My regular followers know that I track the dividend increases of a variety of long-term dividend growth companies. I usually publish my predictions monthly. However, because there were so many companies that I expected to announce increases, I decided to break up the February article into two parts, covering 16 companies in the first half of February and 12 in the second half. Three of these companies haven't announced their increases yet, and of the remaining 13 companies, I accurately predicted 10, underestimated 2 and overestimated 1 of them based on their historical dividend growth records and current EPS growth. You can see the original article here.
Of the 12 companies that I expected to announce dividends in the 2nd half of the month, four of them reported their increases earlier than I expected. Sherwin-Williams (NYSE:SHW) announced a 1.2% increase from $3.36 to $3.40 and has a forward yield of 1.1%. Asset manager T. Rowe Price Group (NASDAQ:TROW) raised its dividend by 5.6% to $2.28 and has a forward yield of 3.2%. Coca-Cola's (NYSE:KO) 55th year of dividend growth brought a 5.7% increase to an annual rate of $1.48; the company's forward yield is 3.6%. Finally, National Health Investors (NYSE:NHI) announced a 5.5% dividend increase to $3.80; the REIT has a forward yield of 5.1%.
Before I give you my predictions for the remaining 8 dividend increases in the second half of February, let's take a look at the predictions from the first half of the month:
Analog Devices (NASDAQ:ADI)
- Prediction: 4.8-6.7% increase to $1.76-1.80
- Actual: 6.7% increase to $1.80
- Forward yield: 2.18%
A 3% drop in earnings in 2016 means Analog Devices' 14th year of dividend growth was below the 10-year average of 11%, but towards the top end of my expectations.
Archer Daniels Midland (NYSE:ADM)
- Prediction: 5.0-8.3% increase to $1.26-1.30
- Actual: 6.7% increase to $1.28
- Forward yield: 2.86%
Archer Daniels Midland's 56th year of dividend growth fell victim to a 28% drop in earnings from the prior year. The 6.7% increase was roughly half the 5-year average of 13%. The company's current payout ratio is 60% - right where I expected it to be.
Bemis Company (NYSE:BMS)
- Prediction: 3.4-5.2% increase to $1.20-1.22
- Actual: 3.4% increase to $1.20
- Forward yield: 2.47%
Packaging company Bemis decided to continue its 4-cent annual dividend increases for the 7th year in a row, despite accelerating earnings. This is Bemis' 34th year of dividend growth.
Church & Dwight (NYSE:CHD)
- Prediction: 5.6-8.5% increase to $0.75-0.77
- Actual: 7.0% increase to $0.76
- Forward Yield: 1.53%
Church & Dwight, owner of the Arm & Hammer cleaning brand, increased its dividend right in line with what I expected. This is the consumer goods company's 21st year of dividend growth.
Eversource Energy (NYSE:ES)
- Prediction: 5.1-7.3% increase to $1.87-1.91
- Actual: 6.7% increase to $1.90
- Forward yield: 3.38%
Energy utility Eversource serves the Northeastern United States. Its 19th year of dividend growth is in line with its announced long-term objective of between 5% and 7%.
Essex Properties Trust (NYSE:ESS)
- Prediction: 10.9-14.1% increase to $7.10-7.30
- Actual: Deferred to 2nd half of February
I had expected Essex Properties to announce its dividend increase in the first half of the month, but it looks like the announcement will come out after President's Day. My prediction above stands.
Genuine Parts Company (NYSE:GPC)
- Prediction: 2.7-5.7% increase to $2.68-2.76
- Actual: Deferred to 2nd half of February
Genuine Parts should announce its annual dividend increase in conjunction with the company's earnings release on February 21st.
Jack Henry & Associates (NASDAQ:JKHY)
- Prediction: 14.2-21.4% increase to $1.28-1.36
- Actual: 10.7% increase to $1.24
- Forward yield: 1.34%
I had expected the provider of business services for small and mid-sized banks to grow its dividend in line with the 10-year average of 17%. Although disappointing, Jack Henry's 14th year of dividend growth still brings a double-digit increase.
- Prediction: 4.5%-8.1% increase to $4.64-4.80
- Actual: 5.9% increase to $4.70
- Forward yield: 2.57%
A company with one of the longest dividend growth streaks out there, 3M's 58th year of dividend growth was lower than the 10-year average of 9%, but right in the middle of the expected 2017 EPS growth of about 4-8%.
Next Era Energy (NYSE:NEE)
- Prediction: 6.9-9.2% increase to $3.72-3.80
- Actual: 12.9% increase to $3.93
- Forward yield: 3.10%
This is NextEra's 2nd year of 13% dividend increases; in my research, I missed the company's statement that it intends to grow the dividend by about 13% a year through 2018. If that's true, the company's forward yield including the 2018 increase would be 3.5%. This is NextEra's 23rd year of dividend growth.
Nu Skin Enterprises (NYSE:NUS)
- Prediction: 1.4-2.8% increase to $1.44-1.46
- Actual: 1.4% increase to $1.44
- Forward yield: 2.25%
Nu Skin continues its record of slow dividend growth - this is the company's 3rd year of 2 cent annual dividend growth and 17th consecutive year of dividend growth overall.
Owens & Minor (NYSE:OMI)
- Prediction: 1.0-2.0% increase to $1.03-1.04
- Actual: 1.0% increase to $1.03
- Forward yield: 2.95%
The healthcare logistics and supplies company continues to see stagnating earnings growth. This is Owens & Minor's 3rd year of a 1-cent increase in the annual dividend.
- Prediction: 3.4-5.4% increase to $3.06-3.12
- Actual: 7.0% increase to $3.22
- Forward yield: 2.98%
The soft drinks and snack company surprised me with a dividend increase slightly higher than earnings growth. This is PepsiCo's 45th year of dividend growth.
- Prediction: 6.9-10.3% increase to $0.62-0.64
- Actual: Deferred to 2nd half of February
I had expected an announcement before the 20th, but it looks like this manufacturer of generic medicines should announce its new payout rate around February 25th.
Thomson Reuters (NYSE:TRI)
- Prediction: 1.5-2.9% increase to $1.38-1.40
- Actual: 1.5% increase to $1.38
- Forward yield: 3.07%
Financial information and news business Thomson Reuters continued its streak of minimal dividend growth. This is the company's 24th year of dividend growth and the 5th straight year of 2-cent dividend increases.
WGL Holdings, Inc. (NYSE:WGL)
- Prediction: 3.6-5.6% increase to $2.02-2.06
- Actual: 4.6% increase to $2.04
- Forward yield: 2.46%
For its 41st year of payout increases, gas utility WGL Holdings raised its dividend by 4.6% - exactly the company's 5-year average. This will be WGL's last dividend increase, as the company is currently in the process of being acquired by Canadian company AltaGas.
Expected Dividend Increases for the 2nd Half of February
Here are my predictions for the 8 dividend increases I expect in the second half of February:
Albemarle is a producer of specialty chemicals and has a large presence in the lithium market. Despite very nice compounded dividend growth records (12.7% over the last 5 years), the dividend increases in 2015 and 2016 were both below 6%, driven by falling earnings. This year, Albemarle is looking at another year of falling earnings, guiding full-year EPS to a midpoint of $3.50, down 11% from 2016. This will put downward pressure on the dividend growth rate once more, although with a payout ratio of less than 40%, the company will still reward investors with its 24th annual dividend increase.
- Prediction: 4.9-6.2% increase to $1.28-1.30
- Predicted Forward Yield: 1.39-1.41%
Best Buy (NYSE:BBY)
Electronics retailer Best Buy will start its 15th straight year of dividend growth in the latter half of February. The company has a stellar record of dividend increases, with a 10-year growth average of more than 12%. Even better, in each of the last two years, Best Buy has increased its payout by more than 20% to the current $1.12 a share. The company is continuing to see nice EPS growth over the first 3 quarters of the fiscal year and is guiding full-year EPS to between $3.54 and $3.59, up 28.4% year over year. I'm looking for the third straight 20%+ dividend increase this year.
- Prediction: 21.4-25.0% increase to $1.36-1.40
- Predicted Forward Yield: 3.01-3.10%
McGrath RentCorp (NASDAQ:MGRC)
McGrath RentCorp provides business-to-business rental services of modular buildings, electronic equipment and containment tanks. An eclectic combination, to be sure, but one that's been good for 24 years of dividend growth. The only downside has been the very slow dividend growth since 2011. Over the last 7 years, McGrath has grown its annual dividend by 2 cents a year. With 2016 EPS up slightly over the first three quarters of the fiscal year, there's a small chance of a slightly higher increase this year.
- Prediction: 2.0-3.9% increase to $1.04-1.06
- Predicted Forward Yield: 2.68-2.73%
Old Republic International Corporation (NYSE:ORI)
The property and casualty insurer had a good year for earnings growth with 2016 EPS up 9.5% to $1.62. Old Republic has a poor record of dividend growth, increasing the payout by a penny per share annually since 2009, giving the company a 5-year compounded growth rate of less than 1.4% and a 10-year compounded growth rate of less than 2.5%. The nice earnings growth means the potential for a larger increase this year (Old Republic's 36th straight year), but I don't think it will be anything to write home about.
- Prediction: 1.3-4.0% increase to $0.76-0.78
- Predicted Forward Yield: 3.68-3.78%
Ross Stores (NASDAQ:ROST)
The discount retailer and owner of the Ross Dress for Less and dd's DISCOUNTS stores continues to grow rapidly, opening another 90 stores in the last year to bring the total number of locations to more than 1,500 stores across both chains. Earnings have grown as well, with EPS over the first 9 months of the year up 11% to $2.06. For the full year, Ross Stores has provided earnings guidance of around $2.80 per share. This is an increase of 11.5% over last year's EPS of $2.51.
The company has an outstanding record of dividend growth - it has compounded dividends at least 10% a year since 1994. Over the last 5 years, its dividend growth rate is nearly 20% annually. Ross' 23rd year of dividend growth is likely to be an increase of between 10% and 15% above the current 54 cent payout.
- Prediction: 11.1-16.7% increase to $0.60-0.63
- Predicted Forward Yield: 0.87-0.92%
SCANA provides electrical and natural gas utility operations to customers in South Carolina, North Carolina and Georgia. The company is seeing EPS growth of about 5.4% in the first 9 months of the year. It generally declines to provide guidance for future earnings due to the unpredictability of the weather, which is a key driver of EPS.
SCANA has a very modest dividend growth rate, with 5 and 10-year compounded averages below 3.5%. Last year's dividend increase of 5.5% was the largest for the company since 2006. Based on the year-to-date EPS growth, I expect SCANA's 17th year of dividend growth to be about the same as last year's.
- Prediction: 5.2-7.0% increase to $2.42-2.46
- Predicted Forward Yield: 3.69-3.75%
Telephone & Data Systems (NYSE:TDS)
Telephone & Data Systems operates its U.S. Cellular and TDS Telecom subsidiaries, which provide communications services to 6 million customers across the United States. The company has increased dividends for 42 years, and in general, tends to grow its dividend by about 4-6% annually. This year, TDS has taken special charges for U.S. Cellular, and it is expecting earnings to be down about 75% year over year. With this dramatic drop in EPS, I expect TDS's increase this year to be smaller than usual
- Prediction: 1.4-3.4% increase to $0.60-0.612
- Predicted Forward Yield: 1.88-1.92%
Investors in Wal-Mart, the world's largest retailer, have seen dividend growth slow to a crawl over the last three years. Since 2013, it has grown its quarterly dividend by only a penny a share, resulting in payout grown around 2%. This is below the 5-year average of 6.5% and the 10-year average of 11.6%. The company's current dividend of $2.00 results in a payout ratio of slightly less than 50%, so Wal-Mart can cover another dividend increase - its 43rd - this year; but with projected 2017 adjusted EPS down about 7% from last year, I wouldn't be surprised with another year of slow dividend growth.
- Prediction: 2.0-4.0% increase to $2.04-2.08
- Predicted Forward Yield: 2.94-3.00%
If you enjoyed this article and would like to find out how my predictions turn out at the end of February, please follow me by clicking the "Follow" button next to my name at the top of the article. Thanks!
Disclosure: I am currently long ADM, ALB, ROST and TROW. Furthermore, I may take a position in any of the stocks mentioned in this article in the near future.
Disclosure: I am/we are long ALB, ADM, ROST, TROW.
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.