As part of my monitoring process, I review the list of dividend increases every week. This exercise helps me to monitor events related to companies I own, in order to keep up with them better. It also helps me identify companies for further research.
I usually focus my attention on the companies that have managed to increase dividends for at least a decade. That’s because my goal is to find companies for long-term investment, which I can hopefully hold for decades. I am not interested in buying a stock that I then have to sell a few years down the road. I am interested in companies that can deliver performance for long periods of time.
There were two companies that raised dividends last week, which also have managed to boost dividends for at least a decade:
The Kroger Co. (KR) operates as a retailer in the United States.
Kroger raised its quarterly dividend by 16.70% to 21 cents/share. This marks the 15th consecutive year of annual dividend increases. The company continues to expect, subject to board approval, an increasing dividend over time. Over the past decade, Kroger has managed to increase dividends at an annualized rate of 13.30%.
I love hearing from the company executives, when they announce a dividend increase:
"In recognition of our strong performance during the last year, we are proud to increase the quarterly dividend at a higher rate than our historical average," said Rodney McMullen, Kroger's Chairman and CEO. "This increase reflects the Board of Directors' confidence in the strength of our free cash flow and our ability to deliver consistently strong and attractive total shareholder returns."
"Kroger remains committed to investing in the business to drive long-term sustainable net earnings growth, maintaining its current investment grade debt rating, and returning excess free cash flow to shareholders via share repurchase and a growing dividend over time. The company actively balances the use of its adjusted free cash flow to achieve these goals."
The company managed to grow earnings from 51 cents/share in 2011 to $3.27/share in 2020. Kroger is expected to earn $3.04/share in 2021.
The stock is selling for 12.86 times forward earnings and yields 2.15%. I find Kroger to be an interesting company for review. Check my analysis of Kroger for more information about this dividend achiever.
John Wiley & Sons, Inc. (JW.A) operates as a research and learning company worldwide.
John Willey & Sons raised its quarterly dividends by 0.70% to 34.50 cents/share. It was Wiley’s 28th consecutive annual increase. Over the past decade, this dividend champion has managed to raise dividends at an annualized rate of 8.60%. However, the 5 year rate is down to 3%.
The company is expected to earn $2.91/share in 2021. For reference, the company earned $2.80/share in 2011, which is not much of a growth.
The stock is selling for 19.73 times forward earnings and yields 2.41%. Given the lack of earnings growth over the past decade, I view it as a hold at best today.
Relevant Articles:
- Realty Income Delivers High Yields and Dependable Dividend Growth
- Nine Dividend Growth Stocks Rewarding Shareholders With Raises
- Ten Dividend Stocks For Further Monitoring
- Five Dividend Growth Stocks Rewarding Shareholders With Raises
I review the list of dividend increases weekly, as part of my portfolio monitoring process. I usually narrow the list down to companies with at least a ten year history of annual dividend increases.
The next involves reviewing each company in sufficient detail, in order to determine if dividend increases are based on solid fundamentals. This review includes looking at trends in earnings per share, dividends per share, payout ratios as good start. The goal is to determine the likelihood of future dividend increases.
The last review point includes valuation. In general, I try to avoid overpaying for companies. Valuation is more art than science however ( as is investing in general). This is why it is important to look at relative valuations and growth in the opportunity set, not just focus on absolute numbers.
These steps keep me in fighting shape, and help me monitor as many companies in the investable dividend growth universe in advance. This helps me to be prepared when the right opportunity at the right price comes along.
Over the past week, there were six companies which raised dividends to shareholders. Each company has a minimum ten year streak of annual dividend increases under its belt. The companies include:
Realty Income (O) increased its monthly dividend to 23.50 cents/share. That's a 1.73% increase over the dividend paid during the same time last year. Over the past decade, Realty Income has managed to increase dividends at an annualized rate of 4.90%. This dividend aristocrat has managed to grow dividends since 1994.
Between 2010 and 2020, Realty Income managed to grow FFO from $1.83/share to $3.31/share. Realty Income is expecting to generate FFO of $3.26 - $3.34/share in 2021.
The stock sells for 18.29 times FFO and yields 4.57%. Check my analysis of Realty Income for more information about the company.
WD-40 Company (WDFC) develops and sells maintenance products, and homecare and cleaning products in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. The company increased its quarterly dividend by 7.46% to 72 cents/share. This marked the 12th consecutive year of dividend increases for this dividend achiever. Over the past decade, the company has managed to increase distributions at an annualized rate of 10.10%.
Between 2010 and 2020, the company grew earnings from $2.15/share to $4.40/share. WD-40 is expected to earn $5.51/share in 2021.
The stock sells for 53.87 times forward earnings and yields 0.97%.
Williams-Sonoma, Inc. (WSM) operates as an omni-channel specialty retailer of various products for home. The company raised its quarterly dividend by 11.32% to 59 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade the company has managed to increase dividends at an annualized rate of 13.60%.
Between 2011 and 2021, the company grew earnings from $1.83/share to $8.61/share. Williams-Sonoma is expected to earn $9.22/share in 2022.
The stock sells for 18.96 times forward earnings and offers a current yield of 1.35%
UDR, Inc. (UDR) is a leading multifamily real estate investment trust with a demonstrated performance history of delivering superior and dependable returns by successfully managing, buying, selling, developing and redeveloping attractive real estate communities in targeted U.S. markets. The REIT hiked its quarterly dividends by 0.69% to 36.25 cents/share. This marked the tenth consecutive year of annual dividend increases for UDR. Over the past decade, the REIT has managed to hike dividends at an annualized rate of 7%.
Between 2011 and 2020, FFO/share grew from $1.28 to $1.85. The REIT is expected to earn $1.95/share in 2021.
The stock sells for 22.26 times FFO and yields 3.35%
Horizon Bancorp, Inc. (HBNC) operates as the bank holding company for Horizon Bank that provides a range of commercial and retail banking services. The company raised its quarterly dividend by 8.33% to 13 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. During the past decade, the company has been able to increase dividends at an annualized rate of 13.60%.
Between 2010 and 2020, the company grew earnings from $0.54/share to $1.55/share. Horizont Bancorp is expected to earn $1.45/share in 2021.
The stock is selling for 13.40 times forward earnings and yields 2.67%.
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 primarily in Massachusetts. The bank hiked its quarterly dividend by 4.34% to 48 cents/share, marking the tenth consecutive annual dividend increase. It has managed to grow dividends at an annualized rate of 9.70% over the past decade.
The bank earned $2.12/share in 2011 and is expected to grow earnings to $3.95/share by 2021.
The stock is selling for 22.93 times forward earnings and yields 2.12%.
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