It doesn’t take much for a company to raise distributions once in a while. In fact, even companies without a shareholder friendly dividend policy could occasionally afford to raise dividends. It is only companies with strong balance sheets and ability to generate excess scash flows that could not only maintain a solid dividend payment, but also afford to increase it consistently every year. As a result enterprising dividend investors should avoid companies that only sporadically raise distributions, and instead follow companies that consistently raise them. I define a company as a consistent dividend payer, if it has raised distributions for over five years in a row. I typically however require a history of at least ten years in a row of annual dividend increases, before initiating a position in a stock. I do this in order to avoid companies which have been able to raise distributions simply because they were in the right place at the right time, and not because they had any solid competitive advantages.
Over the past week, the following consistent dividend payers raised distributions:
Boardwalk Pipeline Partners, LP (BWP), through its subsidiaries, engages in the interstate transportation and storage of natural gas in the United States. This master limited partnership raised its quarterly distribution from 51 to 51.5 cents/unit. The company has raised distributions since going public in 2006. Yield: 6.10%
Ecology and Environment, Inc. (EEI), an environmental consulting firm, provides professional services to the government and private sectors worldwide. The company raised its smi-annual dividend by 4.80% to 22 cents/share. The company has consistently raised dividends since 2006. Yield: 3.30%
NuStar Energy L.P. (NS) engages in the terminalling, storage, and transportation of petroleum products in the United States, the Netherland Antilles, Canada, Mexico, the Netherlands, and the United Kingdom. The company raised its quarterly distributions by 1% to $1.075/share. This master limited partnership has consistently raised distributions since 2001. Yield: 6.80%
Holly Energy Partners, L.P. (HEP) operates a system of petroleum product and crude oil pipelines, storage tanks, distribution terminals, and loading rack facilities. The company raised its quarterly distribution by 1.20% over the previous quarters distribution, to 83.50 cents/unit. This master limited partnership has consistently raised distributions since 2005. Yield: 6.60%
Cintas Corporation (CTAS) provides corporate identity uniforms and related business services in the United States and Canada. This dividend aristocrat raised its annual dividend by 2% to 49 cents/share. The company has raised distributions for 28 years in a row. Yield: 1.80%
Molex Incorporated (MOLX) manufactures and sells electronic components worldwide. The company raised its quarterly dividend by 14.8% to 17.50 cents/share. Despite the fact that this was the first dividend increase since 2008, the company has actually managed to raise annual dividends since 2003.
UMB Financial Corporation (UMBF), a multi-bank holding company, provides banking and other financial services in the United States. The company raised its quarterly dividends by 5.40% to 19.50 cents/share. This dividend achiever has raised distributions for 20 years in a row. Yield: 2.10%
Perrigo Company (PRGO), through its subsidiaries, develops, manufactures, and distributes over-the-counter (OTC) and prescription (Rx) pharmaceuticals, nutritional products, active pharmaceutical ingredients (API), and medical diagnostic products worldwide. The company raised its quarterly dividend by 12% to 7 cents/share. Perrigo has consistently raised distributions since 2003, but only yields 0.40%.
Arrow Financial Corporation (AROW) operates as the holding company for Glens Falls National Bank and Trust Company, and Saratoga National Bank and Trust Company that offer various commercial and consumer banking, and financial products in the United States. The company raised dividends by 3.10% to 25 cents/share. This was the 18th consecutive annual dividend increase for this dividend achiever. Yield: 3.90%
Identifying companies which consistently raise dividends is just the beginning of the screening process. Next steps include analysis of competitive advantages and business models in order to avoid chasing companies which are not likely to keep raising distributions. Even after the right great company has been identified, one shouldn’t overpay for it, nor should they put all their money on that stock.