldwide. It operates through four segments: Aerospace, Marine Systems, Combat Systems, and Technologies.
The company increased quarterly dividends by 7.60% to $1.42/share. This is the 30th year of consecutive annual dividend increases for this dividend aristocrat.
Over the past decade, the company has managed to increase dividends at an annualized rate of 9.07%.
The company has managed to grow earnings from $7.56/share in 2014 to $12.14/share in 2023. The company is expected to earn $14.65/share in 2024.
The stock sells for 18.60 times forward earnings and yields 2.08%.
Horace Mann Educators Corporation (HMN) operates as an insurance holding company in the United States. The company operates through Property & Casualty, Life & Retirement, and Supplemental & Group Benefits segments.
The company increased quarterly dividends by 3% to $0.34/share. This is the 16th consecutive year the Board has increased the annual shareholder cash dividend.
Over the past decade, the company has managed to increase dividends at an annualized rate of 5.40%.
Between 2014 and 2023 the company's earnings went from $2.50/share to $1.09/share. The company is expected to earn $3.19/share in 2024. The earnings stream is volatile.
The stock sells for 11 times forward earnings and yields 3.87%.
Kadant Inc. (KAI) supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling.
The company increased quarterly dividends by 10.30% to $0.32/share. This is the 12th consecutive annual dividend increase for this dividend achiever.
Over the past decade, the company has managed to increase dividends at an annualized rate of 16.28%.
The company has managed to increase earnings from $2.61/share in 2014 to $9.92/share in 2023. Kaidant is expected to earn $9.98/share in 2024.
The stock sells for 32.76 times forward earnings and yields 0.35%.
QUALCOMM Incorporated (QCOM) engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
The company increased quarterly dividends by 6.30% to $0.85/share. This is the 22nd consecutive annual dividend increase for this dividend achiever.
Over the past decade, the company has managed to increase dividends at an annualized rate of 9.25%.
Between 2014 and 2023, the company managed to grow earnings per share from $4.73/share to $6.47/share.
The company is expected to earn $9.70/share in 2024.
The stock sells for 17.60 times forward earnings and yields 2%.
SpartanNash Company (SPTN) distributes and retails grocery products in the United States of America. It operates through Wholesale and Retail segments.
The company increased quarterly dividends by 1.20% to $0.2175/share. This is the fourteenth consecutive annual dividend increase for this dividend achiever.
Over the past decade, the company has managed to increase dividends at an annualized rate of 9.40%.
The company's earnings per share basically went nowhere over the past decade. The company earned $1.56/share in 2014 and $1.53/share in 2023.
The company is expected to earn $2.01/share in 2024.
The stock sells for 10.23 times forward earnings and yields 4.23%.
Trinity Industries, Inc. (TRN) provides rail transportation products and services under the TrinityRail name in North America. It operates in two segments, Railcar Leasing and Management Services Group, and Rail Products Group.
The company increased quarterly dividends by 7.70% to $0.28/share. This is the fifteenth consecutive annual dividend increase for this dividend achiever.
Over the past decade, the company has managed to increase dividends at an annualized rate of 15.32%.
Earnings per share over the past decade actually declined from $4.35/share in 2014 to $1.27/share in 2023. The company is expected to generate $1.42/share in 2024.
The stock sells for 18.50 times forward earnings and yields 4.26%.
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- Four Dividend Growth Stocks Rewarding Shareholders With Raises Last Week