I review
the list of dividend increases every week, in an effort to monitor existing holdings as well as identify companies for further research. In my weekly reviews on the blog, I usually focus on companies that have raised distributions for at least a decade, unless I already own shares of said companies.
Over the past week, there were six companies that raised dividends to shareholders. I reviewed each one briefly below:
AbbVie Inc. (ABBV) discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company was created in 2013, when Abbott Laboratories split into two companies – Abbvie and Abbott. Last week Abbvie raised its dividends for a second time this year, from 96 cents/share to $1.07/share. Abbvie has continued raising dividends to shareholders for the five years since becoming a separate publicly traded company. The current payment is much higher than the quarterly distribution of 40 cents/share that was paid in 2013. The stock sells 11.20 times forward earnings and yields 4.80%.
When I reviewed the stock in September, I liked the valuation but didn’t like the growth prospects for Abbvie. Unfortunately, the company generates too high of a percentage of sales and profits from one blockbuster drug. That drug is going to lose patent protection, and will start seeing a lot more competition over the next 5 years. Others may argue that this uncertainty is already priced in, even more so after the recent declines after I passed on the stock in September. Either way, I will continue holding on to my existing Abbvie shares.
Vectren Corporation (VVC) provides energy delivery services to residential, commercial, and industrial and other contract customers. The company raised its quarterly dividend by 6.70% to 48 cents/share. The dividend increase marked the 59th consecutive year that Vectren (VVC) has increased the annual dividends to shareholders. Over the past decade, Vectren has managed to boost its annual dividends at a rate of 3%/year. This
dividend king has managed to grow earnings from $1.87/share in 2007 to $2.60/share in 2017. The company is expected to earn $2.88/share in 2018.
The long streak of dividend increases for this dividend king is the result of the company’s continued successful execution of key strategic initiatives. Vectren has recognized the value of our long history of dividend growth and the role it has played in delivering above average shareholder returns. Unfortunately, the company is going to be acquired soon, which means that its long history of dividend increases will cease. While many fear mongers discuss dividend cuts, my experience is that many dividend investors end up having to sell their shares, because the businesses they own get acquired. Vectren is another company that is part of this statistic. That being said, the stock is overvalued at 24.90 times forward earnings and yields 2.70%.
AmerisourceBergen Corporation (ABC) sources and distributes pharmaceutical products in the United States and internationally. The company raised its quarterly dividend by 5.30% to 40 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow distributions at a rate of 29.30%/year. Between 2007 and 2018, the company has grown earnings per share from $1.25 to an adjusted $6.49/share. The company is expecting to earn $6.65 to $6.95/share in 2019, which means that it is selling at 13.40 times forward earnings at the low range of estimates and that it yields 1.80%. In general, low yielding securities should be growing distributions at a high rate. While the stock seems cheap, I need to research further why there is a deceleration of dividend growth.
Automatic Data Processing, Inc. (ADP) provides business process outsourcing services worldwide. It operates through two segments, Employer Services and Professional Employer Organization Services. The company raised its quarterly dividend by 14.50% to 79 cents/share, which is the second dividend increase in an year. The new $0.79 quarterly dividend represents a 25.40% increase in the quarterly dividend compared to a year ago, and is a strong signal of the board's confidence in ADP's future and its commitment to shareholder friendly actions. Over the past decade, the company has managed to grow distributions at a rate of 11%/year. This
dividend champion has managed to grow earnings from $2.34/share in 2008 to $3.66/share in 2018. The company expects diluted earnings per share to hit $4.25/share in 2019. The stock is overvalued at 34.60 times forward earnings and yields 2.10%. Given the high valuation, I would have to take a pass on for now. I would be interested to add to ADP on dips below $85/share.
Emerson Electric Co. (EMR), a technology and engineering company, provides various solutions to industrial, commercial, and residential markets worldwide. The company raised its quarterly dividend by 1% to 49 cents/share. This marked the 62nd consecutive annual dividend increase for this
dividend king. The ten year dividend growth is 5.90%/year. The company grew earnings from $2.66/share in 2007 to $3.46/share in 2018. Emerson Electric provided a 2019 guidance of $3.55 - $3.70/share. The stock is fully valued at 19.30 times forward earnings and yields 2.90%.
Spectra Energy Partners, LP (SEP) operates as an investment arm of Spectra Energy Corp. Spectra Energy Partners, LP, through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. The partnership raised its quarterly distribution to 77.625 cents/unit. This was a 6.90% increase over the distribution paid during the same time last year. Spectra Energy Partners has raised distributions for 11 years in a row. Since the end of 2007, the MLP has managed to grow distributions every single quarter, which is not a small achievement. Right now this MLP yields 8.70%.
Relevant Articles:
Continue Reading »
I had put in a low-ball offer a few weeks/months ago, which got executed last week. In this purchase, I added 100 shares of Inter Pipeline Ltd (IPL.TO) @ $20.80. IPL is a pipeline company that I have been a shareholder in for a long time and continue to build my position over the years. I have doubled my position since the start of 2018 with these purchases. IPL now makes a substantial position in my portfolio and will possibly look at limiting any more build-up since I do not want to own too much portfolio concentration in a single stock. With a current yield of ~7%, this purchase adds CAD$168 to my forward dividend income.
