As 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. Check my analysis of Johnson & Johnson for more information about the company.

Dividend Growth Stocks

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%. Check my analysis of Ameriprise for more information about the company.

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

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