As a dividend investor, I monitor the dividend investing universe very closely. I do this through checking the pulse of dividend increases every week. I also do this by regularly screening for quality dividend growth stocks using my entry criteria. Finally, I keep in touch with my portfolio holdings by analyzing them on a regular basis.
The problem is that there is a lot of information to process, and I have a limited amount of time as a parent, spouse, employee, investor and a blogger. As a result, I have developed a method where I can quickly determine if a company is worthy of further research at the moment. In general, I look for the following:
1) A dividend streak of at least a decade
2) A safe dividend, evidenced by a dividend payout ratio that is not too high
3) A rising stream of earnings over the past decade
4) An attractive valuation – after all even the best company in the world is not worth overpaying for.
I looked at the companies that raised dividends over the past week and included those with a ten year streak of annual dividend increases for today’s review. I then included a few relevant data points, in order to determine if I should research those companies any further or wait for a better time to do that.
The companies raising dividends last week, meeting the ten year requirement include:
Ecolab Inc. (ECL) provides water, hygiene, and energy technologies and services for customers worldwide. The company operates through Global Industrial, Global Institutional, and Global Energy segments. The company raised its quarterly dividend by 12.20% to 46 cents/share.
This increase represents Ecolab’s 27th consecutive annual dividend rate increase.
Over the past decade, the company has managed to boost its dividend at an annual rate of 12.40%/year.
Between 2007 and 2017, earnings per share increased from $1.70 to $5.13. The dividend champion is expected to earn $5.25/share in 2018.
The stock is overvalued at 29.30 times forward earnings. Ecolab yields 1.20%. I would be interested in Ecolab on dips below $105/share.
Stryker Corporation (SYK) operates as a medical technology company. The company operates through three segments: Orthopedics, MedSurg, and Neurotechnology and Spine. The company raised its quarterly dividend by 10.60% to 52 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion.
The company has raised dividends at a rate of 22.70%/year over the past decade.
Stryker earned $2.44/share in 2007, which increased to $2.68/share in 2017. The company is expected to earn $7.28/share in 2018.
The stock is overvalued at 23.20 times forward earnings and yields 1.20%. The stock may be worth a second look on dips below $146/share.
W. P. Carey (WPC) is a triple-net lease REIT that invests in high-quality single-tenant industrial, warehouse, office and retail properties subject to long-term leases with built-in rent escalators. Its portfolio is located primarily in the U.S. and Northern and Western Europe and is well-diversified by tenant, property type, geographic location and tenant industry.
The REIT raised its quarterly dividend to $1.03/share, which represented a 2% increase over the dividend paid during the same time last year. W.P. Carey is a dividend achiever with a 21-year streak of annual dividend increases.
During the past decade, this REIT has managed to boost dividends at an annual rate of 8%/year.
Since 2007, FFO/share has grown by 4.70%/year. Growth in FFO/share has decreased to 2% - 3%/year since 2014, which will limit future growth in distributions.
Right now the REIT is attractively valued at 12.90 times forward FFO and yields 5.90%.
Nucor Corporation (NUE) manufactures and sells steel and steel products in the United States and internationally. It operates in three segments: Steel Mills, Steel Products, and Raw Materials.
Nucor raised its quarterly dividend by 5.30% to 40 cents/share. This marked the 47th consecutive annual dividend increase for this dividend champion.
The ten-year dividend growth is 9.10%. The five-year dividend growth is 0.70%/year, as the company has maintained its streak of annual dividend increases with nominal dividend increases.
In the past decade, earnings per share went on a roller coaster ride from $4.94/share in 2007 to $4.10/share in 2017. Nucor is expected to earn $7.55/share in 2018.
The stock seems cheap at 7.60 times forward earnings and yields 2.80%. Given the cyclical nature of its earnings however, I do not view the company as a decent investment. I do admire the long track record of annual dividend increases for Nucor – most steel companies tend to pay fluctuating dividends. Nucor on the other hand has tended to pay special dividends during boom times, on top of the regular dividend payments that make up their long track record. Those special dividends confused the S&P committee however, which is why they removed the stock from the dividend aristocrats list in 2009.
Bristol-Myers Squibb Company (BMY) discovers, develops, licenses, manufactures, markets, and distributes biopharmaceutical products worldwide.
The company boosted its dividend by 2.50% to 41 cents/share. This marked the 10th year of annual dividend increases for the pharmaceuticals company. Over the past decade, it has achieved dividend growth of 3.40%/year. Earnings per share went from $2.62/share in 2008 to an estimated $3.87/share in 2018.
The stock is cheap at 13.70 times forward earnings at yields 3.10%. Given the slow growth in dividends and earnings over the past decade, I view this stock as a hold.
C.H. Robinson Worldwide, Inc. (CHRW) is a third-party logistics company that provides freight transportation services and logistics solutions to companies in various industries worldwide. The company operates through three segments: North American Surface Transportation, Global Forwarding, and Robinson Fresh.
The company raised its quarterly dividend by 8.70% to 50 cents/share. This marked the 21st year of annual dividend increases for this dividend achiever. The company has a ten year dividend growth rate of 9.70%/annum.
Earnings increased from $1.86/share in 2007 to $3.57/share in 2017. Earnings per share have been flat in the past three years. Analysts do expect forward earnings of $4.58/share for 2018 however.
The stock is close to the top valuation range, selling at 19.10 times forward earnings and yields 2.30%. More conservative investors, relying on prior year earnings may require a stock decline below $72/share before considering it for addition in their portfolios.
Edison International (EIX) engages in the generation, transmission, and distribution of electricity in the United States.
The company raised its quarterly dividend by 1.20% to 61.25 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade Edison International has managed to reward shareholders with a 6.50% annual raise on average. The company’s earnings went from $3.31/share in 2007 to $1.72/share in 2017. Analysts expect the company to earn $4.15/share.
Right now, Edison International is attractively valued at 14.10 times forward earnings and yields 4.20%. Unfortunately, the company has not managed to grow earnings per share by much so far this century.
Hillenbrand, Inc. (HI) operates as a diversified industrial company in the United States and internationally. The company operates in two segments, Process Equipment Group and Batesville.
The company raised its quarterly dividend by 1.20% to 21 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade it has raised distributions at a slow 1.30% /year. Earnings per share went from $1.49 in 2008 to $1.20 in 2018. The company is expected to generate $2.56/share in 2019.
The stock seems attractively valued at 15.90 times forward earnings and yields 2.10% Given the slow rate of dividend growth however, and the low yield, I would give the stock a pass for the time being.
J&J Snack Foods Corp. (JJSF) manufactures, markets, and distributes various nutritional snack foods and beverages to the food service and retail supermarket industries in the United States, Mexico, and Canada. The company managed to increase its quarterly dividend by 11.10% to 50 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to raise its dividends at an annual rate of 17.30%/year. Earnings per share more than tripled from $1.47/share in 2007 to $5.51/share in 2018. The company is expected to earn $5.02/share in 2019.
The stock is overvalued at 27.90 times forward earnings and yields 1.30%. It may be worth a second look on dips below $100 - $110/share.
The Toro Company (TTC)manufactures and markets turf maintenance equipment and services, turf irrigation systems, landscaping equipment and lighting products, snow and ice management products, agricultural micro-irrigation systems, and residential yard and snow thrower products worldwide.
The company raised its quarterly dividend by 12.50% to 22.50 cents/share. This marked the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past decade, it has rewarded shareholders with a 19.30% annual dividend increase on average. This dividend growth was supported by rapid growth in earnings per share from $0.85 in 2008 to $2.41/share in 2018. The company is expected to earn $3.01/share in 2019.
The stock is close to the top of the valuation range at 19.40 times forward earnings and yields 1.50%. More conservative investors may be interested in the stock below $48/share.
Universal Health Realty Income Trust, (UHT) is a real estate investment trust. The REIT invests in healthcare and human service related facilities including acute care hospitals, rehabilitation hospitals, sub-acute care facilities, medical/office buildings, free-standing emergency departments and childcare centers. Universal Health Realty Income Trust raised its quarterly distribution to 67.50 cents/share. The payments is 1.50% higher than the distribution paid during the same time last year. This marked the 33rd consecutive annual dividend increase for this dividend champion. Over the past decade however, the rate of annual dividend growth has been slow at 1.40%/year. FFO/share increased from $2.45/share in 2007 to $3.10/share in 2017.
The stock yields 3.80% today. It sells at 22.80 times Funds from Operations, which is a steep valuation. Given the slow growth in dividends per share, and the low dividend yield, I would require a better entry yield before considering this REIT. The reason why this REIT has delivered great performance over the past decade comes down to investor appetite for its stable stream of cashflows. This predictable stream of rent checks enticed investors to require less than a 4% starting yield, which was down from the 7% - 8% yields at the beginning of the decade.
WEC Energy Group, Inc., (WEC) provides regulated natural gas and electricity, and nonregulated renewable energy services in the United States. The company operates through six segments: Wisconsin, Illinois, Other States, Electric Transmission, Non-Utility Energy Infrastructure, and Corporate and Other.
The company raised its quarterly dividend by 6.80% to 59 cents/share. This marked the consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to grow dividends at an annual rate of 15.30%/year.
Between 2007 and 2017, earnings per share increased from $1.42/share in 2007 to $3.79/share in 2017. WEC Energy is expected to earn $3.33/share in 2018.
The stock is selling at 22.10 times forward earnings and spots a 3.20% dividend yield. I find the stock to be overvalued today. It may be worth a second look below $66/share.
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