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Summary

  • Listing the ten S&P MidCap 400 companies that have increased their dividend payouts by the highest average rate during the last five years.
  • Investors can expect from most ofl these companies to continue their steady dividend growth.
  • The average compound annual dividend growth for the past five years of the ten companies was at 31.65%.

In my previous post, I tried to analyze if the ten S&P 500 companies that have increased their dividend payouts by the highest average rate during the last five years can continue their steady dividend growth. However, Mid-Cap companies pay a dividend too, and income investors can find some reliable dividend growers among Mid-Cap companies.

In this article, I looked for the ten S&P MidCap 400 companies, yielding more than 1%, that have increased their dividend payouts by the highest average rate during the last five years, and I tried to analyze if these companies can continue their strong dividend growth.

The table below presents the ten S&P MidCap 400 top dividend growers. The data were taken from Charles Schwab website and Portfolio123 on June 23.

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The table below presents the ten S&P MidCap 400 top dividend growers, their average compound annual dividend growth for the past five years, their dividend yield and the payout ratio.

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Omnicare Inc. (NYSE:OCR)

Omnicare, Inc. operates as a healthcare services company that specializes in the management of pharmaceutical care in the United States and Canada.

In the first quarter of 2014 OCR generated net cash flows from operating activities of $177.5 million, and it used only $26.2 million for capital expenditures and $19.6 million for paying dividends, these leave $125.8 million as free cash flow. However, Omnicare has high debt; its total debt to equity ratio is at 0.84. Moreover, its payout ratio is pretty high at 67.90%, therefore, in my opinion; the company will have difficulty to continue raising its dividend payments at the same high rate.

OCR Dividend Chart

OCR Dividend data by YCharts

Church & Dwight Co. Inc. (NYSE:CHD)

Church & Dwight Co. develops, manufactures, and markets a range of household, personal care, and specialty products under various brand names in the United States and internationally.

For the first three months of 2014, net cash from operating activities was $102.4 million, a $30.1 million increase from the prior year. At March 31 2014, cash on hand was $300 million, while total debt was $803 million. The Company executed two accelerated share repurchase programs totaling $260 million in the quarter. The Company anticipates making additional share purchases in 2014, while continuing to have financial flexibility for acquisitions.

Church & Dwight is generating strong cash flows, and it returns value to its shareholders by stock buyback and by increasing its dividend payments. The company has a low total debt to equity ratio of 0.38, and its payout ratio is only 40.87%. Moreover, the company has strong earnings growth prospects. All these factors lead me to believe that the company can continue to raise its dividend payments.

CHD Dividend Chart

CHD Dividend data by YCharts

Janus Capital Group, Inc. (NYSE:JNS)

Janus Capital Group, Inc. is a publicly owned asset management holding company with approximately $167.7 billion in assets under management.

Janus Capital Group repurchased 955,032 shares of its common stock at an average price of $11.00 per share and a total cost of $10.5 million during the first quarter 2014. Additionally, the Board of Directors approved a 14% increase in the company's regular quarterly dividend to $0.08 per share from $0.07 per share.

Janus Capital Group is generating strong free cash flow; its price-to-free-cash-flow ratio is low at 16.74. Furthermore, the company has strong cash position; its price-to-cash ratio is only 3.06, and its current ratio is very high at 4.50. Since its payout ratio is not high at 45.39%, I believe that there is real possibility that JNS will continue to raise its dividend payments.

JNS Dividend Chart

JNS Dividend data by YCharts

HollyFrontier Corporation (NYSE:HFC)

HollyFrontier Corporation operates as an independent petroleum refiner in the United States.

On May 14, HollyFrontier announced that its Board of Directors approved an increase in the Company's regular quarterly cash dividend to $0.32 per share from the previous rate of $0.30 per share. This is the sixth increase in the regular dividend since its merger in July of 2011, representing a total increase of more than 325 percent. On June 13, 2014, the company paid a special cash dividend in the amount of $0.50 per share.

Although HollyFrontier has low debt, and strong earnings growth prospects, its payout ratio of 116.29% is too high, in my opinion, to maintain such a high dividend growth.

HFC Dividend Chart

HFC Dividend data by YCharts

NewMarket Corporation (NYSE:NEU)

NewMarket Corporation is engaged in the petroleum additives businesses.

On April 24, The Board of Directors approved a new share repurchase program and authorized management to repurchase up to $400 million of NewMarket's outstanding common stock until December 31, 2016. NewMarket's payout ratio is very low at 22.57%, and its current ratio is very high at 3.70. Moreover, it has solid earnings growth prospects. I think that the company can continue to raise its dividend payments.

NEU Dividend Chart

NEU Dividend data by YCharts

Reliance Steel & Aluminum Co. (NYSE:RS)

Reliance Steel & Aluminum Co. operates as a metals service center company.

The Company generated $68.8 million in cash flow from operating activities in the first quarter of 2014, compared to cash flow from operating activities of $72.2 million during the same period in the prior year. As of March 31, 2014, total debt outstanding was $2.13 billion, for a net debt-to-total capital ratio of 33.8%, down from 34.3% at December 31, 2013.

Reliance Steel & Aluminum is generating strong free cash flow; its price-to-free-cash-flow ratio is low at 15.91. Furthermore, the company has very high current ratio of 4.10, and strong earnings growth prospects. Since the payout ratio is very low at 31.1%, I think that the company can continue its strong dividend growth.

RS Dividend Chart

RS Dividend data by YCharts

The Hanover Insurance Group Inc. (NYSE:THG)

The Hanover Insurance Group, Inc. underwrites commercial and personal property, and casualty insurance products and services in the United States.

During the first quarter of 2014, the company repurchased $6.3 million of common stock. On April 28, the company had approximately $130 million of capacity remaining under its $600 million share repurchase program.

The Hanover Insurance Group is generating strong free cash flow; its price-to-free-cash-flow ratio is very low at 7.34. Furthermore, the company has strong cash position; its price-to-cash ratio is at 5.90. Since its payout ratio is very low at 26.28%, I believe that there is real possibility that THG will continue to raise its dividend payments.

THG Dividend Chart

THG Dividend data by YCharts

Reinsurance Group of America Inc. (NYSE:RGA)

Reinsurance Group of America, Incorporated is engaged in the life and health reinsurance business.

In its first quarter 2014 report the company said:

During the quarter, we repurchased approximately 1.45 million shares for a total cost of $112.6 million, leaving $187.4 million under the current share repurchase authorization. Our deployable, excess capital position exceeds $500 million, and we will continue to evaluate attractive capital deployment opportunities, which could include additional share repurchases, shareholder dividend increases, block acquisitions, or some combination of all of these.

Reinsurance Group of America is generating strong free cash flow; its price-to-free-cash-flow ratio is extremely low at 3.17. Furthermore, the company has strong cash position; its price-to-cash ratio is at 4.76. Since the payout ratio is very low at 21.93%, I think that the company can continue its strong dividend growth.

RGA Dividend Chart

RGA Dividend data by YCharts

BR Dividend data by YCharts

Broadridge Financial Solutions, Inc. (NYSE:BR)

Broadridge Financial Solutions, Inc. provides technology solutions to the financial services industry in the United States, Canada, and the United Kingdom.

During the third quarter fiscal 2014, the company repurchased approximately 0.5 million shares of Broadridge common stock at an average price of approximately $38.19 per share.

Although Broadridge Financial Solutions' has a fairly high total debt to equity ratio of 0.58, its payout ratio is low at 36.17%, and the company has strong earnings growth prospects. All these factors lead me to believe that the company can continue to raise its dividend payments.

BR Dividend Chart

BR Dividend data by YCharts

The Scotts Miracle-Gro Company (NYSE:SMG)

The Scotts Miracle-Gro Company is engaged in manufacturing, marketing, and selling consumer lawn and garden care products.

The Scotts Miracle-Gro Company reaffirmed, in its latest quarter report, its full-year outlook for adjusted earnings of $3.05 to $3.20 per share. However, the company has very high debt; its total debt to equity ratio is at 2.11. Moreover, its payout ratio is pretty high at 53.67%, therefore, in my opinion; the company will have difficulty to continue raising its dividend payments at the same rate.

In conclusion, most of the ten S&P MidCap 400 top dividend growers have a low payout ratio and solid financial position. In my opinion, investors can expect from most of these companies to continue their steady dividend growth.

Source: Can S&P MidCap 400 Top Dividend Growers Continue Their Strong Dividend Growth?