I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me to monitor developments in existing holdings. It also helps me to potentially identify companies for further research.
I usually focus on companies with a ten year streak of annual dividend increases, in an effort to weed out cyclical companies. It is not a small feat to raise dividends through a full economic cycle. Meeting this screen increases the chances of identifying quality companies for further research.
Of course, this is just a screen. I look at several data points in order to determine if a company should be put on the list for further research, or discarded.
I look at growth in earnings per share over the past decade, because earnings per share are the fuel behind future dividend increases.
I also look at the most recent dividend increase, and compare it to the 5 and 10 year averages.
Then I also review trends in dividend payout ratios. That's because I do not want dividend growth that happens solely from expansion in the payout ratio.
If a business is fundamentally sound, I would put it on my list for further research.
Last but not least, I also look at valuation. If a business is overvalued, I would determine a price that I would consider it and wait. If a business is fairly valued, I would research it first (assuming I haven't done that before".
Over the past week, there were three companies that raised dividends. These companies have also increased dividends for at least ten years in a row. The companies include:
Fifth Third Bancorp (FITB) operates as the bank holding company for Fifth Third Bank, National Association that engages in the provision of a range of financial products and services in the United States. It operates through three segments: Commercial Banking, Consumer and Small Business Banking, and Wealth and Asset Management.
The company increased quarterly dividends by 5.70% to $0.37/share. This is the 14th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has been able to grow dividends at an annualized rate of 11%.
Between 2014 and 2023, the company managed to grow earnings from $1.68/share to $3.23/share.
Fifth Third Bancorp is expected to earn $3.30/share.
The stock sells for 12.70 times forward earnings and yields 3.52%.
First American Financial Corporation (FAF) provides financial services. It operates through Title Insurance and Services, and Home Warranty segments.
The company raised its quarterly dividend by 1.90% to $0.54/share. This is the 14th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has been able to grow dividends at an annualized rate of 15.90%. The rate of dividend growth has decelerated in the past 5 years however, as earnings per share have largely stagnated.
Between 2014 and 2023, the company's earnings went from $2.18/share to $2.08/share.
The stock sells for 17.10 times forward earnings and yields 3.25%.
New Jersey Resources Corporation (NJR) distributes natural gas. The company operates through four segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, and Storage and Transportation.
The company increased quarterly dividends by 7.10% to $0.45/share. This dividend champion has increased dividends every year for 29 years in a row. The company has managed to grow dividends at an annualized rate of 7% over the past decade.
Between 2014 and 2023, earnings went from $1.69/share to $2.73/share.
The company is expected to earn $2.94/share in 2024.
The stock sells for 16.20 times forward earnings and yields 3.77%.
Philip Morris International Inc. (PM) operates as a tobacco company working to delivers a smoke-free future and evolving portfolio for the long-term to include products outside of the tobacco and nicotine sector.
The company increased quarterly dividends by 3.80% to $1.35/share.This is the 16th year of consecutive annual dividend increases for this dividend achiever. The company has managed to grow dividends at an annualized rate of 3.90% over the past decade.
Between 2014 and 2023, earnings went from $4.76/share to $5.02/share. With that lack of earnings growth, it is no surprise that dividend growth is decelerating. Hopefully their investments can kickstart earnings growth over the next decade.
The company is expected to earn $6.40/share in 2024.
The stock sells for 19.63 times forward earnings and yields 4.30%
Realty Income (O) is a real estate investment trust which owns over 15,450 real estate properties.
Realty Income increased its monthly dividend by 0.20% to $0.2635/share. The new dividend is 2.92% higher than the dividend paid during the same time last year. This dividend aristocrat has increased annual dividends several times per year since going public in 1994. Over the past decade, the company has managed to boost dividends at an annualized rate of 3.60%.
Realty Income grew FFO/share from $2.58 in 2014 to $4.08 in 2023.
Realty Income is expected to generate $4.22/share in FFO in 2024.
The stock sells for 14.87 times forward FFO and yields 5.04%.
U.S. Bancorp (USB) provides various financial services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions in the United States. It operates through Wealth, Corporate, Commercial and Institutional Banking; Consumer and Business Banking; Payment Services; and Treasury and Corporate Support segments.
The company increased quarterly dividends by 2% to $0.50/share. This is the 14th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has been able to grow dividends at an annualized rate of 8.50%.
Between 2014 and 2023, earnings went from $3.10/share to $3.27/share. With that lack of earnings growth, it is no surprise that dividend growth is decelerating.
U.S. Bancorp is expected to earn $3.85/share in 2024.
The stock sells for 11.60 times forward earnings and yields 4.48%.
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