I review the list of dividend increases every week in an effort to monitor existing companies I own and potentially identify companies for further research.
I typically focus my attention on companies that have managed to increase dividends for at least ten years in a row.
I usually review the most recent dividend increase and compare it to the last five or ten years. This gives me valuable information on the consistency and trend in dividend growth.
I also review the trends in earnings per share over the past decade, along with earnings estimates for the near future. Rising earnings are the fuel behind future dividend increases.
I also review valuation as well. Even the best company in the world is not going to deliver good returns if you wildly overpay for it.
Valuation should incorporate forward returns expectations, such as earnings per share growth and dividends and also include a stress test of potential changes in valuation multiples.
Over the past week, there were 25 companies in the US which increased dividends. Five of them have managed to increase dividends for at least a decade. I have included the companies below and also included management comments from the press releases. I find these comments on dividends and capital allocation to be a good filter for management quality as well.
They stress factors such as generating strong cashflows, confidence in the business, dividends being part of a disciplined capital allocations framework, generating stable and growing cashflows, having a long history of profitability and growth.
The companies include:
Badger Meter, Inc. (BMI) manufactures and markets flow measurement, quality, control, and communication solutions worldwide.
Badger Meter raised quarterly dividends by 25.90% to $0.34/share. This is the 32nd year of consecutive annual dividend increases for this dividend champion. Over the past decade the company has managed to grow dividends at an annualized rate of 10.96%.
“Our consistent and disciplined approach to serving customers, executing our business strategy and generating strong cash flow has once again put the Board in a position to raise the dividend. A durable dividend is an important component of our capital allocation framework, and we are immensely proud of our now 32 consecutive years of dividend increases.”
Between 2014 and 2023, the company grew earnings from $1.04/share to $3.16/share.
The company is expected to earn $4.29/share in 2024.
The stock sells for 46.60 times forward earnings and yields 0.68%.
This looks like a great business for further research. Unfortunately, the valuation is a little rich for my taste.
Cboe Global Markets, Inc. (CBOE) operates as an options exchange worldwide. It operates through six segments: Options, North American Equities, Europe and Asia Pacific, Futures, Global FX, and Digital.
Cboe raised quarterly dividends by 14.50% to $0.63/share. This is the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 12.30%.
"The share repurchase authorization increase and increased quarterly dividend are testaments to management and the Board of Directors' confidence in the performance of Cboe's global business lines and adherence to a disciplined capital allocation program. Cboe's balance sheet is strong and has us well-positioned to continue investing in the long-term growth of our business while also returning capital to our shareholders," said Fred Tomczyk, Chief Executive Officer of Cboe Global Markets (CBOE).
Between 2014 and 2023, the company grew earnings from $2.21/share to $7.16/share.
The company is expected to earn $8.64/hare in 2024.
The stock sells for 23.50 times forward earnings and yields 1.24%.
This looks like a great business for further research. The valuation is not cheap, especially compared to the situation a few years ago when I last reviewed it. However, it is promising.
Hyster-Yale, Inc. (HY) designs, engineers, manufactures, sells, and services a line of lift trucks, attachments, and aftermarket parts worldwide.
Hyster-Yale Materials Handling raised quarterly dividends by 7.70% to $0.35/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 2.64%.
Earnings per share grew slightly from $6.61 in 2014 to $7.35 in 2023.
The company is expected to earn $9.91/share in 2024.
The stock sells for 6 times forward earnings and yields 2.34%.
The company looks optically cheap. The slow rate of earnings growth over the past decade, coupled with a slow rate of dividend growth and the low yield are not very inspiring at this stage.
Nordson Corporation (NDSN) engineers, manufactures, and markets products and systems to dispense, apply, and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids worldwide. It operates through three segments: Industrial Precision Solutions; Medical and Fluid Solutions; and Advanced Technology Solutions.
Nordson raised its quarterly dividends by 14.70% to $0.78/share. This is the 61st consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to grow dividends at an annualized rate of 15.36%.
“As a high quality growth compounder, Nordson has a long and rich history of profitability and cash flow, supporting 61 consecutive years of paying and increasing annual cash dividends to our shareholders,” said Daniel Hopgood, executive vice president and chief financial officer. “Our focus on the customer, innovation and differentiation, combined with the Ascend strategy, generates consistent cash flows throughout the cycle and allows us to return value to our shareholders as part of our balanced capital deployment strategy.”
Between 2014 and 2023, the company managed to grow earnings per share from $3.88 to $8.54.
The company is expected to earn $9.47/share in 2024.
The stock sells for 25.30 times forward earnings and yields 1.30%.
This looks like a great business for further research. The valuation is not cheap, though not overly expensive either.
Westlake Corporation (WLK) engages in the manufacture and marketing of performance and essential materials, and housing and infrastructure products in the United States, Canada, Germany, China, Mexico, Brazil, France, Italy, Taiwan, and internationally. The company operates through two segments: Performance and Essential Materials and Housing and Infrastructure Products.
Westlake increased quarterly dividends by 5% to $0.525/share. This is the 20th consecutive annual dividend increase for this dividend achiever. Over the past decade the company has managed to increase dividends at an annualized rate of 15.31%. That was mostly possible due to the expansion in the dividend payout ratio.
Between 2014 and 2023, earnings per share went from $5.09 to $3.72.
The company is expected to earn $7.37/share in 2024.
The stock sells for 19.90 times forward earnings and yields 1.43%.
This sounds like a fair business that is cyclical in nature. Rapid dividend growth over the past decade was possible through the expansion of the payout ratio, while earnings growth was not that high. Future dividend growth would likely be limited to earnings growth over time. If we extrapolate the past decade onto the next, the current valuation does not make a lot of sense to me.
Relevant Articles:
- Six Dividend Growth Stocks Raising Dividends Last Week