Twelve Dividend Growth Stocks Rewarding Shareholders With A Raise

dividend increaseAs part of my monitoring process, I look at the list of dividend increases every single week. I then narrow the list down by focusing on companies that have raised distributions for at least ten years in a row. The next step of the process includes a quick evaluation of company fundamentals, along with valuation and a brief comment about my current take on the company.

There were twelve companies that met the above criteria, and raised distributions over the past week. The companies include:

Johnson & Johnson (JNJ) researches and develops, manufactures, and sells various products in the health care field worldwide. It operates through three segments: Consumer, Pharmaceutical, and Medical Devices. This dividend king raised its quarterly dividend by 5% to 84 cents/share. This marked the 55th consecutive annual dividend increase for Johnson & Johnson. Over the past decade, the company has managed to raise annual dividends at a rate of 8%/year. Earnings per share rose from $3.63 in 2007 to $5.93 in 2016. The company is expected to earn $7.10/share in 2017. Currently the stock is attractively valued at 17.40 times forward earnings and yields 2.70%. If you are a more conservative investor, the company would be a decent idea on dips below $119/share, which is equivalent to 20 times last year’s earnings.

Johnson & Johnson

Dividend Growth Stocks

Johnson & Johnson has delivered impressive annual dividend growth to shareholders for 55 years in a row. Only a dividend king with rock solid business model can manage to accomplish such a feat through several recessions, wars, etc.

Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. The company operates through Upstream, Downstream, and Chemical segments. This dividend champion raised its quarterly dividend by 2.70% to 77 cents/share. This marked the 35th consecutive annual dividend increase for Exxon Mobil. This slow rate of dividend growth is on par with last year’s increase. Of course, other energy company shareholders have gotten dividend cuts, so we should be happy with anything we get. Over the past decade, the company has managed to raise annual dividends at a rate of 8.80%/year. Earnings per share fell from $7.28 in 2007 to $1.88 in 2016. This was driven by the decrease in energy prices. The company is expected to earn $3.88/share in 2017. Currently the stock is overvalued at 21 times forward earnings and yields 3.80%. I do not find the company to be attractively valued today. In addition, the dividend is not very well covered today, even based on the optimistic near term analyst projections. I still think that Exxon Mobil still has the lowest likelihood among the other oil majors for a dividend cut. However, I see the stock as a hold at best for the time being. My analysis of Exxon in the 1980s and 1990s, which were generally characterized with lower energy prices revealed that the company still managed to deliver dividend growth, albeit at a very slow rate.

Ameriprise Financial, Inc. (AMP) provides various financial products and services to individual and institutional clients in the United States and internationally. This dividend achiever raised its quarterly dividend by 10.70% to 83 cents/share. This marked the 13th consecutive annual dividend increase for Ameriprise Financial. Over the past decade, the company has managed to raise annual dividends at a rate of 20.80%/year. I would expect future dividend growth to be no more than half the rate over the past decade. Earnings per share increased from $3.39 in 2007 to $7.81 in 2016. The company is expected to earn $10.84/share in 2017. Currently the stock is attractively valued at 11.80 times earnings and yields 2.60%.

Costco Wholesale Corporation (COST) operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. This dividend achiever raised its quarterly dividend by 11.10% to 50 cents/share. This marked the 14th consecutive annual dividend increase for Costco. In addition, the company also announced a special dividend of $5/share. I will discuss the lessons from this one-time dividend in another post this week. Over the past decade, the company has managed to raise annual dividends at a rate of 13.20%/year. Earnings per share increased from $2.37 in 2007 to $5.33 in 2016. The company is expected to earn $5.64/share in 2017. Currently the stock is overvalued at 31.50 times forward earnings and yields 1.10%. I would be interested in the company on dips below $113/share.

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. This dividend achiever raised its quarterly dividend by 7.10% to $1.50/share. This marked the 22nd consecutive annual dividend increase for IBM. Over the past decade, the company has managed to raise annual dividends at a rate of 17.50%/year. Earnings per share increased from $7.18 in 2007 to $12.39 in 2016. Unfortunately, the company missed its plan to earn $20/share by 2015, and EPS has been on a decline since hitting a high of $15.59/share in 2014. The company is expected to earn $13.71/share in 2017. Currently the stock is attractively valued at 11.70 times forward earnings and yields 3.70%. IBM certainly is a cheap stock, and the company has been buying back shares regularly ( though it has been repurchasing less shares nowadays that they are cheaper, versus the higher amount it spent on buybacks when shares were more expensive than today). However, the business is not very stable, as revenues have been in a decline since 2011, and net income has been declining since 2012. The stock may always go up from here, but without any sustainable growth in earnings over time, intrinsic value will not grow, and future dividend growth will be severely limited. I think that there are a lot of unknowns right now, which is why I see the stock as a hold. That being said, Warren Buffett has been attracted to IBM five years ago, and his company is still sticking to their guns.

W.W. Grainger, Inc. (GWW) distributes maintenance, repair, and operating (MRO) supplies; and other related products and services that are used by businesses and institutions in the United States, Canada, Europe, Asia, and Latin America. This dividend champion raised its quarterly dividend by 4.90% to $1.28/share. This marked the 46th consecutive annual dividend increase for W.W. Grainger. Over the past decade, the company has managed to raise annual dividends at a rate of 15.80%/year. Earnings per share increased from $4.94 in 2007 to $9.87 in 2016. The company is expected to earn $10.47/share in 2017. Currently the stock is fairly valued at 18.40 times forward earnings and yields 2.70%. The company has not been able to grow earnings per share for several years in a row now (since 2013). This is a cause for concern, because we need earnings growth to fuel future dividend increases and to grow intrinsic value over time. A static earnings per share may also be repriced into a lower multiple. I will be watching this company carefully for the time being.

Cullen/Frost Bankers, Inc. (CFR) operates as the holding company for Frost Bank that offers commercial and consumer banking services in Texas. The company operates in two segments, Banking and Frost Wealth Advisors. This dividend achiever raised its quarterly dividend by 5.60% to 57 cents/share. This marked the 24th consecutive annual dividend increase for Cullen/Frost Bankers. Over the past decade, the company has managed to raise annual dividends at a rate of 5%/year. Earnings per share increased from $3.55 in 2007 to $4.70 in 2016. The company is expected to earn $5.30/share in 2017. Currently the stock is fairly priced at 18 times forward earnings and an yield of 2.40%.

Xilinx, Inc. (XLNX) designs and develops programmable devices and associated technologies worldwide. This dividend achiever raised its quarterly dividend by 6.10% to 35 cents/share. This marked the 15th consecutive annual dividend increase for Xilinx. Over the past decade, the company has managed to raise annual dividends at a rate of 14.40%/year. Earnings per share increased from $1.25 in 2008 to $2.32 in 2017. The company is expected to earn $2.48/share in 2018. Currently the stock is overvalued at 25 times forward earnings and yields 2.20%. Given the high valuation, the stock is a pass for the time being.

Portland General Electric Company (POR), is an integrated electric utility company, which engages in the generation, wholesale purchase, transmission, distribution, and retail sale of electricity in the state of Oregon. This dividend achiever raised its quarterly dividend by 6.10% to 34 cents/share. This marked the 12th consecutive annual dividend increase for Portland General Electric Company. Over the past decade, the company has managed to raise annual dividends at a rate of 10.70%/year. Earnings per share increased from $1.25 in 2008 to $2.32 in 2017. The company is expected to earn $2.48/share in 2018. Currently the stock is fully valued at 19.90 times forward earnings and yields 2.90%. Given the lack of earnings growth and high valuation, I would not look further into the company.

UGI Corporation (UGI) distributes, stores, transports, and markets energy products and related services in the United States and internationally. This dividend champion raised its quarterly dividend by 5.30% to 25 cents/share. This marked the 30th consecutive annual dividend increase for UGI Corporation. Over the past decade, the company has managed to raise annual dividends at a rate of 7.30%/year. Earnings per share increased from $1.26 in 2007 to $2.08 in 2016. The company is expected to earn $2.42/share in 2017. Currently the stock is lightly overvalued at 20.70 times forward earnings and yields 2%. It is nice to see a utility company with good earnings growth over a decade. However, the current valuation already reflects some of the future growth prospects. Either way, UGI sounds like an interesting company to research further.

AmeriGas Partners, L.P. (APU) distributes propane and related equipment and supplies in the United States. This dividend achiever raised its quarterly distribution to 95 cents/unit. This marked the 12th consecutive annual dividend increase for AmeriGas Partners. Over the past decade, the partnership has managed to raise annual distributions at a rate of 5%/year. Currently the partnership yields 8.30%. UGI Corporation holds a 26% stake in AmeriGas partners (along with owning the general partner too).

Franklin Electric Co., Inc. (FELE), designs, manufactures, and distributes water and fuel pumping systems worldwide. It operates in two segments, Water Systems and Fueling Systems. This dividend champion raised its quarterly dividend by 7.50% to 10.75 cents/share. This marked the 25th consecutive annual dividend increase for Franklin Electric. Over the past decade, the company has managed to raise annual dividends at a rate of 6.30%/year. This was supported by growth in earnings per share from 61 cents in 2007 to $1.65 in 2016. The company is expected to earn $1.81/share in 2017. Currently the stock is overvalued at 22.70 times forward earnings and yields 1%. This is a company that is not widely followed by institutions and many investors. I should put it on my list for further research. It would be worthy of a second look on dips below $37/share.

Full Disclosure: I have a position in JNJ, XOM, AMP, IBM, GWW

 

Note: This article was contributed to ValueWalk.com by Dividend Growth Investor.

Tags: , , , , , , ,

Category: Lists of Dividend Stocks

About the Author ()

The author of this article is a contributor to ValueWalk.com. ValueWalk is your everyday source of breaking and evergreen news on everything hedge funds and value investing.

Leave a Reply