Each week I review the list of dividend increases. This is helpful in monitoring existing dividend holdings, and monitoring the breadth of dividend increases across the universe of prominent dividend growth stocks. Dividend increases also provide a proxy for near term expectations for the performance of the underlying businesses. If management continues raising dividends at the same rate as before, without achieving that through increases in the payout ratio, this indicates that they are expecting continued success in the business. If management raises dividends slower than expected, this might be an indication that things are slowing down.

 

Photo by alf.melin
Photo by alf.melin

Regular readers know that dividend increases are just one of the things I look for in evaluating companies. I am looking for a company with a strong track record of annual dividend growth, which is supported by growth in earnings per share. If such a company is available at an attractive valuation, it should be analyzed in detail, before being considered for my dividend growth portfolio.

Over the past week, there were six companies that met my minimum requirement for annual dividend increases. The companies include:

Becton, Dickinson and Company (BDX) develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company raised its quarterly dividend by 10.60% to 73 cents/share. This marked the 45th consecutive annual dividend increase for this dividend champion. Over the past decade, the company managed to boost its annual dividends at a rate of 13.10%/year. Best of all, this dividend machine also managed to deliver a solid boost to earnings per share over the past decade. Currently, the stock is attractively valued at 17.90 times forward earnings and yields 1.70%. Check my review of Becton Dickinson for more information.

Hormel Foods Corporation (HRL) produces and markets various meat and food products worldwide. The company operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods, and International & Other. The company raised its quarterly dividend by 17.20% to 17 cents/share. This marked the 52nd consecutive annual dividend increase for this dividend king. Over the past decade, the company managed to boost its annual dividends at a rate of 14.40%/year. Best of all, this dividend machine also managed to deliver a solid boost to earnings per share over the past decade. Currently, the stock is overvalued at 21.20 times forward earnings and yields 1.90%. I would be interested in the company on dips below $31 – $32/share.

Lancaster Colony Corporation (LANC) manufactures and markets specialty food products for the retail and foodservice markets in the United States. The company raised its quarterly dividend by % to cents/share. This marked the 54th consecutive annual dividend increase for this dividend king. Over the past decade, the company managed to boost its annual dividends at a rate of 6.40%/year. While earnings per share have grown over the past decade, most of the growth occurred in the first couple years. The last five- six years have seen a very modest amount of earnings growth. Currently, the stock is overvalued at 29 times forward earnings and yields 1.60%. I would not consider initiating a position in Lancaster Colony at current levels.

South Jersey Industries, Inc. (SJI), through its subsidiaries, provides energy-related products and services. It engages in the purchase, transmission, and sale of natural gas. The company raised its quarterly dividend by 3.30% to 27.25 cents/share. This marked the 18th consecutive annual dividend increase for this dividend contender. Over the past decade, the company managed to boost its annual dividends at a rate of 9%/year. This was much faster than the growth in earnings per share over the past decade. One item of note is that earnings per share have not grown over the past five years, which puts a cap on future dividend growth rates. Currently, the stock is overvalued at 24.60 times forward earnings and yields 3.30%. I would not consider initiating a position in the company at current levels.

Roper Technologies, Inc. (ROP), a diversified technology company, designs and develops license and software-as-a-service software, and engineered products and solutions. The company raised its quarterly dividend by 16.70% to cents/share. This marked the 23rd consecutive annual dividend increase for this dividend contender. Over the past decade, the company managed to boost its annual dividends at a rate of 16.90%/year. Currently, the stock is overvalued at 28 times forward earnings and yields 0.80%. If the stock is ever available at a better entry valuation, I would consider it for inclusion. Unfortunately, I do not like to chase future growth, by overpaying for it.

The York Water Company (YORW) impounds, purifies, and distributes drinking water. It owns and operates two wastewater collection and treatment systems; and has two reservoirs comprising Lake Williams and Lake Redman. The company raised its quarterly dividend by 3% to 16.02 cents/share. This marked the 20th consecutive annual dividend increase for this dividend contender. Over the past decade, the company managed to boost its annual dividends at a rate of 3.70%/year. Currently, the stock is overvalued 38.80 at times forward earnings and yields 1.80%. The stock is so overvalued, that if I owned it, I would consider selling it if I owned it. This is despite the fact that I am against portfolio turnover.

Full Disclosure: Long BDX