Twelve Dividend Growth Stocks In The News

As part of my monitoring process, I review the list of dividend increases every week. I use this process to update my files on companies I own, and see if they are performing according to my expectations. I also use this exercise in order to uncover any hidden dividend gems.

In order to come with the list of dividend increases for this article I followed these steps:

1) I outlined companies that raised dividends last week
2) I focused on the ones with at least a ten year history of annual dividend increases

Subsequently, I reviewed each company using the following criteria, in order to determine if they are worth reviewing further:

1) Comparing the latest dividend increase to the ten year average
2) Reviewing trends in earnings per share, in order to determine the likelihood of future dividend increases
3) Looking at valuation, in order to determine whether a company is worth researching further.

The companies that made it for this weeks review are listed below:

Lincoln Electric Holdings, Inc. (LECO), designs, manufactures, and sells welding, cutting, and brazing products worldwide. It operates through three segments: Americas Welding, International Welding, and The Harris Products Group.

The company raised its quarterly dividend by 4.30% to 49 cents/share. This marked the 25th consecutive annual dividend increase for this dividend champion. During the past decade, the company has managed to boost distributions at an annualized rate of 12.10%/year

The company grew earnings from $2.46/share in 2008 to $4.37/share in 2018.

The company is expected to generate $4.97/share in 2019.

The stock is fairly valued at 18.50 times forward earnings and a dividend yield of 2.10%.

American Electric Power Company, Inc. (AEP) is an electric public utility holding company, which engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States.

The company raised its quarterly dividend by 4.50% to 70 cents/share. This marked the tenth consecutive year of annual dividend increases for this dividend achiever. During the past decade, AEP has managed to boost distributions at an annualized rate of 4.50%.

The company grew earnings from $3.42/share in 2008 to $3.90/share in 2018.

The company is expected to generate $4.16/share in 2019.

The stock is overvalued at 22.70 times forward earnings and a dividend yield of 3%.

Middlesex Water Company (MSEX), owns and operates regulated water utility and wastewater systems. It operates in two segments, Regulated and Non-Regulated.

The company increased its quarterly dividend by 6.70% to 25.625 cents/share. This marked the 47th year of annual dividend increases for this dividend champion. Over the past decade, this dividend champion has raised distributions at an annualized rate of 2.60%.

The company grew earnings from $0.89/share in 2008 to $1.96/share in 2018.

The company is expected to earn $1.97/share in 2019.

The stock is overvalued at 33.10 times forward earnings and offers a dividend yield of 1.60%.

Prosperity Bancshares, Inc. (PB) operates as bank holding company for the Prosperity Bank that provides retail and commercial banking services to small and medium-sized businesses, and consumers.

The bank increased its quarterly dividend by 12.20% to 46 cents/share. This marked the 22nd year of annual dividend increases for this dividend achiever. During the past decade, the company has managed to boost distributions at an annualized rate of 11.20%.

Between 2008 and 2018, Prosperity Bancshares managed to increase earnings from $1.86/share to $4.61/share. The company is expected to earn $4.74/share in 2019.

The stock is fairly valued at 15.40 times forward earnings and offers a dividend yield of 2.50%.

Stepan Company (SCL) produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products in North America, Europe, Latin America, and Asia. The company operates through three segments: Surfactants, Polymers, and Specialty Products.

The Board of Directors of Stepan Company approved 10% increase on its quarterly cash dividend to 27.50 cents/share. The increase marks the 52nd consecutive year in which the quarterly dividend rate for this dividend king has increased. Over the past decade, this dividend king has managed to grow distributions at an annualized rate of 8.10%.

Between 2008 and 2018, earnings per share rose from $1.76 to $4.83. Stepan is expected to generate $4.95/share in 2019.

The stock is close to fully valued at 19.60 times forward earnings and yields 1.10%.

Visa Inc. (V) operates as a payments technology company worldwide. Visa’s board of directors increased its quarterly cash dividend by 20% to 30 cents per share. This marked the 11th consecutive year of annual dividend increases for this dividend achiever. Over the past decade, it has managed to grow dividends at an annualized rate of 32.60%.

Between 2008 and 2018, earnings grew from 24 cents/share to $4.42/share.

Visa is expected to earn $6.26/share in 2019, followed by $7.26/share in 2020.

The stock is overvalued at 28.40 times forward earnings. Visa yields 0.70%. The stock doesn't yield much, but offers a potential for rapid dividend growth.

Cass Information Systems, Inc. (CASS) provides payment and information processing services to manufacturing, distribution, and retail enterprises in the United States. It operates through two segments, Information Services and Banking Services.

The company raised its quarterly dividend by 3.80% to 27 cents/share. This marked the 18th consecutive annual dividend increase for this dividend achiever. During the past decade, it has managed to grow distributions by 10.70%/year.

Between 2008 and 2018, the company has managed to boost earnings from $1.27 to $2.03/share.

The stock is overvalued at 26.30 times earnings and offers a dividend yield of 2%. It may be worth a look below $40/share, assuming the dividend growth doesn't pick up from the low rate of change recently.

Hubbell Incorporated (HUBB) designs, manufactures, and sells electrical and electronic products in the United States and internationally. It operates through two segments, Electrical and Power.

Hubbell increased its quarterly dividend by 8.30% to 91 cents/share. This marked the twelfth consecutive annual dividend increase for this dividend achiever. During the past decade, it has managed to grow dividends at an annualized rate of 8.80%.

The company has managed to boost earnings from $3.93/share in 2008 to $6.54/share in 2018. Hubbell is expected to earn $8.05/share in 2019.

The stock is attractively valued at 17.30 times forward earnings and offers a dividend yield of 2.60%.

V.F. Corporation (VFC) engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products for men, women, and children in the Americas, Europe, and the Asia-Pacific. It operates through four segments: Outdoor, Active, Work, and Jeans.

The company raised its quarterly dividend by 11.60% to 48 cents/share. This marked the 47th consecutive annual dividend increase for this dividend champion. During the past decade, V.F. Corp has managed to grow dividends at an annualized rate of 12.50%.

The company earned $1.35/share in 2008, and managed to grow earnings to $3.15/share in 2018.

V.F. Corporation expects to earn $3.39/share in 2019, followed by earnings of $3.89/share in 2020.

The stock is overvalued at 24.80 times forward earnings and offers a dividend yield of 2.30%. It may be worth a second look on dips below $68/share.

The Gorman-Rupp Company (GRC) designs, manufactures, and sells pumps and pump systems worldwide.

Gorman-Rupp declared a quarterly dividend of 14.50 cents/share, which was a 7.40% in the quarterly distributions. This marked the 47th consecutive annual dividend increase for this dividend champion. During the past decade, this dividend champion has managed to grow distributions at an annualized rate of 7.10%.

Between 2008 and 2018, Gorman-Rupp managed to grow earnings from $1.04/share to $1.53/share. The company is expected to earn $1.39/share in 2019.

The stock is overvalued at 26 times forward earnings. Gorman-Rupp yields 1.60%. Given the slow rate of earnings growth and the high valuation, I do not view it as a good idea even if it is available below 20 times forward earnings.

Brown & Brown, Inc. (BRO) markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. It operates through four segments: Retail, National Programs, Wholesale Brokerage, and Services.

The company raised its quarterly dividend by 6.30% to 8.50 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion. Over the past decade, Brown & Brown has managed to grow dividends at an annualized rate of 7.90%.

Brown & Brown managed to grow earnings from 58 cents/share in 2008 to $1.22/share in 2018. The company is expected to generate $1.40/share in 2019.

The stock is overvalued at 25.70 times forward earnings and offers a dividend yield of 0.90%. Brown & Brown may be worth a second look on dips below $28/share.

ONEOK, Inc., (OKE) engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments.

ONEOK Inc raised its quarterly dividend to 91.50 cents/share, which is a 7% increase over the distributions paid during the same time last year.

ONEOK is a dividend achiever who has rewarded shareholders with a raise for 17 years in a row. During the past decade, ONEOK has managed to boost distributions at an annualized rate of 16.90%.

The stock yields 5.10% today.

Magellan Midstream Partners, L.P. (MMP) engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. The company operates through Refined Products, Crude Oil, and Marine Storage segments.

Magellan Midstream Partners raised its quarterly distribution to $1.02/share, which is a 4.30% increase over the distribution paid during the same time last year. Over the past decade, it has managed to boost distributions at an annualized rate of 10.80%. Magellan Midstream Partners is a dividend achiever with a 19 year track record of annual dividend increases.

The partnership yields 6.40% today.

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2 Recent Buys – BAM, SPGI

A quick update on two purchases in my portfolio. As with the last iteration, this one also includes a new position in the portfolio.

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6 Dividend Stocks Ignoring The 4% Rule

William P. Bengen is an author and a certified financial planner. In 1994 he published a study concluding that if retirees withdrew 4% (the 4% rule) of their nest egg in the first year, and then increased the dollar amount by the inflation rate every year, their savings would easily last 30 years.

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Weekend Reading Links - October 27, 2019

For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

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Fastenal Company (FAST) Dividend Stock Analysis

Fastenal Company (FAST), engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, and internationally. It offers fasteners, and other industrial and construction supplies under the Fastenal name. The analysis of Fastenal was posted to readers of my Dividend Growth Investor Newsletter on September 30, 2019 when the stock was at $32.67/share.

Fastenal is a dividend achiever with a 21-year track record of annual dividend increases. The last dividend increase occurred in July 2019, when management raised its quarterly dividend by 2.30% to 22 cents/share. This was the second dividend increase over the past year however. There was a 7.50% dividend increase in January 2019. Overall, the new dividend is 10% higher than the distribution paid during the same time last year. I would continue monitoring the dividend increase developments for any continuation or deceleration in the dividend growth rate.

During the past decade, Fastenal has managed to boost dividends at an annualized rate of 19.50%. I would expect this rapid growth to slow down to possibly below 10% (more like a 7% - 10% range) over the next decade. Rising earnings per share will provide the fuel behind future dividend increases, given the payout ratio today (please see below)

Fastenal has managed to grow earnings per share over the past decade, which provided the fuel behind dividend increases. Fastenal earned $1.31/share in 2018, which was a good increase from the 47 cents/share it earned in 2008. It is notable to see that earnings per share did decrease in 2009 to 31 cents/share, before rebounding in 2010 to 45 cents/share. The company is expected to generate $1.37/share in 2019.

The company can grow by opening new branches to distribute products, increase sales at existing locations. The principal competitive advantages for Fastenal are its customer service, price, product availability, and convenience.

Growth can be achieved by further expansion abroad, while location growth in the US will be more limited. International accounts for 14% of sales, with the majority of international sales from Canada and Mexico. Having an installed base of vending machines and on-site locations at customer places of business is a great way to get foot in the door and generate recurring revenues ( albeit subject to the cyclical nature of industries it serves). Being part of the customer process embeds Fastenal there, which is a competitive advantage., which can drive incremental revenues. Other growth area includes inventory management services. That could mean more business for Fastenal, which could further its scale and help it offer even more products in its catalogs. The company’s scale is a competitive advantage, both in sourcing and distribution.

Taking share from smaller distributors is another way to capture a bigger market share, and grow revenues. As its customers consolidate, they would require a distributor with a better reach in the US, in order to consistently serve the account. Fastenal offers fast delivery to 90% of products, which is great for its customers, who know they will be taken care of quickly.

Fastenal’s customer base exposes it to the cyclical nature of this client base. Tariffs could be bad for the customers and for Fastenal, as it sources its products from abroad, including China. Tariffs and trade tensions could squeeze margins, as it would increase costs and put pressure on revenues too. Fastenal can pass some cost increases to customers of course, but in a competitive environment, this could be difficult.

The dividend payout ratio increased from 28% in 2008 to 59% in 2018. The doubling of the payout ratio is one reason why dividend growth exceeded the high earnings growth over the past decade. I do not think that there is a lot of room left for further expansion of the payout ratio. A lower payout ratio is a plus, since it provides a margin of safety against temporary declines in earnings.

Fastenal also started repurchasing shares around 2014, reducing the number of shares by almost 4% to 574 million shares. It would be interesting to see if they do more share buybacks in the future as a way to manage earnings per share. It is great to see a company that doesn’t engage in financial engineering in order to reduce shares outstanding at any cost and increase earnings per share at any cost. I like that Fastenal has been able to grow the earnings per share the old fashioned way – by actually growing the business.

Right now the stock is selling at 26.90 times forward earnings and offers a defensible yield of 2.35%.

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Passive Income Update – Sep 2019

Welcome to our monthly passive income update for Sep 2019. This is part of the scorecard series where I track our dividends and other sources of passive income. I also include changes and updates related to our investments during the month – showing the overall progress.

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6 Stocks That Have Paid Dividends For Over 100 Years

The key to successfully selecting dividend growth stocks is the ability to identify companies that will not only maintain but grow their dividend. Often it can be boiled down to a simple question: "How committed is the company to paying its dividend?"

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Weekend Reading Links - October 20, 2019

For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

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Outlook for October 2019

Fireworks in the high-growth sector is seeing investors turn towards value stocks after a long pause. The drawdown and divergence was something to behold during the month of September as the selloff provided some good opportunities in the growth space — although valuation in general still seems pretty high.

The US Fed continued its easing policy with another rate cut and September also saw liquidity issues in the overnight repo rate — resulting in the NY Fed stepping in. Most central banks around the world have started easing as the US$ continues getting stronger, so the currency wars are far from over.

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Love People, Use Dividend Stocks

As humans we are often driven by our emotions and relationships. Over time we tend grow fond of people we have a relationship with. Sometimes we grow to love them like a brother or sister; sometimes even more. In much the same way we can easily grow to love certain stocks, but this is not necessarily a good thing.

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Weekend Reading Links - October 13, 2019

For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

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Four Dividend Growth Stocks Rewarding Shareholders With A Raise

I have long subscribed to the theory that buy and hold means buy and monitor. Dividend investors should continue monitoring their holdings after an initial investment. They should also monitor the dividend investing universe fin order to keep informed of notable company developments. It is helpful to observe dividend growth in action, in order to identify new companies for further research.

I review divided growth actions by companies each week as part of my review process. It is helpful to observe the rate of changes in annual dividend increases for companies I own and companies I may consider owning under the right conditions ( valuation/fundamentals etc)

As part of this weeks review, I focused my attention on the companies that have managed to grow dividends for at least a decade. A long track record of annual dividend increases is a way to identify quality companies for further research.

I also reviewed each company by focusing on the rate of dividend increases relative to the ten year average. I also reviewed trends in earnings per share, in order to determine the likelihood of future dividend growth. Investors can expect dividend growth only from companies that can grow earnings over time. It is also important to look at valuation, since even the best companies in the world are not worth overpaying for. I look at valuation in conjunction with growth, and payout ratios. After all, a company with a P/E ratio of 10 and a dividend yield of 4% will not grow as fast as a company with a P/E of 25 and a dividend yield of 1%.

The companies for today’s review include:

American Financial Group, Inc. (AFG) is an insurance holding company, which provides property and casualty insurance products in the United States. The company operates through three segments: Property and Casualty Insurance, Annuity, and Other.

The company increased its dividend by 12.50% to 45 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. During the past decade, it has managed to grow distributions at an annualized rate of 11.20%.

Between 2009 and 2018, American Financial Group managed to grow earnings from $4.45 to $5.85/share.The company is expected to generate $8.65/share in 2019.

The stock looks fairly valued at 12.10 times forward earnings and yields 1.70%.

Bank OZK (OZK) provides retail and commercial banking services to businesses, individuals, and non-profit and governmental entities.

Bank OZK increased its quarterly dividend to 25 cents/share. This is a 4.17% increase over the last quarterly dividend and a 19% increase over the dividend paid during the same time last year. The bank is a dividend achiever with a 23-year history of annual dividend increases. During the past decade, it has managed to grow distributions at an annualized rate of 20.30%.

Between 2009 and 2018, the bank managed to grow earnings from 55 cents/share to $3.24/share.
The company is expected to generate $3.33/share in 2019.

Right now it is attractively valued at 7.90 times forward earnings and offers a dividend yield of 3.80%.

RPM International Inc. (RPM) manufactures and sells specialty chemicals for the industrial, specialty, and consumer markets worldwide.

The company raised its quarterly dividend to 36 cents/share. This represents a 2.90% increase over the last quarterly payment, and a 12.50% increase over the distribution paid during the same time last year.

This action marks RPM’s 46th consecutive year of increased cash dividends paid to its stockholders. Over the past decade, this dividend champion has managed to grow distributions at an annualized rate of 5.50%.

Between 2010 and 2019, RPM has managed to grow earnings from $1.39/share to $2.01/share.
The company is expected to generate $3.39/share in 2019.

The stock is fully valued at 20.20 times forward earnings and offers a dividend yield of 2.10%

Northwest Natural Holding Company (NWN) provides regulated natural gas distribution services to residential, commercial, and industrial customers in Oregon and Southwest Washington.

The Board of Directors of Northwest Natural Holding Company increased the quarterly dividend to 47.75 cents per share on the Company's common stock. This marks the 64th consecutive annual dividend increase for this dividend king. This is a half a percent raise in the quarterly dividend.

During the past decade, this dividend king has managed to grow distributions at an annualized rate of 2.20%.

Between 2009 and 2018, earnings per share dropped from $2.83/share to $2.24/share. The company is expected to generate $2.39/share in 2019.

The stock is overvalued at close to 29.30 times forward earnings. The stock yields 2.70%, but has a very high payout ratio, no earnings growth and the likelihood of dividend growth stopping in a few years is high.

Thank you for reading!

Relevant Articles:

- Six Dividend Growth Stocks Rewarding Shareholders With a Raise
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2 Recent Buys – JNJ, GOOGL

A quick update on two purchases in my portfolio. As with the last iteration, this one also includes a new position in the portfolio.

• First purchase: I added 20 shares of Johnson & Johnson @ $127.50. During the mayhem of Aug 23, thanks to Trump’s tweets and escalation of trade war, I was able to pick up a few shares of JNJ. JNJ has been undergoing a bit of a weak performance due to ongoing litigation (which later turned into a $572M fine), and some expected revenue drop this fiscal year. However, top line growth should return back to normal starting next year, so I have been adding to my shares in this position over the past few months. The stock yields 2.96% and adds $76.00 in annual dividends.
• Second purchase: I initiated a new position in one of the largest companies in the world; with 3 shares of Alphabet Inc (GOOGL) @ $1,184.00. There are a lot of reasons to own GOOGL – one of the most forward looking companies, founder-operated, arguably best tech talent in the world, largest online ad platform, wide moat (can you imagine life without Google…not just as consumers, but also as a business?), good capital allocation and reinvestment in business, optionality play on unmonetized segments that will sooner or later get commercialized (Alphabet’s subsidiaries include Calico, CapitalIG, DeepMind, Google, Google Fiber, GV, Jigsaw, Loon, Makani, Sidewalk Labs, Verily, Waymo, Wing, and X). This is a starter position in what I expect to be a core holding for years to come, and will continue adding shares in coming months.

What are your thoughts on these purchases. Share a comment below.

Full Disclosure: Long JNJ, GOOGL. Our full list of holdings is available here.

This article was written by Roadmap2Retire. If you enjoyed this article, please consider subscribing to my feed at Roadmap2Retire.com/feed

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We Were Dividends, Before Dividends Were Cool

For a while it seemed that every investing article ended with the same conclusion - you should be buying dividend stocks. They are all quoting studies citing the performance edge that dividends have enjoyed over the long-term and the value of a semi-fixed return generated from periodic dividend payments. However, you should beware of some of the information provided. Beyond the simple concepts, some of the writers are making really bad recommendations and cross-breeding dividend investing with their preferred form of investing.

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Weekend Reading Links - October 6, 2019

For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

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Recent Sell – SWA, BMO

A bit of portfolio cleanup with a couple of recent sales in my portfolio. As mentioned in my monthly outlook posts, I am looking for portfolio simplification — and as a result I want to be only invested in my high conviction ideas.

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