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 short dividend growth streak. 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.
Dividend Growth Stocks
Over the past week, there were five dividend stocks with a long streak of consecutive annual dividend increases, which raised dividends to shareholders. The companies include:
McCormick & Company, Incorporated (MKC) manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. It operates through two segments, Consumer and Industrial. The company raised its quarterly dividend by 9.30% to 47 cents/share. This dividend champion has rewarded shareholders with a dividend raise for the past 31 years in a row. Over the past decade, McCormick has raised dividends at a rate of 9.60%/year. This quality company is selling at 23.50 times forward earnings and yields 2.10%. I would be interested in adding to my position in this compounding machine on dips below $76/share. Check my analysis of McCormick for more information about the company.
The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More
The Walt Disney Company (DIS), together with its subsidiaries, operates as an entertainment company worldwide. The company raised its quarterly dividend by 9.90% to 78 cents/share. This dividend stock has rewarded shareholders with a dividend raise for the past 7 years in a row. Over the past decade, Disney has raised dividends at a rate of 19%/year. The stock is selling at 16.60 times forward earnings and yields 1.60%. I think that the company is attractively valued in the current environment, and is a solid long-term holding idea. Check my analysis of Walt Disney for more information about the company.
WEC Energy Group, Inc. (WEC), through its subsidiaries, generates and distributes electric energy. The company operates through Wisconsin, Illinois, Other States, electric transmission, and We Power, Corporate and Other segments. The company raised its quarterly dividend by 5.10% to 52 cents/share. This dividend contender has rewarded shareholders with a dividend raise for the past 14 years in a row. Over the past decade, it has raised dividends at a rate of 14.80%/year. The stock is selling at 18.90 times forward earnings and yields 3.70%. The trends in earnings and dividends look intriguing enough, to place this stock on the list for further research.
Universal Health Realty Income Trust (UHT) is a publicly owned real estate investment trust. The firm invests in the real estate markets of United States. It invests in the health care and human service related facilities including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub-acute facilities, surgery centers, childcare centers, and medical office buildings.
This REIT raised its quarterly dividend to 65.50 cent/share. This represents an increase of 1.60% over the distributions paid during the same time last year. This dividend champion has rewarded shareholders with a dividend raise for the past 30 years in a row. Over the past decade, it has raised dividends at a rate of 1.60%/year. Due to the higher starting yields, shareholders have managed to generate high returns over the past decade. However, I believe that this REIT is overvalued at a current yield of 4.30% and Price/FFO of 20.80. I would be interested in this REIT at starting yields around 6% (to compensate for the slow rate of dividend growth).
Nucor Corporation (NUE) manufactures and sells steel and steel products in the United States and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The company raised its quarterly dividends by 0.70% to 37.75 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. Over the past decade, Nucor has managed to increase its dividend at a rate of 17.40%/year. However, the rate of dividend growth has significantly slowed down after the financial crisis. The stock is overvalued at 27 times earnings and yields 2.40%. Given the lack of earnings growth over the past decade, I sold the stock earlier in 2016. While the stock price has increased since then, I do not regret the sale. I would not be interested in adding back given the spotty earnings record. Without sustainable growth in earnings, further dividend growth is not possible. Further, sustainable increases in intrinsic values are not possible without earnings growth.
Full Disclosure: Long MKC, DIS,
- Dividend Champions – The Best List for Dividend Investors
- How to read my weekly dividend increase reports
- Five Things to Look For in a Real Estate Investment Trust
- The most important metric for dividend investing