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Dividend Growth Investor
Dividend Growth Investor
Articles (213) 

8 Dividend Companies Increasing Payouts and Returns to Investors

Companies that raised dividends in the past week

As part of my monitoring process, I review the list of dividend increases every single week. I usually focus on companies that have raised dividends for at least a decade in order to narrow down the list of companies to review. In order to be successful at dividend growth investing, you need to identify companies that can grow earnings, dividends and intrinsic values over time, which you can also purchase at an attractive valuation. I write these reviews in order to educate dividend investors about the quick method I use to look at companies before deciding whether to pursue further research or to discard them for the time being.

The companies that raised dividends last week include:

Realty Income Corp. (NYSE:O) is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The company makes investments in commercial real estate. The REIT raised its monthly dividend to 21.15 cents per share. Realty Income is a dividend achiever, rewarding shareholders with rising dividends for 23 years in a row.

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Realty Income has a 10-year annual dividend growth of 4.70% per year. Funds from operations per share has increased at a rate of 5.20% per year over the past decade. I would expect annual dividend growth in the 4% to 5% range over the next decade, unless a big accretive acquisition such as the one in 2013 is made. Unfortunately, this blue-chip REIT is priced aggressively at 18.50 times forward FFO (19.70 times fiscal 2016 FFO) and yields 4.50%. I would consider it below $51 per share. I would find Realty Income a good entry value around 16 times FFO or at a minimum yield of 5%.

W. P. Carey Inc. (NYSE:WPC) is an independent equity real estate investment trust. The company also provides long-term sale leaseback and build-to-suit financing for companies. It invests in real estate markets across the globe. The REIT raised its quarterly dividend to $1 per share. W. P. Carey is a dividend achiever, rewarding shareholders with rising dividends for 20 years in a row.

The REIT has a 10-year annual dividend growth of 8.10% per year. The strong distribution growth occurred as a result of the company’s conversion to a REIT in 2012. Funds from operations per share increased from $3.34 per share in 2007 to $4.86 per share in 2016. I would be surprised if annual dividend growth exceeds 3% to 4% per year over the next decade. Currently, this dividend achiever yields 5.90% and is attractively priced at 14 times FFO.

Target Corp. (NYSE:TGT) operates as a general merchandise retailer. The company raised its quarterly dividend by 3.30% to 62 cents per share. This marked the 50th consecutive annual dividend increase for this newly minted dividend king. Over the past decade, the company has managed to boost dividends at a rate of 18.10% per year. Earnings per share rose from $3.33 per share in 2008 to an estimated $4.23 per share by 2017. The stock is attractively valued at 12.40 times forward earnings and yields 4.70%.

Unfortunately, earnings per share have plateaued over the past four to five years. Target has been unsuccessful in growing abroad and has not managed to open many new stores in the U.S. recently. It has faced intense competition from offline stores and online competitors. The company is working hard to grow its online sales, which could provide some growth. On the other hand, that growth could come at the expense of profitability. The valuation is very compelling and could result in decent returns for patient shareholders. Without further growth in earnings per share however, dividend growth will end in a few years. This is one of the reasons why I am not adding as much as I was three years ago. Check out my analysis of Target for more information about the company.

United Technologies Corp. (NYSE:UTX) provides technology products and services to building systems and aerospace industries worldwide. The company raised its quarterly dividend by an anemic 1.30% to 78 cents per share. This marked the 24th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to boost dividends at a rate of 10.80% per year. Earnings per share rose from $4.27 per share in 2007 to an estimated $6.58 per share by 2017. The stock is fairly valued at 18.30 times forward earnings and yields 2.30%. Earnings growth has been nonexistent since 2012. I believe the company made a mistake selling its Sikorsky business to Lockheed Martin (NYSE:LMT) a few years ago. That being said, it is a good hold for long-term investors.

FedEx Corp. (NYSE:FDX) provides transportation, e-commerce and business services. The company raised its quarterly dividend by 25% to 50 cents per share. This marked the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to boost dividends at a rate of 14% per year. Earnings per share rose from $6.48 per share in 2007 to an estimated $11.95 per share by 2017. The stock is attractively valued at 17.60 times forward earnings and yields 1%.

HEICO Corp. (NYSE:HEI) designs, manufactures and sells aerospace, defense and electronic-related products and services. The company raised its quarterly dividend by 11.10% to eight cents per share. This marked the 11th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to boost dividends at a rate of 18.60% per year. Earnings per share rose from 48 cents per share in 2007 to an estimated $2.05 per share by 2017. The stock is overvalued at 34.80 times forward earnings and yields 0.30%. This high-growth company is usually priced at a premium valuation. If the company hits some temporary roadblocks and is available at 20 times forward earnings or lower, it may offer a great opportunity to initiate a position.

Caterpillar Inc. (NYSE:CAT) manufactures construction and mining equipment. The company raised its quarterly dividend by an anemic 1.30% to 78 cents per share. This marked the 24th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to boost dividends at a rate of 10.80% per year. Earnings per share rose from $5.37 per share in 2007 to an estimated $4.12 per share by 2017.

The stock is overvalued at 26 times forward earnings and yields 2.90%. Given the high valuation, lack of earnings growth over the past decade and high dividend payout ratio, I would not be interested in Caterpillar at this time. The company is in a cyclical industry, which makes the dividend less reliable for retirees. I analyzed the company several years ago when its share price was slightly lower than today but had a single-digit price-earnings (P/E) ratio. It is helpful to learn that not all P/E ratios are created equal.

National Fuel Gas Co. (NYSE:NFG) is a diversified energy company that operates in five segments: Exploration and Production, Pipeline and Storage, Gathering, Utility and Energy Marketing. The company raised its quarterly dividend by 2.50% to 41.50 cents per share. This marked the 47th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost dividends at a rate of 3.10% per year. Earnings per share rose from $2.36 per share in 2007 to an estimated $3.26 per share by 2017. The stock is a little richly valued at 18.30 times forward earnings and yields 2.80%. The company is growing earnings and dividends at a steady but extremely slow pace. I would consider National Fuel on dips below $40 per share. For a slow grower, it would be helpful to get a better starting yield in the 4% to 5% range.

Disclosure: Long WPC, O, UTX, TGT.

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Dividend Growth Investor
http://www.dividendgrowthinvestor.com

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