As a dividend growth investor, my goal is to generate a stream of income, which grows above the rate of inflation.
For the past decade that I have been doing that, my annual organic dividend growth has easily outpaced the historical rates inflation by a factor of 2 or more. In fact, the dividend increases by my portfolio have always been higher than the annual raises I receive at work.
I do not have to spend 40 - 60 hours per week placing cover sheets on TPS reports, nor do I need to waste time in pointless meetings that could have been resolved with a single email. Having a dividend portfolio is like having a tireless employee, who works 24 hours/day, seven days/week, 365 days/year, who shares all of their income with me. Their raises are much higher than what I could get for working extremely hard.
It is not wonder that I have fully embraced the power of dividend investing - I love getting paid and receiving regular raises, even if I do not work hard. Most of the work in building a dividend machine is done upfront. If I did my job of security selection well, I could afford to do nothing for years, and simply enjoy a rising stream of income from my diversified list of dividend paying companies. I would be paid for decades, for an investment decision made a long time ago.
As part of my monitoring process, I review the list of dividend increases every single week. I use this exercise to monitor existing holdings, and also to monitor companies I may be interested in down the road.
I isolated the companies which have a ten year track record of annual dividend increases. The companies include:
Archer-Daniels-Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products.The company's Board of Directors declared a cash dividend of 33.5 cents per share on the company’s common stock, which was a 4.7 percent increase from last quarter’s dividend of 32 cents per share. This marked the 43th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has been able to grow distributions at an annual rate of 10.80%/year. Unfortunately, the company has been unable to grow earnings per share over the past decade. Without earnings growth, future dividend growth will be limited. While Archer-Daniels-Midland sells at a low valuation of 15 times forward earnings, and yields an attractive 3.20%, I view the stock as a hold today.
S&P Global Inc. (SPGI) provides independent ratings, benchmarks, analytics, and data to the capital and commodity markets worldwide. It operates through three segments: Ratings, Market and Commodities Intelligence, and S&P Dow Jones Indices.
S&P Global has approved a 22% increase in the regular quarterly cash dividend to 50 cents/share.. The company has paid a dividend each year since 1937 and has increased its dividend annually for at least the last 45 years. Over the past decade, this dividend aristocrat has been able to grow distributions at an annual rate of 7.20%/year.
"We are raising our annual dividend increase in 2018 in a substantial way as a result of our additional free cash flow capabilities generated by U.S. tax reform. Stepping up the dividend underscores our long-term commitment to returning capital to shareholders."
The company has generated impressive growth in earnings per share over the past decade. S&P Global grew earnings from $2.94/share in 2007 to $5.78/share in 2017. Currently, the stock is overvalued at 21 times forward earnings and yields 1.10%. S&P Global may be worth a second look on dips below 20 times earnings.
Church & Dwight Co. (CHD), Inc. develops, manufactures, and markets household, personal care, and specialty products in the United States.
The company’s Board of Directors today declared an 14% increase in the regular quarterly dividend from $0.19 to $0.2175 per share, equivalent to an annual dividend of $0.87 per share. This is the 22nd consecutive year in which this dividend achiever has increased the dividend. Church & Dwight has paid a regular consecutive quarterly dividend for 117 years. Over the past five years, this dividend achiever has been able to grow distributions at an annual rate of 9.60%/year.
“This action reflects the company’s desire for stockholders to benefit from our strong growth and is an indication of our confidence in the continuation of the company’s strong performance. The company expects to generate significant cash flow over the next three years. Our robust cash flow enables us to deliver higher value directly to our stockholders while maintaining significant financial flexibility.”
The company managed to grow earnings per share from $0.61 in 2007 to $1.94/share in 2017. Currently, Church & Dwight is slightly overvalued at 21.60 times forward earnings and has a dividend yields of 1.80%. It may be worth a second look on dips below $44/share.
CMS Energy Corporation (CMS) operates as an energy company primarily in Michigan. It operates through three segments: Electric Utility, Gas Utility, and Enterprises
The Board of Directors of CMS Energy today increased the quarterly dividend on the company's common stock to 35.75 cents per share, up from 33.25 cents per share. Over the past five years, this dividend achiever has been able to grow distributions at an annual rate of 6.70%/year. This dividend achiever has rewarded shareholders with a dividend increase for 12 years in a row.
Patti Poppe, CMS Energy's president and chief executive officer, said the Board's decision to increase the current dividend to $1.43 per share on an annualized basis reflects the successful execution of the company's business strategy.
"We continue to execute our triple bottom line strategy of people, planet, profit, which allows us to strengthen our business while providing annual earnings growth and higher stock dividends that benefit our investors."
The company has managed to grow earnings between 2008 and 2016 from $1.20 to $1.98/share. The stock is right at the top of its valuation at 19.70 times forward earnings and a dividend yield of 3.40%. Because CMS is a utility, I would get more interested on dips below 16 times earnings.
Avista Corporation (AVA) operates as an electric and natural gas utility company. It operates in two segments, Avista Utilities, and Alaska Electric Light and Power Company.
Avista Corp.’s board of directors has declared a quarterly dividend of $0.3725 per share on the company’s common stock, an increase of 4.20 percent. Over the past five years, this dividend achiever has managed to increase its dividend at an annual rate of 4.30%.
“The dividend increase approved by the board of directors marks the sixteenth consecutive year the board has raised the dividend for our shareholders. I believe it demonstrates the board’s commitment to maximizing shareholder value,” said Avista Corp. Chairman and Chief Executive Officer Scott Morris.
The company almost tripled its earnings per share over the past decade, from 72 cents in 2007 to $2.15 in 2016. The stock yields 3%, but is overvalued at 26 times forward earnings.
Polaris Industries Inc. (PII) designs, engineers, manufactures, and markets power sports vehicles worldwide. It operates through four segments: Off-Road Vehicles (ORVs)/Snowmobiles, Motorcycles, Global Adjacent Markets, and Other.
The company's Board of Directors approved a 3 percent increase in the regular quarterly cash dividend, raising the payout to $0.60 per share. This increase represents the 23rd consecutive year of Polaris increasing its dividend. In the past five years, the company has been able to boost its payout at an annual rate of 9.40%/year.
Polaris Industries grew its earnings per share from $1.53/share in 2007 to $2.69 in 2017. Forward earnings are set at $6.11/share, which translates into a forward P/E of 18.30. The company has been unable to grow earnings past its 2014 record at $6.65/share however. I will need to put it on my list for further research, in order to improve my understanding of the company.
Union Pacific Corporation (UNP), through its subsidiary, Union Pacific Railroad Company, operates railroads in the United States. Board of Directors today voted to increase the quarterly dividend on the company’s common shares by 10 percent to 73 cents per share. This was the second dividend increase over the past year for this dividend achiever, which has managed to reward shareholders with a raise for 12 years in a row. The company grew its earnings per share from $1.73/share in 2007 to $5.79/share in 2017. I view the stock as overvalued today, but would consider it on dips below $116/share.
Prudential Financial, Inc. (PRU) , through its subsidiaries, provides insurance, investment management, and other financial products and services in the United States and internationally.
The company declared a quarterly dividend of 90 cents per share, representing an increase of 20% over the prior year dividend level. Over the past decade, this dividend achiever has been able to grow distributions at an annual rate of 10.10%/year. This marked the tenth consecutive annual dividend increase for Prudential.
The company grew its earnings per share from $7.61/share in 2007 to $10.58/share in 2017. It currently yields 3.40%, and is attractively valued at 10 times earnings.
Hasbro, Inc. (HAS), together with its subsidiaries, operates as a play and entertainment company. The company operates through U.S. and Canada, International, and Entertainment and Licensing.
Board of Directors Increases Quarterly Dividend 11%, or $0.06 per share, to $0.63 per share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Hasbro has managed to hike dividends at an annual rate of 14%/year over the past decade. The company grew its earnings per share from $1.97/share in 2007 to $5.64 in 2017. Currently, the stock is attractively valued at 17.30 times earnings and has a dividend yield of 2.60%. I have been hesitant to own toy companies like Hasbro and Mattel in the past, because I view their business models as highly cyclical, the toy product cycles tend to be short and the competition to be intense. That being said, Hasbro could be a decent pick for a diversified dividend portfolio.
Bemis Company, Inc. (BMS) manufactures and sells packaging products. It operates through two segments, U.S. Packaging and Global Packaging.
The Board of Directors approved a 3.3 percent increase in the quarterly cash dividend, increasing it to 31 cents per share. This marks the 35th consecutive year that the company has increased its dividend payment. The latest dividend increase is slightly lower than the ten year average of 3.60%/year.
“Our dividend program is an important part of our shareholders' total return on investment in Bemis Company," said William F. Austen, Bemis Company's President and Chief Executive Officer. "Our annual cash dividend has increased consecutively for 35 years, demonstrating confidence in our ability to generate strong cash flow and future growth."
This dividend aristocrat grew its earnings per share from $1.74/share in 2007 to $2.39 in 2017. The shares seem fairly valued at 18.20 times earnings. The dividend yield seems sustainable at 2.80%/year. However, the slow dividend growth has prevented me from owning this dividend aristocrat. I view it as a hold, but am not terribly excited about company's prospects.
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