As part of my monitoring process, I review a list of dividend increases every week. I usually focus on companies that have managed to boost dividends to shareholders for at least a decade. It looks like this year may be classified as the year of higher dividend growth.
This is because of the new tax law, which went into effect this year. As a result of the lowering of corporate tax rates, companies are increasing the amounts of their regular dividends to shareholders and are initiating new share buyback programs. Some companies are accelerating their dividend increase schedules and, therefore, are showering their shareholders with more cash. As shareholders of many prominent blue-chips, we can hardly complain, of course.
Over the past week, the following companies increased their dividends:
The Sherwin-Williams Co. (SHW, Financial), which develops, manufactures, distributes and sells paints, coatings and related products, raised its quarterly dividend by 1.20% to 86 cents per share.
This is the third dividend increase in a row of a penny per share. This increase follows 39 consecutive years of dividend increases for this dividend aristocrat. The company is prioritizing debt repayment over high dividend hikes, which seems prudent. The company has managed to raise its annual dividend at a rate of 10.40% per year over the past decade. The stock yields 0.90%.
The company managed to grow its earnings per share from $4.70 in 2007 to $15.07 per share in 2017. Currently, the stock is overvalued at 26 times earnings and yields 0.90%.
I would be interested in Sherwin-Williams on dips below $300 per share.
The Coca-Cola Co. (KO, Financial) is a beverage company that manufactures and distributes various nonalcoholic beverages worldwide. Coca-Cola raised its quarterly dividend by 5.40% to 39 cents per share. This marked the 56th consecutive annual dividend increase for this dividend king.
Coca-Cola has increased its dividend at an annual rate of 7.90% per year over the past decade. Unfortunately, the company has been unable to grow earnings per share over that same period. Coca-Cola earned $1.28 per share in 2007. Last year, in fiscal 2017, it earned only $1.10 per share. The company does expect to earn between $2.06 and $2.10 per share in 2018. However, the forward expectations for near-term earnings have been around $2 per share for several years in a row now.
As a result, I view the stock as overvalued at 21.80 times forward earnings. While Coke yields a nice 3.50% today, I view the forward dividend payout ratio at 75% to be a tad too high. Consistent with my analysis from last year, I view Coca-Cola as a hold. I would not be buying shares today if I were just starting out.
AbbVie Inc. (ABBV, Financial) develops, manufactures and sells pharmaceutical products worldwide. The company hiked its quarterly dividend by 35% to 96 cents per share. The company has increased dividends by 140% since it split from Abbott Laboratories (ABT) in 2013. Between 2013 and 2017, Abbvie grew its earnings per share by 43% to $3.70 per share.The company expects to further grow its earnings per share to between $6.45 and $6.55 in 2018. AbbVie is fairly valued at 18.40 times forward earnings and yields 3.20%.
The Clorox Co. (CLX, Financial) manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle and International.
Clorox hiked its dividend by 14% to 96 cents per share. This is an accelerated declaration of the company's dividend increase, which typically occurs in May. Annual dividends paid to shareholders of this dividend aristocrat have increased each year since 1977. Clorox has managed to hike its dividends at an annual rate of 8% per year over the past decade. The stock yields 2.90%. The dividend payout ratio is a little high at 71.90% today. It is adequate at 61.50% using forward earnings estimates of $6.24 per share. The company has managed to grow earnings per share from $3.24 in 2008 to $5.34 in 2017. Unfortunately, the stock is a little overvalued at 24.70 times earnings. Clorox shares may be worth a look on dips below $107 per share.
PepsiCo Inc. (PEP, Financial) operates as a food and beverage company. The company hiked its quarterly dividend by 15% to 92.75 cents per share. This is the 46th consecutive dividend increase for this dividend aristocrat. PepsiCo has managed to hike its dividend at an annual rate of 8.90% per year over the past decade.
The company grew its earnings per share between 2008 and 2017 from $3.21 per share to $5.08 per share. The stock is a little overvalued at 21.90 times earnings. It may be worth another look on dips below $100 per share. PepsiCo yields 3.30%, but the dividend payout ratio comes out to 73% today, which is higher than I would want it to be. Using forward earnings however, the dividend payout ratio is more sustainable at 65%.
T. Rowe Price Group Inc. (TROW, Financial) is a publicly owned investment manager. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries and institutions. T. Rowe Price hiked its quarterly dividend by 23% to 70 cents per share. This marks the 32nd consecutive year the company has increased its regular annual dividend. The company has managed to increase its dividends at an annual rate of 12.90% per year over the past decade. The stock yields 2.60% and has an adequately covered dividend. Dividend growth has been supported by solid growth in earnings per share, from $2.40 in 2007 to $5.97 per share in 2017. The stock is fairly valued at 18.50 times earnings today.
NextEra Energy Inc. (NEE) generates and distributes electricity to customers in North America. The company generates electricity through wind, solar, nuclear and natural gas-fired facilities.
Today, NextEra Energy declared a regular quarterly common stock dividend of $1.11 per share, up approximately 13% from the prior-year quarterly dividend. This marked the 24th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has grown its dividend at a rate of 9.10% per year. The company expects to translate to a growth rate in dividends per share of 12% to 14% per year through at least 2020. The stock yields 2.90% today and has an adequately covered dividend. Dividend growth has been supported by solid growth in earnings per share, from $3.27 in 2007 to $6.70 in 2017. Unfortunately, this stock is currently overvalued at 23.30 times earnings. It may be worth a second look on dips below $134 per share.
CSX Corp. (CSX, Financial) provides rail-based transportation services in the U.S. and Canada. The company hiked its quarterly dividend by 10% to 22 cents per share, which marked the 14th year of annual dividend increases for this dividend achiever. Over the past decade, it has raised its distributions at an annual rate of 15.80% per year. The stock yields 1.60%. The company managed to grow its earnings from $1.11 per share in 2008 to $2.15 per share in 2017.The stock is currently overvalued at 26.10 times earnings. Using forward earnings estimates for 2018 of $3.11 per share, it looks fairly valued at 18 times forward earnings. CSX may be worth a second look below $43 per share.
The Dun & Bradstreet Corp. (DNB) provides commercial data, analytics and insights on businesses worldwide.The company increased its quarterly distribution by 4% to 52.25 cents per share. This marked the company's 12th year of annual dividend increases. Over the past decade, it has been able to hike its dividends at an annual rate of 7.20% per year. The stock yields 1.70%. The company grew its earnings from $4.99 per share in 2007 to $6.18 per share in 2017. At this time, I am giving the company a pass as it seems to be growing earnings slowly. It is close to fully valued at 19.60 times earnings.
L3 Technologies Inc. (LLL, Financial) produces aerospace, communication and electronic systems and products used on military and commercial platforms. The company hiked its quarterly dividend by 6.70% to 80 cents per share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, L3 Technologies has managed to raise its annual dividend at a rate of 12.10% per year. The stock yields 1.60%. While the company has been able to grow earnings per share a bit over the past decade, this was achieved mostly through financial engineering - meaning share buybacks. Given the fact valuations today are higher, it means the impact of future share buybacks will be subdued at best. Since the stock is selling above 20 times earnings, I view it as a hold.
Ryder System Inc. (R) provides transportation and supply chain management solutions to small businesses and large enterprises worldwide.The company hiked its quarterly dividend by 13% to 52 cents per share, which is higher than the 10-year average of 7.90% per year. This marked the 14th consecutive annual dividend increase for this dividend achiever. The stock yields 2.50%. The company was unable to significantly grow earnings over the past decade, as they went from $4.24 per share in 2007 to $4.53 in 2017. While the stock seems attractively valued on the surface at 16.90 times earnings with a dividend yield of 2.50%, the lack of earnings growth makes it a pass for me at this time.
Jack Henry & Associates Inc. (JKHY) provides technology solutions and payment processing services. The company increased its annual dividend by 19.40% to 37 cents per share, which is a little higher than the average annual increase over the past decade of 16.90% per year. This marked the 28th annual dividend increase for this dividend champion. The stock yields 1.30%. The company grew its earnings from $1.16 per share in 2008 to $3.14 per share in 2017. Unfortunately, the stock is currently overvalued at 38 times earnings. If the company is ever available below $70 per share, which is equivalent to 20 times forward earnings, it may be worth a second look.
