Thursday, April 30, 2020

Seven Dividend Growth Stocks In The News

As part of my monitoring process, I review the list of dividend increases. I usually focus on the dividend increases for companies with a dividend streak longer than ten years in a row.

There were several notable dividend increases over the past week:

The Southern Company (SO), engages in the generation, transmission, and distribution of electricity. It operates in four segments: Gas Distribution Operations, Gas Pipeline Investments, Wholesale Gas Services, and Gas Marketing Services.

Southern Company raised its quarterly dividend by 3.20% to 64 cents/share. This marks the 19th consecutive year that that Southern has raised the dividend on its common stock.

During the past decade this dividend achiever managed to increase dividends at an annualized rate of 3.60%.
Southern Company managed to grow earnings from $2.36/share in 2010 to $4.50/share in 2019.
The company is expected to earn $3.15/share.

The stock yields 4.40% and sells at 18.30 times forward earnings.

The Travelers Companies, Inc. (TRV) provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance.

Traveler's hiked its quarterly dividends by 4% to 85 cents/share. This marked the 16th consecutive year of annual dividend increases for this dividend achiever

During the past decade the company managed to increase dividends at an annualized rate of 10.10%.
Travelers managed to grow earnings from $6.62/share in 2010 to $9.92/share in 2019. The company is expected to earn $9.33/share.

The stock yields 3.40% and sells at 10.80 times forward earnings. Check my analysis of Travelers Companies for more information about the company.

UGI Corporation (UGI) distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.

UGI Corporation hiked quarterly dividends by 1.50% to 33 cents/share. This marked the 33rd consecutive year of annual dividend increases for this dividend champion.

During the past decade the company managed to increase dividends at an annualized rate of 8.10%.
UGI Corporation has managed to grow earnings from $1.57/share in 2010 to an adjusted $2.28/share in 2019.

The company is expected to earn $2.58/share.

The stock yields 4.70% and sells at 10.95 times forward earnings.

People's United Financial, Inc. (PBCT) operates as the bank holding company for People's United Bank, National Association that provides commercial banking, retail banking, and wealth management services to individual, corporate, and municipal customers. The company operates in two segments, Commercial Banking and Retail Banking.

The bank hiked its quarterly dividend by 1.40% to 18 cents/share. This was the 27th consecutive annual dividend increase for this dividend aristocrat. During the past decade, the company has managed to increase dividends at an annualized rate of 1.50%/year.

The company managed to grow earnings from 30 cents/share in 2009 to $1.27/share in 2019. However, the low earnings per share in 2009 were as a result of an earnings recession that had lasted since EPS hit a high of 81 cents/share in 1999. They didn't exceed those earnings until 2014.

The company is expected to earn $1.01/share in 2020, but as with all other estimates for this year, take them with a huge grain of salt.

The stock looks attractively valued at 11.80 times forward earnings and the dividend yield looks high at 6.05%.

There was another company that announced its expectations to raise dividends in September. The company is Carlisle Companies (CSL). They did not discuss the amount of the dividend after the hike, but it was a breath of fresh air amidst a sea of turmoil. During the past decade the company managed to increase dividends at an annualized rate of 11.10%. Carlisle still has pretty ambitious goals for tis 2025 Vision – it plans to earn $15/share in 5 years. I wish them success, but they have some tough economic pressures to overcome. For reference, the company earned $8.20/share in 2019 and analysts are now expecting earnings of $6.14/share.

There was also one notable dividend from the list of dividend champions.

Meredith (MDP) which was a dividend champion, suspended dividends last week. This ended a 27 year streak of annual dividend increases. The ten year dividend growth was 9.80%/year annualized.
Just 2 months ago they raised dividends 3.5% to 59.50 cents/share.

CEO's statement from Feb 3rd: "One of the hallmarks of Meredith's business is the very strog and durable cash flow that our portfolio of top media brands generates. We are proud to continue delivering on our goal of consistent annual dividend growth as part of our strategy"

During the last recession in 2008/9, Gannett cut dividends. Newspaper publishing used to be recession resistant, until the internet ate its lunch in the 2000s. I didn’t own the stock, but if I did, I would have sold it.

Anyways, it looks like analysts are expecting that Meredith would earn $5.24/share, which makes it seem like the stock is selling at roughly 2 times earnings. Meredith Corp grew earnings from $2.28/share in 2010 to $4.16/share in 2017. In 2018, earnings fell due to one-time events to $1.47/share. In 2019 it reported a loss of 71 cents/share due to one-time events. I looked into the stock in 2018 and 2019, but for some lucky reason never bought it. It was probably because there were too many one-time items to keep track of, and the fact that traditional print media is in decline. I am skeptical that this company will earn $5.24/share in an environment where companies are slashing advertising budgets.

I also saw a very confusing dividend announcement from 1st Source Financial (SRCE). (Source) I am keeping it in a category of its own. Perhaps I should call it a dividend cut increase? Or a dividend increase cut?

They declared a dividend of 28 cents/share, which is 3.45% lower from the previous two quarterly dividend payments of 29 cents/share. They had last raised dividends from 27 to 29 cents/share in October 2019.

The dividend is 3.70% higher from the dividend paid during the same time last year however.
They sent three dividend payments of 27 cents/share and one dividend payments of 29 cents/share in 2019 for a total of $1.10/share.

They paid 29 cents/share in 2020. If they pay three dividends at 28 cents/share, it comes out to a total of $1.13/share for 2020.

The press release reads like they increased dividends, when in fact they cut the dividend. If they maintain it at 28 cents/share however, the company will be able to still keep streak alive. I don’t own the stock, but I never the less find this very confusing.

It does seem like they have managed to grow earnings from $1.10/share in 2010 to $3.57/share in 2019. During the Global Financial Crisis, earnings nosedived from $1.56/share in 2006 to 72 cents/share in 2009.

I also expect to hear from the following companies next week:

Ameriprise (AMP)
IBM (IBM)
Apple (AAPL)
Exxon-Mobil (XOM) - I don't think they can afford their dividend, but they will most likely skip a raise, and keep it unchanged
Simon Property Group (SPG) – I would not be surprised if they cut dividends.

Relevant Articles:

Dividend Momentum from Five Dividend Growth Stocks
Nineteen Dividend Growth Stocks For Further Research
Lindsay Corporation Hikes Dividends
14 Dividend Growth Stocks I Bought Last Month

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