In the long run, dividend increases can only be sustained through higher earnings and cash flows. Fortunately, over the past decade, each of the three companies below has earned well above their current dividend payments.
Strong fundamentals should allow them to continue bumping their payouts for years to come. Recently, all three have opted to do so, raising their dividends by 5% to 7%.
Altria Group Inc. (MO, Financial)
Dividend yield: 3.7%
Altria Group was founded in 1919 and has long been a favorite of income investors. While many have avoided shares due to the depopularization of cigarettes, Altria has consistently proven that it can grow both earnings and dividends through price increases and new products. Its international segment, Philip Morris International (PM, Financial), was spun off in 2008, so growth has slowed down a bit. But the company's return on assets last quarter was a whopping 20.3%.
Last week, Altria Group increased its quarterly dividend by 8% to 61 cents per share.
Dividend yield: 2.3%
Harris Corp. provides advanced, technology-based solutions to mission critical challenges of government and commercial customers across 125 countries. With defense budgets under pressure in recent years, the company has turned to buying back shares and acquiring competitors to create shareholder value. One of its recent purchases (Exelis) help grow the business by over 50%. In business for over 120 years, Harris Corp. has proven its ability to navigate business cycles.
Last week, Harris Corp. declared a quarterly dividend of 53 cents per share, an increase of 6%.
Dividend yield: 2.4%
Dover Corp. is a diversified industrial company that manufactures heavy equipment, components and specialty systems. The company also provides supporting engineering, testing and other services for those items. Dover has a very strong dividend history with 60 years of consecutive dividend increases behind it. A recent price retreat driven by weakness in the energy sector has pushed its dividend yield close to historic highs.
In August, the firm upped its semi-annual dividend to 44 cents per share, an increase of roughly 5%.
Disclosure: I have no positions in any of the stocks mentioned above and no intention to initiate a position in the next 72 hours.
