Last week, there were five dividend growth companies which increased distributions to their shareholders. Each of these companies has managed to grow distributions for at least ten consecutive years. I reviewed the most recent increase in dividends relative to the historical average. I also reviewed trends in earnings per share, in order to determine the likelihood of future dividend increases. In addition, I also reviewed valuation, in order to determine if a company is worth pursuing today, or it may be a better deal at a better price. I follow this process weekly, in an effort to monitor companies I own and to uncover potential opportunities for further research.
The companies for this weeks review include:
Marsh & McLennan Companies, Inc. (MMC), is a professional services company that provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. It operates in two segments, Risk and Insurance Services, and Consulting.
The company increased its quarterly dividend by 9.60% to 46 cents/share. This marked the 10th consecutive year of annual dividend increases for this newly minted dividend contender. Marsh & McLennan has managed to grow dividends at an annualized rate of 7% over the past decade.
Between 2009 and 2018, the company managed to grow earnings from 42 cents/share to $3.23/share. Marsh & McLennan is expected to generate $4.60/share in 2019. The stock is a little overvalued at 20.80 times forward earnings and yields 1.90%. If valuation becomes more attractive, the stock may be worth a second look.
National Bankshares Inc. (NKSH) operates as the bank holding company for the National Bank of Blacksburg that provides retail and commercial banking services to individuals, businesses, non-profits, and local governments.
The company raised its semi-annual dividend by 6.40% to 67 cents/share. This marked the 20th year of annual dividend increases for this dividend achiever. During the past decade, it managed to grow these distributions at an annualized rate of 4.20%.
Earnings per share didn’t grow by much between 2009 and 2018, rising only from $2.06/share to $2.32/share. The bank is expected to generate $2.63/share in 2019.
National Bankshares is fairly valued at 15.70 times forward earnings and offers a dividend yield of 3.20%. Given the slow earnings growth, I may place this on the back burner for now.
Northrop Grumman Corporation (NOC), a security company, provides products in the areas of autonomous systems, cyber, space, strikes, and logistics and modernizations in the United States, the Asia Pacific, and internationally. The company operates through four segments: Aerospace Systems, Innovation Systems, Mission Systems, and Technology Services.
The company raised its quarterly dividend by 10% to $1.32/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. During the past decade, it managed to grow distributions at an annual rate of 12.70%/year.
Between 2009 and 2018 earnings increased from $5.21/share to $18.49/share. Northrop Grumman is expected to generate earnings of $19.38/share in 2019.
Currently, the stock is fairly valued at 15.80 times forward earnings and offers a safe yield of 1.70%.
IDEX Corporation (IEX), through its subsidiaries, operates as an applied solutions company worldwide. The company operates through three segments: Fluid & Metering Technologies (FMT), Health & Science Technologies (HST), and Fire & Safety/Diversified Products (FSDP).
The company increased its quarterly dividend by 16.30% to 50 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend contender. During the past decade, it has managed to grow dividends at an annual rate of 13.20%/year.
Between 2009 and 2018, earnings rose from $1.40/share to $5.29/share. The company is expected to generate $5.82/share in 2019.
Unfortunately, this company is overvalued at 25.90 times forward earnings. The stock yields 1.30% today. It may be worth a second look if it dips below 20 times forward earnings, which is equivalent to decline below $116/share.
Marriott International, Inc. (MAR) operates, franchises, and licenses hotel, residential, and timeshare properties worldwide. The company operates through North American Full-Service, North American Limited-Service, and Asia Pacific segments. The company raised its quarterly dividend by 17.10% to 48 cents/share. This was in line with the ten year average increase of 17.30%/year. Marriott International managed to grow earnings from $0.96/share in 2008 to $5.38/share 2018. The company is expected to generate $6.10/share in 2019.
The stock is overvalued at 21.50 times forward earnings. It yields 1.50%. The hospitality industry has had a strong decade, which has resulted in growing earnings per share. The next recession will decrease earnings per share, and shrink multiples to a more reasonable level.
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- How to read my weekly dividend increase reports
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- Rising Earnings – The Source of Future Dividend Growth
- How to read my stock analysis reports
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