Reviewing the dividend growth universe for dividend increases is part of my monitoring process. For my review, I narrow my focus to the companies with a ten year streak of annual dividend increases. I do this in order to look at companies with a sufficiently long streak of dividend growth.
The next step involves reviewing trends in earnings and dividends. I want to see earnings per share which are growing. Rising EPS can fuel future dividend growth. I also want to see dividend increases which are of decent size, and not done merely to maintain the streak of annual dividend increases.
A steep deceleration in the dividend growth rate relative to the ten year average tells me that management is not very optimistic on their business. If this is coupled with a high payout ratio and stagnant earnings per share, I can tell that the dividend streak is nearing its end.
Last but not least, I also want a decent valuation behind an investment. If I overpay dearly for an investment today, this means that the expectations for the first few years after I make the investment are already baked in the price. As a result, I want to void overpaying for an investment. Unfortunately, this is easier said than done.
The companies that raised dividends over the past week include:
The Coca-Cola Company (KO) is a beverage company, manufactures and distributes various nonalcoholic beverages worldwide. The company provides water, enhanced water, and sports drinks; juices; juice, dairy, and plant based beverages; teas and coffees; and energy drinks. It also offers concentrates, syrups, beverage bases, source waters, and powders/minerals, as well as fountain syrups to fountain retailers, such as restaurants and convenience stores.
The company raised its quarterly dividend by 2.60% to 40 cents/share. This marked the 57th year of consecutive annual dividend increases for this dividend king. Coca-Cola has managed to boost its dividends at an annual rate of 7.50%. Between 2009 and 2018, earnings per share went up slightly from $1.47 to $1.50. Analysts expect the company to earn $2.10/share in 2019.
Coca-Cola is overvalued at 21.40 times forward earnings. The stock yields 3.60%. Given the lack of earnings growth since 2012, I believe that Coca-Cola is at risk of losing its status of a dividend king. While I will hold on to my shares for as long as the dividend is maintained, I will not be buying Coca-Cola stock anytime soon. I will also be allocating my dividend income elsewhere. Check my analysis of Coca-Cola for more information about the company.
NextEra Energy, Inc. (NEE) generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America.
The company raised its quarterly dividend by 12.60% to $1.25/share. This marked the 25th consecutive annual dividend increase for this newly minted dividend champion. The latest increase was higher than the ten year average of 9.60%/year. The company managed to grow its earnings from $3.97/share in 2009 to an adjusted earnings of $7.70/share in 2018.
Analysts expect the company to earn $8.40/share in 2019. Unfortunately, this utility is overvalued at 22.40 times forward earnings. NextEra Energy may be worth a second look on dips below 20 times earnings. NextEra Energy yields 2.70%.
Cohen & Steers, Inc. (CNS) is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to institutional investors, including pension funds, endowments, and foundations. It manages separate client-focused equity, fixed income, multi-asset, and commodity portfolios through its subsidiaries.
Cohen & Steers managed to increases its quarterly dividend by 9.10% to 36 cents/share. This marked the tenth consecutive year of annual dividend increases for Cohen & Steers. The ten year dividend growth rate is 5.20%. Between 2008 and 2018, the company managed to grow its earnings from 43 cents/share to $2.40/share in 2018.
Analysts expect the company to earn $2.19/share in 2019.The stock sells at 18.50 times forward earnings and yields 3.50%.
Essex Property Trust, Inc. (ESS), an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 245 apartment communities with an additional 6 properties in various stages of active development.
The REIT announced a 4.80% increase in its quarterly dividend to $1.95/share. This increase was slightly lower than the ten year dividend growth rate of 6.30%. This increase marked the 25th year of annual dividend increases for this newly minted dividend champion. The REIT managed to grow FFO/share from $6.14 in 2008 to $12.76 in 2018.
The REIT sells for 21.90 times FFO and yields 2.80%. I find it overvalued today, but may consider it on dips.
Xcel Energy Inc. (XEL) engages primarily in the generation, purchase, transmission, distribution, and sale of electricity in the United States. It operates through Regulated Electric Utility, Regulated Natural Gas Utility, and All Other segments.
The company raised its quarterly dividend by 6.60% to 40.50 cents/share. This marked the 16th year of consecutive dividend increases for Xcel Energy. Over the past decade, it has managed to grow its dividends at a rate of 4.80%/year.
Between 2009 and 2018, the company managed to boost its earnings from $1.48/share to $2.47/share.
Analysts expect the company to earn $2.61/share in 2019.
The stock is overvalued at 21 times forward earnings and offers a dividend yield of 3%.
Analog Devices, Inc. (ADI) designs, manufactures, and markets integrated circuits (ICs), algorithms, software, and subsystems that leverage analog, mixed-signal, and digital signal processing technologies.
The company increased the quarterly dividend to shareholders by 12.50% to 54 cents/share. The increase was higher than the ten year average of 9.40%/year. It also marked the 17th year of annual dividend increases for this dividend achiever. Analysts expect the company to earn $5.47/share in 2019.
The stock seems close to fully valued at 19.70 times forward earnings and offers a dividend yield of 2%.
Genuine Parts Company (GPC) distributes automotive replacement and industrial parts, electrical and electronic materials, and business products in the United States, Canada, Mexico, Australasia, France, the United Kingdom, Germany, and Poland.
Genuine Parts Company boosted its quarterly dividend by 5.90% to 76.25 cents/share. This marked the 63rd year of dividend increases for this dividend king. Over the past decade, it has managed to grow its dividend at a rate of 6.30%/year. Genuine Parts Company has managed to grow earnings from $2.92/share in 2008 to $5.50/share in 2018. Analysts expect the company to earn $5.93/share in 2019.
The stock is fully valued at 19.90 times earnings and offers a dividend yield of 2.80%.
National Health Investors, Inc. (NHI) is a real estate investment trust specializing in sale-leaseback, joint-venture, mortgage and mezzanine financing of need-driven and discretionary senior housing and medical investments. NHI's portfolio consists of independent, assisted and memory care communities, entrance-fee retirement communities, skilled nursing facilities, medical office buildings and specialty hospitals.
The company raised its quarterly dividend by 5% to $1.05/share. This marked the 17th year of consecutive annual dividend increases for this dividend achiever. The latest increases was slower than the ten year average of 6.30%/year. NHI has managed to grow FFO from $2.35/share in 2008 to $5.46/share in 2018.
The REIT seems attractively valued at 14.70 times FFO and offers a dividend yield of 5.20%.
Walmart Inc. (WMT) engages in the retail and wholesale operations in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.
The company raised its quarterly dividend by 1.90% to 53 cents/share. Wal-Mart’s dividend growth has slowed down significantly over the past five years. The ten year dividend growth rate is 8.30%/year. Between 2009 and 2019, Wal-Mart has managed to boost earnings per share from $3.39 to $4.91. Analysts expect the company to earn $4.76/share in 2019.
I find Wal-Mart to be overvalued at 20.80 times forward earnings. The stock yields 2.10%. Given the lack of earnings growth over the past five years, and the slowdown in dividend growth, I am going to take a pass on the stock.
Waste Management, Inc. (WM), through its subsidiaries, provides waste management environmental services to residential, commercial, industrial, and municipal customers in North America.
The company increased its quarterly dividend by 10.20% to 51.25 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to boost distributions by 5.60%/year. Between 2009 and 2018, Waste Management has managed to boost earnings per share from $2.01 to $4.45.
Analysts expect the company to earn $4.38/share in 2019. Waste Management may be worth a second look on dips below $88/share. The investor appetite for companies with resilient recession proof earnings streams is making the stock overvalued today at 22.20 times forward earnings. The stock yields 2.10%.
Moody's Corporation (MCO) provides credit ratings; and credit, capital markets, and economic related research, data, and analytical tools worldwide. It operates through two segments, Moody's Investors Service and Moody's Analytics.
The company raised its quarterly dividend by 13.60% to 50 cents/share. This marked the tenth year of annual dividend increases for Moody’s. In the past decade, Moody’s has managed to grow its dividend at an annual rate of 16%/year. Moody’s grew earnings from $1.87/share in 2008 to $6.74/share in 2018.
Analysts expect the company to earn $7.95/share in 2019. Moody’s could be worth a second look on dips below $135/share.
United Parcel Service, Inc. (UPS) provides letter and package delivery, specialized transportation, logistics, and financial services. It operates through three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight.
UPS boosted its quarterly dividend by 5.50% to 96 cents/share. This marked the tenth year of annual dividend increases for this newly minted dividend achiever. Over the past decade, UPS has managed to increase its dividends at an annual rate of 7.30%/year. Between 2009 and 2018, UPS managed to grow earnings from $2.14/share to $5.51/share.
Analysts expect the company to earn $7.56/share in 2019. UPS is attractively valued at 14.70 times forward earnings and offers a yield of 3.50%.
Digital Realty (DLR) is a leading global provider of data center, colocation and interconnection solutions.
The REITs Board of Directors approved a 7% increase in the quarterly common stock cash dividend to $1.08 per share. This marked the 14th consecutive year of growing the dividend. The ten year annual dividend growth is 12.30%/year. Digital Realty Trust has managed to grow its FFO/share between 2008 and 2018 from $2.59 to $6.46. Digital Realty expects to hit FFO/share in the $6.60 - $6.70 range in 2019.
Right now the REIT seems richly valued at 18.10 times FFO and offers an yield of 3.70%. It may be an interesting idea if it yields 4% or more.
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