Two Recent Dividend Increases and Five Future Dividend Increases

Last week, there were nine companies that raised dividends in the US. Only two of those companies have managed to raise dividends for at least a decade however. The week before that, there were seven companies that raised dividends last week in the US. None of them have raised dividends for at least 5 years in a row however.

That's consistent with prior years however.

The companies that raised dividends last week that also have managed to raise dividends for at least a decade include:

Bank OZK (OZK) operates as a full-service Arkansas state-chartered bank that provides retail and commercial banking services in the United States. 

The bank raised quarterly dividends by 2.40% to $0.43/share. This is a 10.26% increase over the dividend paid during the same time last year. This is due to the fact that the company raises dividends every quarter. This dividend aristocrat has raised dividends for 29 years in a row. It has a ten year annualized dividend growth rate of 12.90%.

Between 2015 and 2024, the company grew earnings from $2.10/share to $6.16/share.

The company is expected to earn $5.94/share in 2025.

The stock sells for 6.40 times forward earnings and yields 4.50%.

Trinity Bank, N.A. (TYBT) provides personal and business banking products and services in Texas.

The bank raised semi-annual dividends by 2.20% to $0.95/share. This is the 13th year of consecutive annual dividend increases for this dividend contender. Over the past decade, the company has managed to grow dividends at an annualized rate of 10.80%.

The company has managed to increase earnings from $2.91/share in 2014 to $7.36/share in 2023.

The stock sells for 11.40 times earnings and yields 2.23%.

As far as the rest of April, I expect that the following notable and consistent dividend growth payers to announce an increase to their quarterly dividends:

Ameriprise Financial (AMP) - I expect a ten cent raise in the quarterly dividned to $1.58/share. This will be the the 21st consecutive annual dividend increase for this dividend achiever.

Johnson & Johnson (JNJ) - I expect a 4 cent raise in the quarterly dividend to $1.28/share. This will be the 63rd consecutive annual dividend increase for this dividend king.

Costco (COST) - I expect a 13 cent raise in the quarterly dividend to $1.29/share. This will be the the 21st consecutive annual dividend increase for this dividend achiever.

Procter & Gamble (PG) - I expect a 5 cent raise in the quarterly dividend to $1.06/share. This will be the 69th consecutive annual dividend increase for this dividend king.

Traveler's (TRV) - I expect a 5 cent raise in the quarterly dividend to $1.10/share. This will be the the 21st consecutive annual dividend increase for this dividend achiever.

I came up with these estimates by lookiing at near term trends in earnings, the payout ratios and the latest trends in the dividend payments. My crystal ball is cloudy.

Thank you for reading!

In bear markets, stocks return to their rightful owners

 “In bear markets, stocks return to their rightful owners.” 

- J.P. Morgan

I love this quote. It summarizes a ton of insights into a simple, succint message. 

There is a lot to unpack here.

In short, it means that when stocks fall down in price, panicked sellers tend to dispose of their holdings in desperation. Perhaps they are scared of market declines due to being overextended or not knowing that stocks can decline in price. Those are both expensive lessons, and then some. 

The investors who take those shares from the panicked sellers are those who are patient and disciplined. The buyers are long-term investors, who stick to their plan, and buy when they have money to invest. These rightful owners are financially stable and buy cheap when there is blood on the streets. They are financially stable because they live below their means, have a long-term mindset, have their financial house in order, and as a result they have a surplus to invest every month. 

Those patient long-term investors with strong conviction often buy stocks at lower prices from panic-sellers, as seen in historical bear markets. It's a story as old as time. It's just that participants change.

Succumbing to emotions can be dangerous for investors, both when stocks are roaring high and when stocks are declining accross the board. 

In order to succeed at investing, you need to develop and stick to a disciplined strategy through thick or thin. 

Readers of this site stick to a strategy of dividend growth investing. Focusing on quality companies that have increased dividends for a long period of time, investing regularly at good valuations, and maintaining a long-term diversified portfolio are the winning ingredients to long-term success. Also, focusing on the dividend, and understanding the fundamental drivers behind them and their safety, while also looking for value, can greatly aid in the process of long-term value creation.

In addition, ignoring noise, but focusing on the stability of dividends is a good jedi mind-trick that keeps one calm and invested.

As a Dividend Growth Investor, I view share price declines as opportunities to acquire quality assets at a good price. Future income is available on sale when share prices drop. This is something you want to see in the accumulation phase. For each $1,000 that you invest, you are increasing forward annual dividend income by $20 - $40. That dividend income will likely grow above the rate of inflation over time. Reinvesting those dividends further turbocharges dividend income growth. You keep stacking to income streams, brick by brick, until you hit the coveted dividend crossover point. The dividend crossover point is the point at which dividend income exceeds expenses. You are financially independent, job optional, perhaps even an early retiree at that point.

If one is retired, then they are living off the dividends from a diversified portfolio. They can ignore the noise and enjoy the fruits of their labor. Those dividends are more stable, predictable and reliable than share prices, which makes them a perfect source of income for retirees. Dividends from diversified portfolios rarely decline, but they tend to grow above rate of inflation over time, and are taxed preferentially to other sources of income (e.g. fixed income, labor etc). Perhaps you also earn some social security and pension income too.  And perhaps even you have a paid off home.

In times like these I am happy to be a Dividend Growth Investor.

I focus on the dividend payments, which are much more stable, predictable and reliable than share prices.

The focus on dividends makes me do the work on fundamentals and valuation and helps me stay invested.

Anywho, I think that this too shall pass.

Relevant Articles:

- The value of experience

- Use these tools within your control to get rich

- How To Get Rich With Dividends

- How to become a successful dividend investor

Happy Coca-Cola Dividend Day Warren Buffett

Warren Buffett’s Berkshire Hathaway just received a  dividend check for $204 million dollars from Coca-Cola.

Berkshire Hathaway owns 400 million shares of Coca-Cola (KO), which are projected to generate $816 million in annual dividend income. 

This comes out to roughly $2,235,616.43 in dividend income per day, $93,150.68 dollars in dividend income per hour, $1,552.51 dollars in dividend income for Berkshire Hathaway every minute, or almost $25.87 every single second. 

Those shares have a cost basis of $1.29 billion dollars, and were acquired between 1988 – 1994. This comes out to $3.25/share. The annual dividend payment produces an yield on cost of over 62.77%. This means that Berkshire receives its original cost back every other year in dividends alone, while still retaining full ownership of its shares. This is why I believe that Warren Buffett is a closet dividend investor.

Since 1994, Buffett has received $28.76/share in total dividend income from Coca-Cola.

That is $11.504 billion in dividend income, against a total cost of $1.299 billion, which was allocated to buy stakes in other businesses and shares.

His Coca-Cola stock is worth $28.60 billion today. Given the fact that Coca-Cola has also repurchased stock over the years, it also means that his ownership in Coca-Cola has increased over time, without adding a single dime.

This is a testament to the power of long-term dividend investing, where time in market is the investors best ally, not timing the market. If you can select a business which is run by able and honest management, which has solid competitive advantages, and which is available at a good price today, one needs to only sit and let the power of compounding do the heavy lifting for them. As Buffett likes to say, time is a great ally for the good business. In the case of Coca-Cola, the past 33 years have been a great time to buy and hold the stock. The company has been able to tap emerging markets in Eastern Europe, Asia, Africa and Latin America like never before. As a result, it has been able to receive a higher share of the worldwide drinks market, which has also been expanding as well. If you add in strategic acquisitions, new product development, cost containment initiatives and streamlining of operations, you have a very powerful force for delivering solid shareholder returns. With dividend investing your are rewarded for smart decisions you have made years before.

If they closed the stock market for a period of 10 years, Buffett would still be earning steady cashflow from his investment in Coca-Cola. This is because ten years from now, the company would likely be earning more than what it is earning today, and would likely be distributing more in dividend income than it is paying to shareholders today. Receiving a huge dividend check every three months is a reminder that you are a shareholder in a real company with real products that are consumed by billions of consumers worldwide. The stock is not a lottery ticket but a partial ownership in a company, which entitles you to a share of the profits being paid out to you as a shareholder in the form of dividends.

At the end of the day, if you identify a solid business, that has lasting power for the next 20 – 30 years, the job of the investor is to purchase shares at attractive values, and hold on to it. This slow and steady approach might seem unexciting initially, but just like with the story of the slow-moving tortoise beating the fast moving hare, the power of compounding would work miracles for the patient dividend investor.

In the case of Warren Buffett's investment in Coca-Cola, he is able to recover his original purchase price in dividends alone, every two years. Even if Coca-Cola goes to zero tomorrow, he has generates a substantial returns from dividends alone, which have flown to Berkshire's coffers, and have been invested in a variety of businesses that will benefit Berkshire Hathaway's shareholders for generations to come.

Currently, Coca-Cola is selling for 24.23 times forward earnings and yields 2.85%. This dividend king has managed to increase dividends for 62 years in a row.  

There were only 46 companies in the US, which have gained membership into the exclusive list of dividend kings, as of early 2025. 

Over the past decade, Coca-Cola has managed to increase dividends by 4.70%/year.  This is much better than the raises I have received at work over the past decade, despite the fact that I have routinely spent 55 - 60 hour weeks at the office.


Relevant Articles:

- Coca-Cola: A wide-moat dividend growth stock to buy and hold
- Warren Buffett Investing Resource Page
- Seven wide-moat dividends stocks to consider
- Warren Buffett’s Dividend Stock Strategy
- The importance of yield on cost

Dividend Investors: Stay The Course

The past few months have been difficult for many investors. Stocks are down from their all time highs, reached just a few months ago. It is during times like these that you see who really is a long-term investor, and who is just a pretender. When you are a long-term buy and hold investor, you stand the best chances to take maximum advantage of the power of compounding, and end up with the probability for the highest dividend income and capital gains. These are the times where having a disciplined approach to investing pays off. These are the times when the ability to allocate capital to use in quality dividend stocks would seem stupid in the short-term, but potentially really brilliant 10 – 20 years down the road. When stock prices fall, there is an urge in the investor to protect their nest eggs from further price impairment.

This is a dangerous situation to be in because:

1) Noone knows in advance today when this correction is going to run out of steam or what its ultimate severity will be. So when you act on short-term noise, you are actually shooting yourself and those who will depend on you in the foot.

2) Therefore, if you act based on short-term price fluctuations, you are speculating and have essentially thrown out your edge of being a long-term investor. It is extremely difficult to win in investing as a short-term speculator – you will be in an out of stocks and paying taxes and commissions through the nose. Your main edge in the stock market lies in the ability to hold on to your stocks through thick and thin for decades, and cashing in those growing dividend checks ( or reinvesting them in the accumulation phase)

3) If you are in the accumulation phase, you should be praying for lower prices, because you are buying shares to provide for you in 20 – 30 years. A 200 point decline on the S&P 500 decline will likely look just like a blip on the charts 20 – 30 years from now. If you don’t believe me, check the 1987 crash. A lower entry price results in more future dividend income for you.

4) If you are in the retirement phase, you already have a plan to live off your assets. You are likely spending those dividends, and hopefully those dividends are coming from a diversified portfolio of dividend growth stocks. You are likely getting social security and possibly a pension. As long as there is some margin of safety in financial independence, and the dividend portfolio mostly consists of quality blue chips, the investor should be just cashing in their dividend checks and enjoy the fruits of their lifetime of labor.

I know that seeing unrealized capital losses hurts. However, the important thing is to just stick to your plan and stay the course. This is why I have chosen to be a dividend growth investor. When the stock market is going up, everyone is a total return investor and chases hot growth stocks and talks about how much capital gains they have made.

However, when the stock market starts going down in price, those capital gains could quickly turn into losses. Imagine having to sell chunks of your portfolio for living expenses when the stock market is going lower. You will eat your principal quickly, and increase your chances of panicking and doing the wrong thing of selling everything out. When your dividends cover your living expenses however, it is much easier to ignore those stock price fluctuations. As long as those dividends are coming from a diversified portfolio of quality blue chip stocks that are dependable, the investor has nothing to worry about. In fact, receiving cash dividends when the stock prices are going down is very reassuring, and provides the investor with positive reinforcement to just stay the course.

There is a reason why stocks have done much better than bonds in the long-run – they are riskier. With stocks, there is always the chance that there will be violent fluctuations in the price. You can have steep downturns, which can have many weak hands scrambling for the exits. When stock prices go down, many investors assume that something is wrong, they panic and sell. They forget that your upside potential in terms of dividends and capital gains is virtually unlimited. Some companies you own will ultimately cut dividends and sell at levels that were lower than what you paid for. Other companies in your portfolio will do well enough in the long term that will more than compensate for the failures you have experienced.

The issue with stocks of course is that the amount and timing of future capital gains is largely unknown in advance. This is why people panic when prices start going down – they project the recent past onto the future indefinitely. They forget that stocks are not just some pieces of paper or blips on a computer screen, but real businesses that sell real goods and services to consumers who are willing to exchange the fruits of their labor for those goods and services. Over time, those businesses as group will likely learn ways to sell more, charge more, earn more and reward their shareholders. No matter the turbulence we will experience in the US and Global stock markets and economies in the short-run, I believe that things will be better for all of us ten years from now. And as investors, we invest for the long term, not for the next 5 years or 5 months.

With bonds, you get limited upside mostly in terms of the interest payment you receive, and then hopefully a guaranteed return on investment after a set period of time. The issue of course is that fixed income will mostly keep up with inflation over time. Cash looks safe in the short-term, but it is expensive in the long run. Stocks look risky in the short run, but they are safer in the long run. While a portfolio of bank CD’s will not be quoted every day, providing an illusion that the money is safe, they are mostly keeping up with inflation rates in the long-run, before taxes.

Holding on to stocks pays in the long term better than holding bonds precisely due to their “riskier” nature. If you stay the course of regularly adding money to your accounts, you will be able to buy more shares of quality companies at a discount. After the dust settles, you will be ending up with more valuable pieces of real businesses than before. It intuitively makes sense that you will be better off buying a stock at $40/share as opposed to $75/share. If one share a stock is bought today, and dividends are reinvested, it could result in a net worth of $400 in 30 years. This exercise assumes a total return of 8%/year.. It also intuitively makes sense that if you reinvest your dividends when prices are low, you will end up with more shares and more dividend income over time.

Again, in order to benefit from all of this, you need to stay the course. This means saving money every month, putting money to work regularly, and not getting scared away. Perhaps if you are concerned about prices and you are in the accumulation phase, it may make sense to just start reinvesting dividends automatically. Or alternatively, it may make sense to automatically invest a portion of your paycheck through your 401 (k).


Relevant Articles:

- Successful Dividend Investing Requires Patience
- Fixed Income for dividend investors
- Dividend income is more stable than capital gains
- How to think like a long term dividend investor
- Long Term Dividend Growth Investing

The Importance of Dividends

I was reviewing my old files and re-visited an interesting paper from Standard & Poor's from a few years ago about the importance of dividends.

The paper states that dividends are important because:

1. They are a growing portion of personal income

2. More than one third of historical total returns came from dividends

3. Dividend paying stocks offer superior risk adjusted returns and potential for downside protection

I wanted to zoom in on this statement "Dividend paying stocks offer superior risk adjusted returns and potential for downside protection"

numerous academic studies have shown that dividend payers tend to outperform non-dividend payers across market cycles and offer higher risk-adjusted returns.

Dividends also play another important role during periods of volatility. While price returns can be either positive or negative, dividend incomes are by definition positive. Therefore, dividends provide investors with the opportunity to capture the upside potential while providing some level of downside protection in negative markets.

Fuller and Goldstein2 examined the return behavior of dividend paying and non-dividend paying firms in both up and down markets, from January 1970 to December 2007. The authors found that dividend paying firms outperformed non-dividend paying firms more in down markets than in up markets, with the results showing outperformance of 1% to 2% per month.

Dividends Act as a Cushion during Negative Equity Markets

Dividends also have lower volatility than Capital appreciation

The compounding effects of reinvesting dividends is undisputed.

You can read the full study here. 

Dividend investing is a widely discussed investment topic. The role of the paper was to add to the discussion by highlighting the role of dividends in generating returns. The beauty of dividend investing is that one can custom tailor their strategy to the outcome they are looking for. Some may focus on current income more so than dividend income growth, while others may want stable growth and income. The best way to embrace dividends is to identify your goals and objectives, your timeframce and risk preference, and design and implement a strategy to get you there.

Eight Dividend Growth Stocks Raising Distributions Last Week

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

Dividend increases provide signaling value to me in my process of evaluating dividend growth companies. I believe it is an important tool in my toolset.

This exercise also helps me quickly review and scan large quantities of companies in order to narrow down the list to the most desirable candidates for further research.

I typically focus my attention on companeis that have managed to increase dividends for at least a decade.

Last week, there were 27 companies that increased dividends in the US. Eight of them have managed to increase dividends for at least a decade. The companies include:

CareTrust REIT, Inc.’s (CTRE) primary business consists of acquiring, financing, developing and owning real property to be leased to third-party tenants in the healthcare sector. 

The REIT raised its quarterly dividend by 15.52% to $0.34/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 24.85%.

The company managed to grow FFO from $0.94/share in 2015 to $1.50/share in 2024.

The company is expected to generate FFO/share of $1.78/share in 2025.

The stock sells for 16.10 times forward FFO and yields 4.68%.

Colgate-Palmolive Company (CL) manufactures and sells consumer products in the United States and internationally. It operates through two segments: Oral, Personal and Home Care; and Pet Nutrition.

The company raised its quarterly dividend by 4% to $0.52/share. This is the 62nd consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to increase dividends at an annualized rate of 3.38%.

The company managed to grow earnings from $1.53/share in 2015 to $3.53/share in 2024.

The company is expected to earn $3.71/share in 2025.

The stock sells for 24.35 times forward earnings and yields 2.30%.

Independent Bank Corp. (INDB) operates as the bank holding company for Rockland Trust Company that provides commercial banking products and services to individuals and small-to-medium sized businesses in the United States. 

The company raised its quarterly dividend by 3.51% to $0.59/share. This is the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 9.17%.

The company managed to grow earnings from $2.51/share in 2015 to $4.52/share in 2024.

The company is expected to earn $5.43/share in 2025.

The stock sells for 11.62 times forward earnings and yields 2.32%.

JPMorgan Chase & Co. (JPM) operates as a financial services company worldwide. It operates through three segments: Consumer & Community Banking, Commercial & Investment Bank, and Asset & Wealth Management.

The company raised its quarterly dividend by 12% to $1.40/share. This is the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 11.42%.

The company managed to grow earnings from $6.05/share in 2015 to $19.79/share in 2024.

The company is expected to earn $18.29/share in 2025.

The stock sells for 13.21 times forward earnings and yields 2.32%.

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, Qualcomm Technology Licensing, and Qualcomm Strategic Initiatives. 

The company raised its quarterly dividend by 4.71% to $0.89/share. This is the 23rd consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 7.60%.

The company managed to grow earnings from $3.26/share in 2015 to $9.09/share in 2024.

The company is expected to earn $11.73/share in 2025.

The stock sells for 13.36 times forward earnings and yields 2.27%.

Shoe Carnival, Inc. (SCVL) operates as a family footwear retailer in the United States. 

The company raised its quarterly dividend by 7.14% to $0.15/share. This is the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 15.90%.

The company managed to grow earnings from $0.73/share in 2015 to $2.72/share in 2024.

The company is expected to earn $1.94/share in 2025.

The stock sells for 21.52 times forward earnings and yields 2.79%.

Southern Michigan Bancorp, Inc. (SOMC) operates as the bank holding company for Southern Michigan Bank & Trust that provides a range of commercial banking services to individuals, businesses, institutions, and governmental agencies primarily in the southwest Michigan communities. 

The company raised its quarterly dividend by 6.67% to $0.16/share. This is the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 7.74%.

The company managed to grow earnings from $1.21/share in 2015 to $2.28/share in 2024.

The stock sells for 8.33 times earnings and yields 3.37%.

Williams-Sonoma, Inc. (WSM) operates as an omni-channel specialty retailer of various products for home.

The company raised its quarterly dividend by 15.79% to $0.59/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 12.73%.

The company managed to grow earnings from $1.71/share in 2015 to $8.91/share in 2024.

The company is expected to earn $8.53/share in 2025.

The stock sells for 19.19 times forward earnings and yields 1.61%.

Substance over Form

I tend to focus my attention on companies that regularly increase dividends to shareholders.

A long history of annual dividend increases is often the result of a strong business, with strong competitive advantages, with high return on investment, which tends to gush rising tides of free cash flows.

It's a symptom of a strong business.

However, that doesn't mean that every dividend increase is treated the same or that you should not look under the hood to understand the drivers behind that dividend increase.

I view dividend increases as signals, that indicate management's stance on the company, industry and economy. They simply are one aspect of my process.

A history of dividend increases will put a company on my map for sure. However, I do additional work from there to determine if a company is worth researching and even potentially adding to my portfolio.

That works includes reviewing trends in:

• Earnings Per Share or FCF/share
• Dividend Payout Ratios
• Growth in dividends per share
• Shares outstanding
• etc

I also try to put dividend growth in context.

A company that just initiated dividends would likely grow those dividends faster than earnings, especially as the dividend payout ratio is starting off on a low point. 

But a company that grows dividends faster than earnings and is not in the initial phase of dividend growth can only afford to do so through an increase in the dividend payout ratio. That has a natural limit to it.

A company that grows earnings and dividends at roughly similar rates is typically what you end up seeing. That being said, there could be some volatility in dividend growth rates from year to year, and also volatility in dividend payout ratios over periods of time.

In addition, I like to discuss the trade-offs between dividend yield and dividend growth in this context.

Namely there are three types of dividend growth stocks:

1. High Dividend Yields but low dividend growth 

2. Those in the Sweet Spot in terms of generating medium dividend yield and medium dividend growth

3. Low Dividend Yield but High Dividend Growth

Naturally, there are trade-offs between higher yields and lower yields, and higher expected growth versus lower expected growth. You also need to take into consideration the payout ratio, the maturity of the industry you are in, the type of business entity you are evaluating as well.

Nothing is a one size fits all approach.

I am mostly saying all of this because I see incorrect statements on the internet, presented as facts (I know, big surprise) that dividend investors are easily fooled by any dividend announcement or dividend increase or dividend streak. I've been doing this for close to 2 decades now, and I have not really seen this happen. Perhaps some novice investors do fall for this trap once or twice, but they learn from it. 

Dividend investors usually look under the hood when investing in a company, meaning they review fundamentals to determine dividend safety and potential for dividend growth, and try to acquire stocks at a good valuation.

This perspective of looking under the hood before you buy is also evident in dividend investors who buy ETF's too. They also look under the hood as well, in order to determine what they are getting themselves into. 

It is important to look under the hood, and try to evaluate the data using some simple logic. It's also important to avoid making a conclusion, without really looking at all the facts. 

Now I am sure there are some that just keep buying without doing any work, but from my experience, those would be a minority.

Most Dividend Growth Investors do tend to do quite a good amount of research, when screening for, researching companies, and building their portfolios. Then a lot of research goes into monitoring, learning and growing as well. They do focus their attention on the data, look under the hood, but most importantly focus on substance over form. 

Relevant Articles:

- Three stages of dividend growth

- Types of dividend growth stocks

- Rising Earnings – The Source of Future Dividend Growth

- How to read my stock analysis reports

Six Dividend Growth Stocks Raising Dividends Last Week

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

Dividend increases provide signaling value to me in my process of evaluating dividend growth companies. I believe it is an important tool in my toolset.

This exercise also helps me quickly review and scan large quantities of companies in order to narrow down the list to the most desirable candidates for further research.

I typically focus my attention on companeis that have managed to increase dividends for at least a decade.

Last week, there were 23 companies that increased dividends in the US. Six of them have managed to increase dividends for at least a decade. The companies include:

DICK'S Sporting Goods, Inc. (DKS) operates as an omni-channel sporting goods retailer primarily in the United States. 

The company raised quarterly dividends by 10.20% to $1.2125/share. This is the 11th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 24.30%. 

The company managed to grow earnings from $2.87/share in 2015 to $14.48/share in 2024.

The company is expected to earn $14.47/share in 2025. 

The stock is selling for 12.90 times forward earnings and yields 2.49%.

Oracle Corporation (ORCL) offers products and services that address enterprise information technology environments worldwide. 

The company increased quarterly dividends by 25% to $0.50/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, Oracle has managed to increase dividends at an annualized rate of 12.79%.

Note that Oracle does not raise dividends every year, but nevertheless it's annual dividend has been increasing for 12 years in a row. Also note that the company seems like it cut dividends in 2013, but that's not the case. There was expectation for a tax hike on dividends in 2013, which is why a lot of good companies ended up pre-paying 2013 dividends in 2012.

The company managed to grow earnings from $2.26/share in 2015 to $3.81/share in 2024.

The company is expected to earn $6/share in 2025. 

The stock is selling for 24.60 times forward earnings and yields 1.35%.

Realty Income (O) is a real estate investment trust which invests in diversified commercial real estate. It has a portfolio of 15,450 properties in all 50 US states, the UK and six other countries in Europe.

Realty Income raised monthly dividends to $0.2685/share, which is a 4.47% increase over the dividend paid during the same time last year. Note that Realty Income raises dividends several times per year. This new dividend is 0.20% higher than the previous dividend they paid, but a cool 4.47% increase over the dividend paid during the same time last year.

Realty Income is a dividend aristocrat which has increased annual dividends since 1994. Over the past decade, the company has managed to grow dividends at an annualized rate of 3.60%. 

Between 2015 and 2024, Realty Income managed to growth FFO from $2.77/share to $4.02/share.

Realty Income is expected to generate $4.31/share in FFO in 2025.

The stock sells for 12.96 times forward earnings and yields 5.68%.

SpartanNash Company (SPTN) distributes and retails grocery products in the United States of America. It operates through two segments, Wholesale and Retail. 

The company raised quarterly dividends by 1.15% to $0.22/share. This is the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 6.10%. 

The company is expected to earn $1.76/share in 2025. In comparison, it earned $1.67/share in 2015.

The stock is selling for 11.30 times forward earnings and yields 4.38%.

TE Connectivity plc (TEL) manufactures and sells connectivity and sensor solutions in Europe, the Middle East, Africa, the Asia–Pacific, and the Americas. The company operates through three segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. 

The company increased quarterly dividends by 9.20% to $0.71/share. This is the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 8.50%. 

The company managed to grow earnings from $5.98/share in 2015 to $10.40/share in 2024.

The company is expected to earn $8.08/share in 2025. 

The stock sells for 17.47 times forward earnings and yields 1.95%.

UDR, Inc. (UDR) is a multifamily real estate investment trust that focuses on managing, buying, selling, developing and redeveloping attractive real estate properties in targeted U.S. markets.

The REIT raised quarterly dividends by 2.38% to $0.43/share. This is the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 5.26%. 

UDR managed to grow FFO from $1.68/share in 2015 to $2.30/share in 2024.

This REIT is expected generate $2.51/share in FFO in 2025. 

The stock sells for 16.96 times forward FFO and yields 3.97%.

Relevant Articles:

- Five Dividend Growth Stocks Raising Dividends Last Week

- Realty Income (O): A look at the past five years

- 19 Dividend Growth Stocks Raising Dividends for Shareholders

- Twenty Dividend Growth Stocks Raising Dividends Last Week

How I think about diversification

I am a big fan of diversification.

That doesn't just mean owning a lot of companies however.

It means spreading the risk.

You need to understand your risk profile, by analysing your assets, income, profile.

For most of us who weren't born with a silver spoon, our biggest asset is the ability to earn income. Where you earn that income, in what industry, and how you allocate any savings really matters.

For example, someone who owns a portfolio that's heavy on energy stocks, who works and lives in Houston, and works at a company in the energy sector is heavily concentrated on Energy.

This person risks enduring a lost decade like 2015 - 2025, where they are at a high risk of losing their primary source of income - their job.

All the while their investments do not do as well, plus their home may lose value as well.

Someone who works and lives in Silicon Valley, owns a portfolio that is tech heavy, and works at a technology company is heavily concentrated on Technology.

This person risks enduring a lost decade like 2000 - 2010, where they lose their primary source of income - their job.

Their investments also lose value at the same time, and probably their home value declines too.

Someone who works and lives in New York, who owns a portfolio that is heavily weighted towards financials, and works in the financial sector, is heavily concentrated on Financials.

This person risks enduring a financial crisis, like the one we saw in 2007 - 2009, which led to layoffs, share prices collapsing etc. You do not want to be heavily invested on the industry that generates your income.

You want to have some diversification in case things go wrong. Insurance is great to have when you really need it.

If you do not need it, the cost of insurance is really not that high in the grand scheme of things if everything goes right for you. 

Of course, there is a trade-off involved.

For example, if you go heavy on technology, you may end up really obscenely rich. Think stock options, bonuses, RSUs. Like those lucky employees of Nvidia. Winning the employment lottery must feel great, and must be life changing. However, the chances of winning the lottery as very slim, at best. It's good to be lucky, though it is far more likely that you are not. Hence, it may make a lot of sense to allocate a large portion of your money away from the sector that employs you, and invest it elsewhere.

If you went heavy on energy in the 1990s/early 2000s, you ended up doing very well, as your energy investments outperformed the market and you didn't suffer through the lost decade of early 2000s. I personally was a beneficiary of the energy boom, as this was one of the few sectors hiring after the Global Financial Crisis. It is good to be lucky, though it is far more likely that you are not. Hence, it may make a lot of sense to allocate a large portion of your money away from the sector that employs you, and invest it elsewhere.

In another example, if you went heavy on the financials in the 1990s and early 2000s, you may have made a ton of money as well. The Financial Sector can pay really well if you are good at your job, and your company does well. Think bonuses, stock, etc. It is good to be lucky, though it is far more likely that you are not. Hence, it may make a lot of sense to allocate a large portion of your money away from the sector that employs you, and invest it elsewhere.

What is the point of this post?

You need to think about your whole financial picture, and allocate funds accordingly, in order to spread the risk

You need to think about risks and rewards related to income and assets

Spreading the risk ensures that you can weather the storms that life throws at you

Those include layoffs, recessions, unemployment, health issues, family problems, retirement/education etc...

In order to take full advantage of the long-term compounding of equities, you need to be able to survive first, and then shovel as much capital as possible into investments to reach the desired FI crossover point.

Five Dividend Growth Stocks Raising Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing positions. I also helps me monitor the dividend growth investing universe for hidden gems. 

This exercise also helps me showcase how I review companies quickly, in order to determine if they should be put on my list for futher research, or discarded.

Long-time readers know that I basically look at fundamentals and valuaton in unison. I require a long history of dividend increases as my first step to even look at a security.

Next I look at its earnings power, and observe whether earnings per share are growing. Without growth in earnings per share, future dividend growth and intrinsic value growth would be impossible. Lack of earnings per share growth also threatens the dividend safety as well.

You want to look at earnings per share, which is your ownership piece of the company. Some companies tend to buy back their own stock, hence it's also helpful to see the trends in shares outstanding over time. 

Third, I look at trends in dividend payments over time. I want to see how the most recent dividend increase compares to the historical average. Dividends have a signaling power, because they show you changes in the business for the better or worse. Dividends are declared by the management after a careful evaluation of the business neeeds, the competitive environment and the economy. Therefore, it is no wonder that dividend increases tend to provide better than average signaling power as to what management expectaitons are.

Fourth, you want to evaluate the dividend payout ratio, in order to determine dividend safety. In general, the payout ratio should stay in a range, as dividend increases follow earnings growth. If dividend growth is achieved through paying out a higher portion of earnings, that may be a potential red flag to be aware of. A high payout ratio on its own is not always bad, although it does increase risk of a dividend cut during the next recession, even if the business has stable and recurring defensible cashflows.

Last but not least, you want to look at the valuation of the business. It is the culmination of research, and takes into consideration growth expectations, stability of the business, cyclicality of the business earnings stream, along with P/E ratios. It's a bunch of trade-offs, lumped together, to determine the best values today. You want to think about the sources of investment return, by lumping fundamentals and valuations together.

Anyways, over the past week, there were five companies that raised dividends and also have a minimum ten year streak of consecutive annual dividend increases. The companies include:

American Tower (AMT) is one of the largest global REITs. It is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of over 148,000 communications sites and a highly interconnected footprint of U.S. data center facilities.

The company raised quarterly dividends by 4.90% to $1.70/share. This is the 14th annual dividend increase for this dividend achiever. Over the past decade, the REIT has managed to grow distributions at an annualized rate of 16.70%.

FFO/share has increased from $4.10 in 2015 to $11.18 in 2025.

The REIT is expected to generate FFO/share of $9.75.

The stock sells for 21.80 times FFO and has a dividend yield of 3.20%.

Best Buy Co., Inc. engages in the retail of technology products in the United States, Canada, and international. 

The company eked out a 1.10% increase in its quarterly dividends to $0.95/share. This is the 21st consecutive annual dividend increase for this dividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 17.90%. 

The company grew earnings from $2.59/share in 2015 to a high of $9.94/share in 2021, but then EPS fell to $4.31/share in 2024. The company is expected to earn $6.36/share in 2025.

The stock sells for 12.50 times forward earnings and yields 4.80%.

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 raised quarterly dividends by 5.60% to $1.50/share. This is the 28th consecutive annual dividend increase for this dividend aristocrat. Over the past decade, the company has managed to grow dividends at an annualized rate of 8.70%.

The company grew earnings from $9.45/share in 2015 to $13.81/share in 2024.

The company is expected to earn $14.84/share in 2025.

The stock sells for 18.30 times forward earnings and has a dividend yield of 2.20%.

Horace Mann Educators Corporation (HMN) operates as an insurance holding company in the United States. It operates through Property & Casualty, Life & Retirement, and Supplemental & Group Benefits segments. 

The company increased its quarterly dividend by 3% to $0.35/share. This is the 17th consecutive year the Board has increased the annual shareholder cash dividend, reflecting Horace Mann’s commitment to long-term shareholder value creation. Over the past decade, the company has increased dividends at an annualized rate of 4%.

Between 2015 and 2024, the company's earnings grew from $2.23/share to $2.49/share, with some volatility in between.

The company is expected to earn $3.82/share in 2025.

The stock sells for 10.90 times forward earnings and yields 3.35%.

Kadant Inc. (KAI) supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. 

The company raised quarterly dividends by 6.30% to $0.34/share. This is the 12th year of consecutive annual dividend increase for this dividend achiever. Over the past decade, the company managed to raise dividends at an annualized rate of 8.10%.

Between 2015 and 2024, the company managed to grow earnings from $3.16/share to $9.51/share.

The company is expected to earn $9.94/share in 2025.

The stock sells for 37.80 times forward earnings and yields 0.36%.

Relevant Articles:

- On dividends and stock price fluctuations

- How I quickly review companies

- The Trade-Off Between Dividend Yield and Dividend Growth

- How to value dividend stocks

- 

Realty Income (O): A look at the past five years

Realty Income (O) stock reached an all-time-high of $82.29/share in February 2020, or about five years ago.

Today, the stock is selling at $56.50/share.

This is a stock price decline of 31.30% over the past five years.

Yet, this Real Estate Investment Trust (REIT) grew FFO/share from $3.29 in 2019 to $4.02/share in 2024.

This is an increase in FFO/share of 22.20%.

Note that the last three years have had FFO/share basically stay around $4/share, which possibly also makes some investors "nervous". Though prospects for FFO/share growth may appear promising too.

So why did this happen?

Long-time readers know that future returns are a function of:

1. Dividends

2. Cashflows per share (I also use EPS interchangeably or FFO/share here)

3. Change in valuations

The first two items are the fundamental sources of returns. Those are the sources of return that matter the most in the long run. I define the long run as a period that is at least 10 years.

The last item is the speculative source of return. It matters the least in the long run. It does matter a lot in the short run - that is over a period that is 5 - 10 years or so.

It looks like in the case of Realty Income the business actually increased cashflows over the past five years.

Monthly dividends per share also increased from $0.2325 in January 2020 to $0.2640 in January 2025. Subsequently the REIT hiked monthly dividends to $0.2680/share in February.

The reason is that the valuation multiple decreased over the past five years, acting as a headwind to share price appreciation.

Basically the stock sold at a Price to FFO of 25 in 2019 to a Price to FFO of 13.60 in 2025.

The multiple shrank by almost half in the past 5 years, when the business actually improved and generated more in cashflows per share.

This is a huge headwind in the short-run, entirely driven by the changes in investor appetite and how much they are willing to pay for a dollar in FFO/share

Some of it was driven by change in interest rates, as the 10 year Treasury Yield went from 2% in late 2019 to 4.40% today. But also the changes in investor appetite for REITs.

The reason for the poor performance in the stock was because investors were over excited about the stock five years ago, and were willing to bid it up. Perhaps that was also because interest rates were low.  Investors were willing to pay a premium valuation for this REIT five years ago.

Today however, investors are not willing to pay premium valuation for this REIT.  Interest rates are also higher as well. 

Predicting investor moods is very hard. Some times they are overly exuberant about a company (like they were about Realty Income in 2019). Other times, they are not excited at all about it (like today).

I believe that the mutliple today appears fine. I have no idea if the FFO multiple would shrink or grow in the future.

I do believe Realty Income will continue to grow FFO/share over time, and its investors would continue to receive their monthly and growing dividends over time. The company has been successful in doing just that for about 30 years as a publicly traded company, through various boom/bust cycles.

Sean William Scott - Dividend Investor

I came upon an interesting story about another dividend investor, this time a famous actor. This is Sean William Scott, who starred in such movies as American Pie. The Yahoo Finance article is an interesting read.

Seann William Scott, best known for his role as Stiffler in the Movie American Pie, has built a strong financial foundation beyond Hollywood. 

He has a dividend portfolio worth $12 Million, which generates $31,000 in monthly dividend income.

He has been able to smartly save and invest his income from acting, which is why he also has $18 Million in paid off real estate.

All of this passive income can provide for his needs, even if he is unable to secure new acting gigs.

This is great to hear, because acting is a notoriously volatile profession. It takes a long time to get established, and to get acting gigs. You may make a lot of money on a few projects, but that money does not always last. You may not be able to secure another role that ends up being highly paid. 

Hence, it is important to avoid inflating your lifestyle, and it is very important to save quite a bit from any windfall, and invest it wisely. There are lots of things that could go wrong, from spending, to investments to dealing with sudden influx of wealth when you are not ready and do not have the ability to manage those finances.

It looks like the royalties and dividends exceed his spending. He said he received another $47,400 in royalty payments and $31,685 in interest and dividends. He also earned $140 in residuals last month. Though that spending does seem high. He said his monthly expenses total $49,739, including $15,333 in property taxes, $8,000 in homeowner’s insurance, $7,554 in child care, $1,500 on eating out, $2,000 on utilities, $1,000 on health care, $1,500 on clothes, $1,800 on education, $1,500 on entertainment and gifts, $1,000 on auto expenses and various other bills.

It's unfortunate that his dividend portfolio holdings are not listed. But based on the monthly dividend amounts, it looks as if he generates a dividend yield of about 3%. Assuming this income is invested in a diversified portfolio of companies, it would likely grow at or above the rate of inflation over time. Qualified dividends are also tax-advantaged, meaning that they have lower tax rates than ordinary income too.

It's great to see the example of someone who made large incomes, and also managed to save and invest a large portion of it. It is unfortunate that we get to see these figures publicly, due to a divorce. Divorces can definitely put a serious dent on any otherwise well-crafted financial plan.

To paraphrase the late Charlie Munger, there are three ways that a smart man could go broke:

"ladies, liquor and leverage"

As we know, higher income won't fix bad spending habits. For example, a lot of athletes tend to make millions of dollars over short periods of time, only to have nothing to show for it later. That's because humans are programmed to base their spending on their incomes. If you suddenly get a large income, you start spending as if this income would last forever. Sadly, it doesn't, which leads to all sorts of potential problems. If you haven't this documentary can be quite interesting. 30 for 30 Broke

Did you find this story inspiring or motivational? You may like these stories listed below as well. Or if you are interested in sharing yours or another story, reach out at dividendgrowthinvestor@gmail.com

Relevant Articles:

- How Ronald Read managed to accumulate a dividend portfolio worth $8 million

- How Anne Scheiber Made $22 Million Investing in Dividend Growth Stocks

- How Grace Groner Turned $180 in $7 Million by Investing in Dividend Growth Stocks

- This Is How This Successful Dividend Investor Turned $1,000 Into $2 Million

- The Oracle of Buffalo

- How Earl Crawley Built a $500,000 Dividend Portfolio on Minimum Wage

19 Dividend Growth Stocks Raising Dividends for Shareholders

As a shareholder, there are two ways to make profits from a stock. 

The first way is when you sell your stock for a gain, after it has increased above your purchase price. The downside is that once you sell your stock, you will not be able to participate in any further upside. If you hold patiently however, you will experience a surge in net worth if the business succeeds. 

The second way is when a stock you own distributes a dividend. A company typically distributes a dividend after carefully evaluating its business needs. If a business does not find enough good opportunities to deploy profits at high rates of return, then the rational thing to do is to distribute it to shareholders. Some businesses are able to both grow earnings and dividends. 

There are over 520 businesses in the US, which have managed to increase dividends to shareholders for at least a decade. I try to monitor most of them, in an effort to review existing holdings, and uncover companies for further research. 

My monitoring process involves different steps. I regularly screen the investable universe, using my criteria, before reviewing promising candidates. I also review some major news like filings and dividend increases as well for a narrower view of the universe.

For example, last week, there were 63 US companies that raised dividends. Of those companies, only 19 had managed to grow dividends for at least 10 years in a row. You can view this list below:

As part of my review, I look at the size of the increase and compare it to the five and ten year average. I also review the trends in earnings per share, in order to determine if the track record of dividend growth was from a solid base.

I like reviewing trends in payout ratios, in order to determine dividend safety. This of course is best done in conjunction with reviewing of earnings per share.

Last but not least, I also review valuation, in order to determine if a company is worth reviewing today for a potential acquisition.

When I review companies, I look at ten year trends in:

1) Earnings per share

2) Dividend payout ratio

3) Dividends per share

4) Valuation

Since I have some experience evaluating dividend companies, I also modify my criteria based on the environment we are in and the availability of quality companies. If I see a company with a strong business model and certain characteristics that I like, I may require a dividend streak that is lower than a decade. I have also found success in looking beyond screening criteria by purchasing stocks a little above the borders contained in a screen.

It is important to be flexible, without being too lenient.

How to think about the sources of investment returns

In terms of a somewhat succint summary, it is good to think in terms of trade-offs in the full picture. The expected returns formula I use really summarizes things neatly, and makes you think about how changes in the different variables impact overall results over a given time period.

The expected returns formula is a function of:

1. Dividends

2. Earnings Per Share Growth

3. Changes in valuation

I am using this additional step in the exercise, because quite often I see folks whose whole analysis stems from looking at a price chart and making up their mind from it. This is dangerous in my opinion, because you need to understand the context and reasons of why what happened happened. And from them to determine if it can happen further in the future, or not. All probabilistically speaking of course.

One needs to look at these three items together, rather than in isolation, when it comes to understanding where returns come from.

But in general, the first two items, dividends and earnings per share growth are the fundamental sources of returns. Over long periods of time, of at least 10 - 20 years, these items generate the lions portion of returns. The percentage increases the further out in time you go.

The last time, change in valuation, is part of the speculative returns. This can ebb and flow wildly in the short run, from month to month, year to year and even 5 - 10 years. Changes in valuation can push down returns or really accelerate returns in the short-run, but those are very hard to predict. The longer your timeframe however, the lower the importance of the changes in valuation on returns. Unless of course you really really overpaid at the start - think investing at 100 times earnings in Nikkei in 1989 or buying tech stocks at 100 times earnings in 1999. 

As a long-term investor, I focus on fundamental returns (dividends and earnings). I do try to ensure I am not overpaying for a security. Other than that, valuation is a range that is accepted or not. My goal is to find a good company I can hold for decades first. Valuation is important, but in reality it only affects a portion of my returns.

For example, if I invest in a stock it does matter if I pay 15 or 25 times earnings for it in the first decade of ownership. After all, if growth in earnings per share is the same under each scenario, you are better off buying at 15 times earnings. Buying low also means obtaining a higher starting yield today. In an ideal world, you would buy low, then be able to reinvest dividends at a higher yield, and then ultimately the stock price would be revalued higher. This is how many of the greatest investors have done it.

However, you do not always have the option of either buying low or buying high. In many cases, you may have to "buy high" because you may also miss out on buying at all. There is an opportunity cost associated with waiting for too long for the perfect set-up that never comes.

After all, the real wealth for a long-term investor is not if you bought at 15 or 25 times earnings, but identifying a company that can grow those earnings at a steady clip over time, and pay a growing dividends along the way. It took me a long while to realize this lesson.

I really love this chart from the late Jack Bogle, which illustrated the interplay between the sources of return on S&P 500 between 1946 and 2015. It really puts things in perspective. 

This type of thought process works on individual companies, indices and other assets such as bonds for example.

I have posted several articles in the past, discussing the sources of investment returns, and applying the concepts to real-world situations. You can read and enjoy below:

Altria, Dividends and Total Returns

Sources of Investor Returns: Visa Edition

A Simple Model For Estimating Future Returns

Price, Value and Sources of Returns

Realty Income Over The Past Five Years

Microsoft During the lost decade

The one lesson from the first "Lost Decade" of the 21st Century..

Value in Growth Clothes: Growth in Value Clothes

The Best Performing Dividend Aristocrat Over The Past Decade

Microsoft and Altria: A Look at the past decade

Altria and Microsoft - returns over the past decade

Twenty Dividend Growth Stocks Raising Dividends Last Week

 I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing holdings, but also potentially identify companies for further research. Plus, it helps me get the pulse of corporate boards. One of my favorite exercises in compiling this report is to look at the press releases, and noting down management verbiage related to the dividend increases. That pulse check is a good sentiment check. After all, dividends have a great deal of signaling power, which neatly summarizes corporate board expectations about near term business conditions. The output of that being the dividend increase amounts. 

TL;DR - dividend increase announcements include a lot of information that could be helpful to me as an investor.

Over the past week, there were 60 dividend increases in the US. I went ahead and isolated the 20 companies that increased dividends last week AND have a ten year track record of annual dividend increases. The list can be observed below:

Reviewing the dividend growth universe for dividend increases is part of my monitoring process. For my review, I narrow my focus to the companies with a ten year streak of annual dividend increases. I do this in order to look at companies with a sufficiently long streak of dividend growth.

The next step involves reviewing trends in earnings and dividends. I want to see earnings per share which are growing. Rising EPS can fuel future dividend growth. I also want to see dividend increases which are of decent size, and not done merely to maintain the streak of annual dividend increases.

A steep deceleration in the dividend growth rate relative to the ten year average tells me that management is not very optimistic on their business. If this is coupled with a high payout ratio and stagnant earnings per share, I can tell that the dividend streak is nearing its end.

Last but not least, I also want a decent valuation behind an investment. If I overpay dearly for an investment today, this means that the expectations for the first few years after I make the investment are already baked in the price. As a result, I want to void overpaying for an investment. Unfortunately, this is easier said than done.

The Trade-Off Between Dividend Yield and Dividend Growth

Life is full of choices. 

A few examples include:

Should I spend money on things today, or save money for the future?

Ultimately, you need to strike the right balance between those two seemingly opposite ends of the spectrum.

This is where trade-offs come handy, because they force a balance, a compromise between these two ends of the spectrum.

In the world of Dividend Growth Investing, the ultimate trade-off is the Dividend Yield versus Dividend Growth Connundrum.

On one hand, buying a company with a high dividend yield today would provide high income today. However, this investment may not grow the dividend to maintain the purchasing power of that income. In addition, that high yielding investment may have a high payout ratio. A higher payout ratio may be a problem in a recession, when earnings decline, thus increasing the risk of a dividend cut. 

On the other hand, buying a company with a high dividend growth today, could provide high income in the future.

This investment would not provide high income today however. Even though the dividend is expected to grow at a high rate of return over time, this does require patience. In addition, there is a possibility that this growth expectation does not materialize, as growth slows down. 

All of this is a gross simplification. There are a lot of data points to consider, and possible exceptions, but I've tried to summarize it to the best way possible. That being said, I view three different types of dividend growth companies, based entirely on this yield/growth trade-off.

I personally try to think through those trade-offs when I review a company. In general, expected returns are a function of:

1. Dividend Yield

2. Growth (EPS or Dividend Growth as they are roughly equal over time)

3. Change in valuation multiples

For example, for a company like Verizon (VZ) today, you get a dividend yield of 6.75%. You have an expected dividend growth rate of about 2%. This nets to an expected return of 8.75%. Let's call it 9% for simplicity.

On the other hand of the spectrum is a company like Visa (V). You get a dividend yield of 0.70%. However, dividends have a high expected rate of growth. If Visa manages to grow dividends by 12%/year, it can generate high yields on cost for patient long-term investors. Along with high expected returns of roughly 12.70%. Let's call it 13% for simplicity.

We can go back 10 or 15 years, and see that an investment in Visa would have been a smarter choice than an investment in Verizon. This of course is used merely to illustrate a point.

At the very end of 2009, Verizon sold at $27.59/share. The company paid an annual dividend of $1.90/share. The starting yield was high at 6.88%. Fast forward to the end of 2024, and the stock sold at $39.99/share and paid an annual dividend of $2.72/share. Therefore, the investor from 2009 would be generating an yield on cost of 9.85%, on top of the modest capital gains they generated.

At the end of 2014, Verizon sold at $46.78/share and had an annual dividend of $2.20/share. The starting yield was 4.70%. Investors who bought it back then would be sitting on a small unrealized capital loss, but generating an yield on cost of 5.81%.

Let's look at Visa.

At the very end of 2009, Visa sold at $21.86/share. This was adjusted for stock splits. The company paid an annual dividend of $0.12/share. The yield was low in 2009 at 0.55%. Fast forward to the end of 2024, and the stock sold at $316.04/share and paid an annual dividend of $2.36/share. The current yield is still low at 0.75%. However, the investor from 2009 would be generating an yield on cost of 10.80%, on top of the exceptional capital gains they generated.

At the end of 2014, Visa sold at $65.55/share and had an annual dividend of $0.48/share. The yield was low at 0.73%. However, investors who bought it back then would be sitting on a high unrealized capital gain, but generating an yield on cost of 3.60%.

The yield on cost for Visa is higher than Verizon over the past 15 years, and the same is true for the unrealized capital gains.

Over the past ten years however, Verizon still has a higher yield on cost than Visa, notably due to the higher starting yield. However, Visa still delivered higher unrealized capital gain.

I would argue that Visa's dividend is better covered than Verizon, due to it's lower payout ratio and higher expected growth in earnings. However, Visa's stock is not cheap today, as it discounts expectations for growth to continue. Visa sells for 30.85 times forward earnings and yields 0.68%. It has a forward payout ratio of 21%.

Verizon's stock is cheaper today, selling at 8.50 times forward earnings and yields 6.80% today. The forward payout ratio is 58%. However that's because the market expects small growth, if any. The high payout ratio also makes this dividend riskier.

Ultimately, life is full of trade-offs. The decision of whether to focus more on dividend yield versus dividend growth, or vice versa, is one such trade-off. 

Where you lean on the spectrum of this trade-off would depend on various factors, such as your expectations, risk profile, timeframe, experience, goals and objectives etc.

Hope you enjoyed today's article, and you get to thinking about those trade-offs you are making, when making your next investment. I know I do think about the trade-offs involved, whenever I try to build out my portfolio, brick by brick, to reach out my own goals and objectives.

23 Dividend Growth Companies Raising Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. Dividends have signaling power about management's outlook for the business. As such dividend increase announcements could provide useful insights, if you know how to read them. Which goes hand in hand with monitoring.

This exericise helps me review existing holdings and also potentially identify companies for further research.

This exercise also shows how I can quickly evaluate a population of dividend growth stocks, and narrow it down to a more manageable list for further research.

Over the past week, there were 62 companies that raised dividends in the US. Twenty three of these companies that raised dividends also have a 10 year track record of annual dividend increases under their belt. The companies include:

As I mentioned above, this list is just a starting list for research and monitoring. It's not a recommendation. In order to narrow down the list, I would look at each company fundamentally, and then do a review of its valuation before deciding where to go next. I also do try to invest in companies I understand, which also prevents me from investing in companies I do not understand. You may like this old post about my entry criteria.  You may also like my post about valuation here. 

Note that I didn't include Meta's (META) first dividend increase in this review. Note that I did find it a little low - a measly 5% to 52.50 cents/share on the quarterly dividend. I would have expected that a large company in the initial phase would have stronger dividend growth. Or perhaps Meta is stating that whatever it is they are building today may need a ton of cash. Hopefully, those large CAPEX investments are allocated at a high ROI to generate further FCF/share growth. 

I also wanted to note that there were a few non-US companies that raised dividends last week as well. These are well-known and perhaps widely held as well.

Those include:

British American Tobacco (BTI), which announced a 2% hike in the annual dividend to GBP 2.4024/share. This is the 28th consecutive annual dividend increase for this international dividend aristocrat.

Nestle (NSRGY), which announced a 1.67% raise in the annual dividend to 3.05 CHF/share. This is the 29th consecutive annual dividend increase for this international dividend aristocrat. 

I was unsure whether to note it or not, but it seems like Unilever (UL) is starting to increase dividends again. The company just raised quarterly dividends to €0.4528/share, which is 6.09% raise over the dividend paid during the same time last year. It's also a 3% increase over the prior dividend. That's after keeping it unchanged for three and a half years, and losing its dividend aristocrat status in 2022.