Tom Gayner

Ten Dividend Stocks Providing Consistent Raises To Shareholders

As part of my monitoring process, I look at the list of dividend increases every week. I usually focus my attention on the companies that have managed to grow dividends for at least a decade. As a result, I didn’t include shares of Tractor Supply (TSCO), which is a company whose story I am monitoring.

Q1 hedge fund letters, conference, scoops etc

Tom Gayner

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I also tend to focus on the companies that are growing dividends by more than a token amount, unless of course I own them. As a result, I didn’t include shares of Microchip Technologies (MCHP), which is raising distributions at a slow rate of less than 1%/year.

For the companies that are left to review, I look at the dividend increase relative to the ten-year average, to determine if dividend increases are moving in the right direction.

I also review the growth in earnings per share and payout ratio, in order to determine if the dividend is safe, and if there is room for further dividend increases down the road.

Last but not least, I also review valuation per my valuation guidelines. Even the best dividend growth stock in the world is not worth buying at excessively high valuation levels.

These are very similar to the criteria I use in my dividend stock analyses. The ideas I use to review companies are also the same types of attributes I use to put companies on the list for further research, to hold off until the right price or to quickly discard into the ‘too hard” box.

One of the reasons why I share these lists is to illustrate my criteria in action, hope to educate others about tools they could implement into their own process. Speaking of process, I find it very important to develop your own process, and to follow it, by continuously improving it as well.

Over the past week, there were several companies that increased dividends. Aside from the ones I already mentioned in a previous post, the companies in todays review include:

Chesapeake Utilities Corporation (CPK), a diversified energy company, engages in regulated and unregulated energy businesses. The company operates in two segments, Regulated Energy and Unregulated Energy.

The company hiked its quarterly dividend by 9.50% to 40.50 cents/share. This marked the 16th consecutive annual dividend increase for this dividend achiever. During the past decade, this company has been able to grow distributions at an annual rate of 5.70%.

Chesapeake Utilities managed to boost earnings from $1.43/share in 2009 to $3.45/share in 2018. Chesapeake Utilities is expected to earn $3.70/share in 2019.

The stock is overvalued at 25.70 times forward earnings and yields 1.70%.

Expeditors International of Washington, Inc. (EXPD) provides logistics services in the Americas, North Asia, South Asia, Europe, the Middle East, Africa, and India.

The company hiked its semi-annual dividend by 11.10% to 50 cents/share. This marked the 25th consecutive annual dividend increase for this newly minted dividend champion. The latest dividend hike is in line with the ten year average of 10.90%/year.

Between 2009 and 2018, Expeditors International managed to boost earnings from $1.11/share to $3.48/share. Expeditors International is expected to earn $3.55/share in 2019.

The stock is slightly overvalued at 20.80 times forward earnings and yields 2.70%. I will consider reviewing the stock if it drops below $71/share.

MSA Safety Incorporated (MSA) develops, manufactures, and supplies safety products that protect people and facility infrastructures in the oil, gas, petrochemical, fire service, construction, utilities, and mining industries worldwide. It operates through Americas and International segments.
The company approved a 10.50% increase in its quarterly dividend to 42 cents/share. This marked the 48th year of annual dividend increases for this dividend champion. During the past decade, it has managed to grow the annual dividends at a rate of 4.70%/year.

The company managed to grow earnings from $1.21/share in 2009 to $3.18/share in 2018.
MSA Safety is expected to earn $4.82/share in 2019. The stock is overvalued at 22.50 times forward earnings and yields 1.55%.

NACCO Industries, Inc. (NC),
operates surface mines that supply bituminous coal and lignite primarily to power generation companies.

The company hiked its quarterly dividend by 15.20% to 19 cents/share. This marked the 34th year of annual dividend increase for this dividend champion. During the past decade, it managed to grow its dividends at a rate of 12.40%/year. From a fundamentals perspective, NACCO is more challenging to analyze, because the company from a decade ago is different from the company today due to two large spin-offs in 2012 and 2017. NACCO earned $5/share in 2018, which was higher than the $4.41/share it earned in 2017 – the first year as a stand-alone company.

The stock is cheap at 9.70 times earnings and yields 1.60%.

Quaker Chemical Corporation (KWR) develops, produces, and markets various formulated chemical specialty products for a range of heavy industrial and manufacturing applications in North America, Europe, the Middle East, Africa, the Asia/Pacific, and South America.

The company raised its quarterly dividend by 4.10% to 38.5 cents/share. This marked the twelfth year of annual dividend increases for this dividend achiever. During the past decade, it has managed to grow distributions at an annual rate of 4.80%/year.

Between 2009 and 2018, the company grew earnings from $1.47/share to $4.45/share.
Quaker Chemical is expected to earn $6.72/share in 2019. The company is overvalued at 30.80 times forward earnings and yields 0.70%.

VSE Corporation (VSEC) operates as a diversified services and supply company in the United States. The company operates in three segments: Supply Chain Management Group, Aviation Group, and Federal Services Group. The company raised its quarterly dividend by 12.50% to 9 cents/share. This marked the 16th year of annual dividend increases for this dividend achiever. During the past decade, it has managed to increase dividends by 13.40%/year.

Between 2009 and 2018, earnings per share increased from $2.33 to $3.21/share.
The stock looks attractively valued at 8.70 times earnings, though the current yield looks low at 1.30%.

Weyco Group, Inc. (WEYS) designs and distributes footwear. The company operates through two segments, North American Wholesale and North American Retail. Weyco raised its quarterly dividend by 4.40% to 24 cents/share. This marked the 38th consecutive annual dividend increase for this dividend champion. During the past decade, it has managed to boost distributions to shareholders at an annual rate of 6%.

Between 2008 and 2018, this dividend champion managed to grow its earnings from $1.44/share to $1.97/share. Unfortunately, the record earnings last year were only a few cents higher than the record earnings from 2007 of $1.90/share.

The stock looks attractively valued at 16.50 times earnings and offers a decent yield of 2.90%. The lack of material earnings growth over the past decade or so does not bode well for future dividend growth.

Cardinal Health, Inc. (CAH)
operates as an integrated healthcare services and products company in the United States and internationally. The company operates through two segments, Pharmaceutical and Medical. Cardinal Health boosted its quarterly dividend by 1% to 48.11 cents/share. This marked the 24th consecutive annual dividend increase for this dividend achiever. During the past decade, Cardinal Health has managed to increase dividends at an annual rate of 17.50%. Annual dividend growth had slowed down to 3%/year over the past three years. The current rate of annual dividend increases shows that management does not expect much in terms of earnings growth for the next 12 – 36 months.

Cardinal Health is expected to earn $5.09/share in 2019. This is a decent growth from 2009’s earnings of $3.18/share.

At 9.60 times forward earnings, the stock is very cheap. The current yield is 3.90%, and the dividend seems well covered from earnings. However, I dislike the slowdown in dividend growth, and view it as an indication that the business is facing some larger than anticipated challenges. Check my analysis of Cardinal Health for more information about the company.

Connecticut Water Service, Inc. (CTWS), operates as a regulated water company. The company operates through three segments: Water Operations, Real Estate Transactions, and Services and Rentals. The company increased its quarterly dividend by 4.80% to 32.75 cents/share. This marked the 50th year of annual dividend increases for this newly minted dividend king. Over the past decade, it has managed to grow dividends at an annual rate of 3.40%/year.

Connecticut Water Service is expected to earn $2.34/share in 2019, which is higher than the 2009’s earnings of $1.11/share.

I view the stock as very overvalued at 29.80 times forward earnings. The yield is also low for a utility at 1.90%, while the dividend growth is not too exciting either.

Southside Bancshares, Inc. (SBSI) operates as the bank holding company for Southside Bank that provides a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. The company boosted its quarterly dividend by 3.30% to 31 cents/share. This marked the 25th consecutive annual dividend increase for this newly minted dividend champion. During the past decade, the company has managed to grow its distributions at an annual rate of 13.70%/year.
Southside Bancshares is expected to earn $2.27/share in 2019.

The stock yields 3.50% and trades at an attractive forward P/E of 15.60 times earnings.

Relevant Articles:

Article by Dividend Growth Investor


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