As my current followers know, I provide predictions for and track the dividend increases for the components of the S&P High Yield Dividend Aristocrats index. This index consists of stocks that are part of the S&P 1500 index - that's the combination of the S&P 500, S&P Mid Cap 400 and the S&P Small Cap 600 indices - that have increased their regular dividends each year for the last 20 years.
But there are lots of great dividend growth stocks that aren't part of the S&P High Yield Aristocrats; I've been including these in my monthly columns as well.
Among the stocks that I track, I expect 11 members to announce dividend increases in December. Before I give you my predictions for December's increases, let's take a look at how well I did with my November predictions.
In the interest of full disclosure, I should point out that I missed dividend increases from two companies: Roper Industries (NYSE:ROP) announced a 16.7% increase to an annualized rate of $1.40; and utility South Jersey Industries (NYSE:SJI) moved its annual dividend increase up, announcing a 3.3% stock dividend to an annualized rate of $1.09.
Aside from these two companies, I did pretty well, accurately predicting 15 of 17 dividend increases (you can see the original article here):
ADP, Inc. (NASDAQ:ADP)
Prediction: 7.5 - 10.4% increase to $2.28 - $2.34
Actual: 7.5% increase to $2.28
Forward yield: 2.35%
Slower expected earnings growth in 2017 held back ADP's 42nd year of dividend growth to the low end of my prediction, well below the 10-year average of 13.1%.
Atmos Energy Corporation (NYSE:ATO)
Prediction: 4.8 - 8.3% increase to $1.76 - $1.82
Actual: 7.1% increase to $1.80
Forward yield: 2.43%
Atmos increased its dividend by nearly the same amount as its guidance for EPS growth this year and by twice as much as the 5-year average of 3.5%. This is Atmos's 29th year of dividend increases.
Becton, Dickinson & Company (NYSE:BDX)
Prediction: 10.6 - 14.4% increase to $2.92 - $3.02
Actual: 10.6% increase to $2.92
Forward yield: 1.69%
Becton Dickinson continues its tradition of double-digit dividend increases and is in line with the company's 5-year average of 10.1%, but half the expected earnings growth for this year. 2016 marks the 45th year of dividend growth for the medical instruments company.
Brown-Forman Corporation (BF-B)
Prediction: 4.4 - 8.8% increase to $0.71 - $0.74
Actual: 7.4% increase to $0.73
Forward yield: 1.56%
The company's heavy debt load likely kept this year's dividend increase from the maker of distilled beverages below the 10-year average of 9%. This is Brown-Forman's 33rd year of dividend growth.
CDK Global, Inc. (NYSEARCA:CDK)
Prediction: 11.1 - 18.5% increase to $0.60 - $0.64
Actual: 3.7% increase to $0.56
Forward yield: 0.95%
I underestimated the effect of CDK's debt load on the dividend increase this year. The small increase is disappointing, especially with the company expecting 2017's earnings growth to be more than 30% after this year's 37% EPS growth.
Prediction: 0 - 2.1% increase to $1.90 - $1.94
Actual: 1.1% increase to $1.92
Forward yield: 3.53%
The expected drop in earnings for Emerson forced the maker of industrial equipment to duplicate last year's small dividend increase. Expect more of the same going forward until the company gets its growth back on track. This is Emerson's 60th consecutive year of dividend growth.
Hormel Foods (NYSE:HRL)
Prediction: 13.8 - 20.7% increase to $0.66 - $0.70
Actual: 17.2% increase to $0.68
Forward yield: 1.92%
Hormel continues to be a dividend growth powerhouse, with its 8th straight year of double-digit growth. The company has more than tripled its dividend since 2010.
Lancaster Colony Corporation (NASDAQ:LANC)
Prediction: 9.0 - 15.0% increase to $2.18 - $2.30
Actual: 10.0% increase to $2.20
Forward yield: 1.59%
The food manufacturer continues its streak of dividend increases, with its 54th year of growth. With no debt, Lancaster Colony's earnings growth goes directly to the dividend payout, share buybacks and new acquisitions.
Matthews International Corporation (NASDAQ:MATW)
Prediction: 8.3 - 13.3% increase to $0.65 - $0.68
Actual: 13.3% increase to $0.68
Forward yield: 0.94%
Matthews' dividend increase this year was right in line with the company's 5-year average of 13%. Despite a heavy debt load, it's another nice increase from the manufacturer of memorialization products.
Mercury General Corporation (NYSE:MCY)
Prediction: 0.4 - 1.6% increase to $2.49 - $2.53
Actual: 0.4% increase to $2.49
Forward yield: 4.19%
With an expected payout ratio north of 90%, the property and casualty insurer didn't have much room to play with. This is Mercury General's 4th year of increasing the annual dividend by a penny or less.
MDU Resources Group, Inc. (NYSE:MDU)
Prediction: 1.3 - 2.7% increase to $0.76 - $0.77
Actual: 2.7% increase to $0.77
Forward yield: 2.70%
MDU's change of focus on construction materials and its regulated energy business is continuing, and it's taking a toll on earnings growth and limiting the company's dividend growth. This is the 7th year of 2-cent dividend growth.
McCormick & Company (NYSE:MKC)
Prediction: 8.1 - 12.8% increase to $1.86 - $1.94
Actual: 9.3% increase to $1.88
Forward yield: 2.02%
Despite expected year-over-year earnings growth of 19%, McCormick begins its 3rd decade of dividend growth with an increase in line with the 10-year average of 9.5%.
Prediction: 12.5 - 18.8% increase to $0.72 - $0.76
Actual: 12.5% increase to $0.72
Forward yield: 1.42%
The footwear company met the low end of my expectations, but still rewarded investors with its 7th consecutive year of double-digit increases. Nike has nearly quadrupled its dividend over the last 10 years.
Sysco Corporation (NYSE:SYY)
Prediction: 3.2 - 4.8% increase to $1.28 - $1.30
Actual: 6.5% increase to $1.32
Forward yield: 2.45%
I overestimated the impact of the food wholesaler's debt load on the dividend increase this year. Sysco is clearly interested in sharing the earnings growth with its shareholders. This is the first time in 8 years that Sysco has increased the dividend by more than 4 cents a share and the company's 41st year of dividend growth.
Universal Corporation (NYSE:UVV)
Prediction: 1.9% increase to $2.16
Actual: 1.9% increase to $2.16
Forward yield: 3.91%
No surprise here - this is the 11th year of a 4-cent dividend increase for the tobacco supplier.
The Valspar Corporation (NYSE:VAL)
Prediction: 12.1 - 15.2% increase to $1.48 - $1.52
Actual: 12.1% increase to $1.48
Forward yield: 1.45%
In what is likely its final year of operation as an independent company before being acquired by Sherwin-Williams (NYSE:SHW), Valspar once again rewarded investors with a double-digit increase, in line with the 5-year average growth rate.
Vectren Energy (NYSE:VVC)
Prediction: 2.5 - 5.0% increase to $1.64 - $1.68
Actual: 5.0% increase to $1.68
Forward yield: 3.28%
Vectren's dividend increase is twice the energy company's 5-year average of 2.5% and meets the midpoint of the expected earnings growth this year. This is Vectren's 57th year of dividend growth.
Expected Dividend Increases for December
Based on historical patterns, I expect these 11 companies to announce their annual dividend increases in December. Here are my predictions for the dividend increases:
ABM Industries (NYSE:ABM)
ABM provides facility management services, like janitorial services for commercial buildings and parking facilities management. For the last 8 years, this low margin business has supported slow dividend growth - the company has compounded dividends at around 4% over the last decade. ABM has increased its full year EPS guidance to between $1.30 and $1.35, giving the company a little bit of room for an above average increase for its 51st year of growth.
Prediction: 3.0 - 4.5% dividend increase to an annualized rate of $0.68 - $0.69.
Predicted Forward Yield: 1.52 - 1.54%
Abbott is guiding adjusted EPS to a range of $2.19 - $2.21, an increase of 2.3% from 2015's $2.15 at the mid-point. This is consistent with the increase in 3rd quarter sales year-over-year of 2.9%. Despite a modest payout ratio around 50%, the slow EPS growth should limit this year's dividend increase (Abbott's 45th) to the 8 cent per share increase in each of the last two years.
Prediction: 5.8 - 9.6% dividend increase to an annualized rate of $1.10 - $1.14.
Predicted Forward Yield: 2.84 - 2.94%
Franklin Resources (NYSE:BEN)
Asset manager Franklin Resources has seen a drop in assets under management (AUM) over the last year due to outflows of more than $85 billion, representing about 10% of the company's total AUM. This resulted in a 10% drop in full year EPS to $2.94 a share. With a current payout ratio of less than 25%, Franklin Resources has plenty of coverage for its 35th annual increase this year. I expect something in line with the 5-year average growth rate of nearly 16% with a small chance of something closer to last year's 20% dividend increase.
Prediction: 13.9 - 19.4% dividend increase to an annualized rate of $0.82 - $0.86.
Predicted Forward Yield: 2.12 - 2.22%
C. H. Robinson Worldwide (NASDAQ:CHRW)
2016 will be the 19th year of dividend growth for logistics and shipping company C. H. Robinson. Last year's dividend increase of 13.2% was well above the 5-year average of 8.59% but with expected full year earnings growth to be below 4% this year, we'll see a smaller dividend increase.
Prediction: 4.7 - 8.1% dividend increase to an annualized rate of $1.80 - $1.86.
Predicted Forward Yield: 2.40 - 2.48%
CVS Health Corporation (NYSE:CVS)
CVS Health has an excellent growth record over the 13 years that its been increasing its dividend. Over the last 5 and 10 years, the pharmacy health care company and retailer has compounded its dividend by more than 27% annually. Things may slow a bit going forward, with GAAP EPS and adjusted EPS growth expected to slow to 5.4% and 12.4%, respectively, due to slowing prescription growth. The company also expects 2017 EPS to be up about single digits, limiting dividend growth going forward. But with a payout ratio of 35%, CVS still has room for a nice increase.
Prediction: 10.6 - 17.6% dividend increase to an annualized rate of $1.88 - $2.00.
Predicted Forward Yield: 2.48 - 2.64%
After 10 years of 10%+ dividend increases, Ecolab increased its dividend by only 6.1% last year. As it begins its 3rd decade of dividend growth, the industrial water and chemical treatment company is facing flat earnings growth and investors are facing a slow dividend growth environment. With a payout ratio around 32%, we should see a dividend increase on par with last year's increase but far short of the 5-year average of 16%.
Prediction: 5.7 - 10.0% dividend increase to an annualized rate of $1.48 - $1.54.
Predicted Forward Yield: 1.27 - 1.32%
Graco Inc. (NYSE:GGG)
The manufacturer of fluid handling equipment should announce its 18th year of dividend growth in December. Graco has been struggling, with sales and earnings flat for the first 9 months of the year over 2014. While this year's dividend growth could match the 5-year growth average of 9.46%, there's a good chance of something a little smaller.
Prediction: 6.1 - 10.6% dividend increase to an annualized rate of $1.40 - $1.46.
Predicted Forward Yield: 1.72 - 1.80%
Monsanto Company (NYSE:MON)
While it waits for its acquisition by Bayer to go through, Monsanto will also announce their 18th year of dividend growth in December. The company's outstanding record of dividend growth is at risk this year, as Monsanto reported full year earnings of $4.48 a share, down 22% from 2015's $5.73 a share. Despite this, Monsanto's expectation of EPS growth in 2017 and the reasonable payout ratio of 50% gives the company room for a modest increase.
Prediction: 7.4 - 11.1% dividend increase to an annualized rate of $2.32 - $2.40.
Predicted Forward Yield: 2.27 - 2.34%
Nucor's recent dividend increases haven't been anything to write home about. Over each of the last 6 years, the steel company has increased its dividend by only a penny a share. This has resulted in 5- and 10-year dividend growth rates of less than 0.7% a year. This may be the year that the dividend increase picks up a bit - Nucor recently reported 38% year-over-year earnings growth for the first 9 months of the year. Although the company hasn't provided full year EPS guidance, Nucor should be able to cover a small increase over the current dividend of $1.50.
Prediction: 1.3 - 6.7% dividend increase to an annualized rate of $1.52 - $1.60.
Predicted Forward Yield: 2.47 - 2.60%
SEI Investments Company (NASDAQ:SEIC)
Unlike Franklin Resources, SEI has seen a small increase in assets under management, leading to a 1.4% increase in EPS in the first 9 months of the year. While encouraging, this small increase won't be enough to maintain the 10% average dividend growth over the last 5 years. SEI's semi-annual dividend payment will be buoyed by a current payout ratio below 30% and should be in line with last year's 8.3% increase.
Prediction: 5.8 - 9.6% dividend increase to an annualized rate of $0.55 - $0.57.
Predicted Forward Yield: 1.16 - 1.20%
Stryker Corporation (NYSE:SYK)
Medical device manufacturer Stryker is projecting a 12.3% increase in adjusted EPS from 2015 to 2016. This should continue to power the strong dividend growth from the company. Annual dividend growth has averaged nearly 30% over the last decade and nearly 20% over the last 5 years. I expect to see another good increase from this future S&P 500 Dividend Aristocrat.
Prediction: 11.8 - 19.7% dividend increase to an annualized rate of $1.70 - $1.82.
Predicted Forward Yield: 1.47 - 1.58%
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Disclosure: I am currently long HRL and may take a position in any of the stocks mentioned in this article in the near future.
Disclosure: I am/we are long HRL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.