Baby R2R’s Portfolio Update – Q2 2020

This post is part of the series where I share the progress of Baby R2R’s investment portfolio. I started documenting this in Q3 2017 and intend to provide quarterly updates.

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Nine Dividend Paying Companies Raising Dividends Last Week

As part of my monitoring process, I review the list of dividend increases every week. This exercise helps me to monitor existing portfolio holdings, and to identify promising companies for further research.

I tend to focus my attention on companies with at least ten years of annual dividend increases. This activity helps me to focus on companies with a higher chance of delivering sustainable dividends, and lets me identify the companies with a long runway for future dividend increases.

I review each company, in order to determine if it can continue raising its dividends for the foreseeable future. I believe that rising earnings per share are the fuel behind future dividend increases.

I look at rising earnings per share, in conjunction with trends in the dividend payout ratio. A high payout ratio is generally a warning sign, unless the business model is highly predictable or earnings are growing faster than dividends. I generally prefer if earnings and dividends grow at roughly the same long-term rate. Sometimes there are changes, and reasons for why that’s not the case, especially if a company just recently started growing dividends from a low base.

I like to review trends in dividend growth too, and check if it is accelerating, decelerating or just keeping pace at a constant rate.

I also like to review the valuation in terms of P/E and yield. While these are viewed as old-fashioned today, I have found them to be useful yardsticks to follow, along with dividend growth, payout ratio and earnings growth. Valuation is part art, part science.

American States Water Company (AWR) provides water and electric services to residential, industrial, and other customers in the United States. It operates through three segments: Water, Electric, and Contracted Services.

The company raised its quarterly dividend by 9.80% to 33.50 cents/share. This marked the 66th consecutive year of annual dividend increases for this dividend king. During the past decade, this dividend king has managed to grow distributions at an annualized rate of 8.70%.

Between 2009 and 2019, the company grew earnings from 81 cents/share to $2.28/share.
The company is expected to earn $2.29/share in 2020.

The stock is overvalued at 33.60 times forward earnings. The stock yields 1.75%.

Community Trust Bancorp, Inc. (CTBI) operates as the bank holding company for Community Trust Bank, Inc. that provides commercial and personal banking services to small and mid-sized communities.

The company raised its quarterly dividend by 1.30% to 38.50 cents/share. This marked the 40th consecutive year of annual dividend increases for this dividend champion. During the past decade, this dividend champion has managed to grow distributions at an annualized rate of 3.10%.

Between 2009 and 2019, the bank grew earnings from $1.50/share to $3.64/share. The company is expected to earn $3.10/share in 2020.

The stock is attractively valued at 9.90 times forward earnings and yields 5%.

McKesson Corporation (MCK) provides pharmaceuticals and medical supplies in the United States and internationally. It operates through four segments: U.S. Pharmaceutical, Prescription Technology Solutions, International, and Medical-Surgical Solutions.

The company raised its quarterly dividend by 2.45% to 42 cents/share. This marked the 13th consecutive year of annual dividend increases for this dividend achiever. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 12.65%.
The company has managed to grow earnings from $2.95/share in 2009 to $4.95/share in 2019. The company is expected to earn $14.40/share in 2020.

McKesson sells for 10.40 times forward earnings. The stock yields 1.10%.

Portland General Electric Company (POR) is an integrated electric utility company, engages in the generation, wholesale purchase, transmission, distribution, and retail sale of electricity in the state of Oregon. The company operates seven thermal plants; seven hydroelectric plants; and two wind farms. 

The company raised its quarterly dividend by 5.85% to 40.75 cents/share. This marked the 15th consecutive year of annual dividend increases for this dividend achiever. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 4.10%.

This utility managed to grow earnings from $1.31/share in 2009 to $2.39/share in 2019.
The company is expected to earn $2.39/share in 2020.

The company sells for 18.50 times forward earnings. The stock offers a dividend yield of 3.70%.

Republic Services, Inc. (RSG) provides non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States.

The company raised its quarterly dividend by 4.95% to 42.50 cents/share. This marked the 18th consecutive year of annual dividend increases for this dividend achiever. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 7.25%.

Republic Services managed to grow earnings from $1.30/share in 2009 to $3.33/share in 2019.
The company is expected to earn $2.85/share in 2020.

The stock is not cheap at 30.60 times forward earnings. Republic Services yields 1.95%.

The Scotts Miracle-Gro Company (SMG) manufactures, markets, and sells consumer lawn and garden products in the United States and internationally. The company operates through three segments: U.S. Consumer, Hawthorne, and Other.

The company raised its quarterly dividend by 6.90% to 62 cents/share. This marked the 11th consecutive year of annual dividend increases for this dividend achiever. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 16.30%.

The company managed to grow earnings from $2.32/share in 2009 to $8.18/share in 2019.
The company is expected to earn $6.37/share in 2020.

The stock sells for 24.90 times forward earnings. The stock offers a dividend yield of 1.55%.

W.W. Grainger, Inc. (GWW) distributes maintenance, repair, and operating (MRO) products and services in the United States, Canada, and internationally.

The company raised its quarterly dividend by 6.25% to $1.53/share. This marked the 49th consecutive year of annual dividend increases for this dividend champion. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 12.30%.

Between 2009 and 2019, W.W. Grainger managed to increase earnings from $5.62/share to $15.32/share. The company is expected to earn $15.94/share in 2020.

The stock sells for 21.40 times forward earnings and yields 1.80%.

Altria Group, Inc. (MO) manufactures and sells cigarettes, smokeless products, and wine in the United States.

The company raised its quarterly dividend by 2.40% to 86 cents/share. This marked the 51st consecutive year of annual dividend increases for this dividend king. During the past decade, this dividend king has managed to grow distributions at an annualized rate of 9.70%.

Altria earned $1.87/share in 2010 and is expected to earn $4.31/share in 2020.

The stock is cheap at 9.50 times forward earnings. The stock yields 8.35%.

Eagle Bancorp Montana, Inc. (EBMT) operates as the bank holding company for Opportunity Bank of Montana that provides various retail banking products and services to small businesses and individuals in Montana.

The company raised its quarterly dividend by 2.60% to 9.75 cents/share. This marked the 21st consecutive year of annual dividend increases for this dividend achiever. During the past decade, this dividend achiever has managed to grow distributions at an annualized rate of 3.30%.

The bank grew earnings from 52 cents/share in 2009 to $1.69/share in 2019. The company is expected to earn $2.36/share in 2020

The stock sells for 6.55 times forward earnings and yields 2.50%.

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3 Recent Buys – BAM, FB, MSFT

A quick update on a couple of recent buys in the portfolio.

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Five Dividend Growth Stocks Rewarding Shareholders With Raises

As part of my monitoring process, I review the list of dividend increases every week This activity helps me to monitor the business performance of any companies I am invested in. It also helps me to identify any hidden dividend gems, and place them on my list for further research.

My reviews are an example of the quick way I use to evaluate companies, before deciding if they are worth a second look later or not.

The companies in today’s article have managed to grow dividends for at least ten years in a row. These companies also announced a dividend increase during the past week. The companies include:

PPG Industries, Inc. (PPG) manufactures and distributes paints, coatings, and specialty materials worldwide.

The company raised its quarterly dividend by 6% to 54 cents/share. This marked the 49th year of consecutive annual dividend increases for this dividend champion. PPG Industries has managed to grow dividends at an annualized rate of 6.40% over the past decade.

Between 2010 and 2019, PPG Industries managed to grow earnings from $2.31/share to $5.22/share.
The company is expected to generate $4.44/share in 2020

The stock sells for 24 times forward earnings and yields 1.95%.

Computer Services, Inc. (CSVI) delivers core processing, digital banking, managed services, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate entities in the United States.

The company raised its quarterly dividend by 19.10% to 25 cents/share. According to their press release, this marked the 49th year of consecutive annual dividend increases for the company. Sadly, I have not been able to verify this with any other independent source. I see that the stock has been publicly traded since 2003, hence I have to use this data as a starting point for the dividend record. If the stock was privately held before, the record of annual dividend increases before that doesn’t count.
If I find reliable data showing that the record started 49 years ago, I would update my stance on the topic.

Computer Services has managed to grow dividends at an annualized rate of 15.80% over the past decade.

Between 2010 and 2019, Computer Services managed to boost earnings from 81 cents/share to $1.91/share.

The stock sells for 27 times forward earnings and offers a dividend yield of 1.90%.

National Retail Properties (NNN) invests primarily in high-quality retail properties subject generally to long-term, net leases.

This real estate investment trust raised its quarterly dividend by 1% to 52 cents/share. This marked 31 years of consecutive annual dividend increases for this dividend champion.

The company has raised dividends by 3.10%/year annualized over the past decade.

Over the past decade, National Retail Properties has managed to boost its AFFO/share from $1.73 in 2009 to $2.79 in 2019.

The REIT is selling for 13.35 times forward FFO and yields 5.85%.

Stanley Black & Decker, Inc. (SWK) engages in tools and storage, industrial, and security businesses worldwide.

The company raised its quarterly dividend by 1.40% to 70 cents/share. This marked the 53th consecutive annual dividend increase for this dividend king. This dividend king has managed to boost distributions at an annualized rate of 7.60% over the past decade.

The company managed to boost earnings from $2.79/share in 2009 to $6.35/share in 2019.
The company is expected to earn $5.73/share in 2020.

The stock is selling for 25.10 times forward earnings and offers a dividend yield of 1.85%.

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 2.20% to 46.50 cents/share. Marsh & McLennan has managed to grow dividends at an annualized rate of 8.10% over the past decade.
Earnings increased from $1.55/share in 2010 to $3.41/share in 2019.

The company is expected to generate $4.60/share in 2020.

The stock sells at 24.65 times forward earnings and yields 1.65%.

MGE Energy, Inc. (MGEE) operates as a public utility holding company primarily in Wisconsin. It operates through five segments: Regulated Electric Utility Operations; Regulated Gas Utility Operations; Nonregulated Energy Operations; Transmission Investments; and All Other.

MGE Energy raised its quarterly dividend by 5% to 37 cents/share. This event marked the company's 45th consecutive year of increasing its dividend. MGE Energy is a dividend champion which has managed to grow dividends at an annualized rate of 3.60% during the past decade.

MGE Energy managed to grow earnings from $1.67/share in 2010 to $2.51/share in 2019.

The stock looks richly valued at 26.50 times forward earnings. It yields 2.20%.

Relevant Articles:

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