Each week, I go through the list of dividend increases in order to monitor performance of existing holdings, and uncover hidden dividend gems. I then narrow down the list by eliminating companies with a dividend growth streak that is less than a decade. I also look at things like trends in earnings per share, dividends per share, dividend payout ratios, in order to determine the likelihood of future dividend growth and growth in intrinsic value. My basic analysis also focuses on valuation and dividend sustainability.

Over the past week, there were six dividend stocks with a long streak of consecutive annual dividend increases, which raised dividends to shareholders. The companies include:

Brown-Forman Corporation (BF.B) manufactures, bottles, imports, exports, markets, and sells various alcoholic beverages worldwide. It provides spirits, wines, ready-to-drink cocktails, whiskey, vodka, tequilas, champagnes, brandy, and liqueur. Last week, the company raised its quarterly dividend by 7.40% to 18.25 cents/share. This marked the 33th consecutive annual dividend increase for this dividend champion. Over the past decade, Brown-Forman has managed to raise its dividends at a rate of 9.40%/year. Currently, the stock is overvalued at 26.10 times forward earnings and yields 1.60%. Brown-Forman would look more appealing on dips below $36/share. Check my analysis of Brown-Forman for more information about the company.

 

Photo by alf.melin
Photo by alf.melin

Union Pacific Corporation (UNP), through its subsidiary, Union Pacific Railroad Company, operates railroads in the United States. Last week, the company raised its quarterly dividend by 10% to 60.50 cents/share. Union Pacific was overdue for a dividend increase, as it had kept the quarterly dividend unchanged for the past 7 quarters. Union Pacific has managed to boost annual dividends to shareholders for a decade. Over the past decade, Union Pacific Corporation has managed to raise its dividends at a rate of 22%/year. This was possible because of the expansion in the dividend payout ratio, along with the strong earnings performance over the past decade. Currently, the stock is overvalued at 20.20 times forward earnings and yields 2.40%. The stock would look better on dips below $97/share. It would look even better at a P/E of 15 – 16. Check my analysis of Union Pacific for more information.

NIKE, Inc. (NKE), together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. Last week, the company raised its quarterly dividend by 12.50% to 18 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, NIKE has managed to raise its dividends at a rate of 15.50%/year. Currently, the stock at 21.60 times forward earnings and yields 1.40%. I would be interested in initiating a position in Nike on dips below $47 – $48/share.

The Valspar Corporation (VAL) develops, manufactures, and distributes a range of coatings, paints, and related products worldwide. It operates in two segments, Coatings and Paints. Last week, the company raised its quarterly dividend by 12.10% to cents/share. This marked the 39th consecutive annual dividend increase for this dividend champion. Over the past decade, Valspar has managed to raise its dividends at a rate of 11.90%/year. Currently, the stock is overvalued at 20.80 times earnings and yields 1.50%. Valspar is in the process of being acquired by Sherwin-Williams (SHW) for $105 – $113/share in cash. Therefore, I would not consider the former. The latter may be interesting if it ever gets below 20 times earnings, and even more appealing at a P/E of 15 – 16.

Sysco Corporation (SYY), through its subsidiaries, markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry. Last week, the company raised its quarterly dividend by 6.50% to 33 cents/share. This marked the 47th consecutive annual dividend increase for this dividend champion. Over the past decade, Sysco has managed to raise its dividends at a rate of 7.20%/year. Currently, the stock is overvalued at 22.10 times forward earnings and yields 2.50%. I am not interested in Sysco, since the company has failed to grow earnings per share over the past decade. Without growth in earnings per share, future dividend growth will be impossible.

MDU Resources Group, Inc. (MDU) operates as a diversified natural resource company in the United States. Its Electric segment generates, transmits, and distributes electricity in Montana, North Dakota, South Dakota, and Wyoming. Last week, the company raised its quarterly dividend by 2.70% to 19.25 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion. Over the past decade, MDU Resources has managed to raise its dividends at a rate of 4.10%/year. Currently, the stock is overvalued at 25 times forward earnings and yields 2.70%. The lack of earnings growth over the past decade, and the high valuation make this stock an avoid for me.

Full Disclosure: Long UNP