There Are Dividend Growth Companies Actually Increasing Their Dividend Growth Rates

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Includes: AIZ, APOG, ATO, BKH, BMRC, CSL, CTAS, CTWS, CWT, DDS, DTE, ED, EIX, EL, EMCI, ENH, ESS, FDX, FFIN, GGG, HEP, HIFS, HON, HPQ, HUBB, INDB, ISCA, LKFN, LYBC, MAA, MATW, MDNB, MGEE, MSEX, NEE, NI, NNN, PNW, POOL, PPG, RAI, RGCO, SCG, SHW, SKT, SON, SPGI, SR, SRCE, SSB, SWX, SYBT, TR, TWX, VVC, WLTW, WST
by: Accelerating Dividends

Summary

I wanted to find whether there were any dividend growth companies whose dividend growth was actually increasing.

Out of 813 dividend growth companies, only 57 companies were identified as increasing their dividend growth year over year.

After assessing the 57 companies, only six were retained with Tanger Factory Outlet Centers Inc. emerging as the best choice right now.

Rising dividend, increasing dividend growth, growth, dividends, positive trend

Source: KANNAWAY

INTRODUCTION

I love dividends! I love receiving them. I love investing them. Most importantly, I love seeing them grow!

Have you been wondering if there are any companies whose dividend growth is actually increasing? I asked that question. Your usual stalwarts like Johnson and Johnson (NYSE:JNJ) or Coca-Cola (NYSE:KO), among many others, have decreasing dividend growth, which is less desirable than even steady dividend growth.

There are 813 dividend growth companies found in David Fish's Dividend Champion, Contender, Challenger list. In this article, I will present companies that I found in the list with increasing dividend growth that may be of interest to dividend growth investors.

FINDING THESE GEMS

I would call a dividend growth company whose dividend growth rate is increasing as a gem because they are rare. What do I mean by increasing dividend growth rate. I am specially looking for the 1 year to be greater than the 3-year which is to be greater than the 5-year which is to be greater than the 10-year or 1 > 3 > 5 > 10. Below is the formula I used to find these gems within the CCC list. Here are the instructions so you can do it too:

Insert a column beside column AP (to the right of the 10 year DGR) Copy the formula below:

=IF(AM7<AN7,"No",IF(AN7<AO7,"No",IF(AO7<AP7,"No","Yes")))

Click cell AQ7 Paste the formula into the cell Copy and drag the formula to the bottom.

Now you are going to look for the cells that contain "yes," as that means that the dividend growth rate of the company is increasing year over year.

The following table presents the companies whose dividend growth rate is increasing. The companies are sorted alphabetically by ticker symbol.

Company

Ticker

Sector

CCC Yrs

Div. Yield

DGR 1yr

DGR 3yr

DGR 5yr

DGR 10yr

Assurant Inc.

(NYSE:AIZ)

Financials

13

2.14

48.2

28.4

23.7

18.2

Apogee Enterprises Inc.

(NASDAQ:APOG)

Materials

6

0.98

13.6

11.6

8.9

6.7

Atmos Energy

(NYSE:ATO)

Utilities

33

2.30

7.5

6.4

4.6

3.1

Black Hills Corp.

(NYSE:BKH)

Utilities

47

2.74

3.7

3.4

2.8

2.4

Bank of Marin Bancorp

(NASDAQ:BMRC)

Financials

12

1.58

13.3

11.8

9.4

8.4

Carlisle Companies

(NYSE:CSL)

Industrials

40

1.36

18.2

15.7

13.2

9.6

Cintas Corp.

(NASDAQ:CTAS)

Industrials

34

1.13

26.7

20.0

19.8

14.3

Conn. Water Service

(NASDAQ:CTWS)

Utilities

47

1.98

6.2

4.4

3.5

2.7

California Water Service

(NYSE:CWT)

Utilities

50

1.96

3.0

2.5

2.3

1.8

Dillard's Inc.

(NYSE:DDS)

Consumer Discretionary

6

0.51

12.0

10.1

9.2

5.8

DTE Energy Company

(NYSE:DTE)

Utilities

8

3.26

10.0

6.5

6.1

4.1

Consolidated Edison

(NYSE:ED)

Utilities

43

3.58

3.1

2.9

2.2

1.5

Edison International

(NYSE:EIX)

Utilities

14

2.72

15.0

12.5

8.4

5.9

Estee Lauder Companies Inc.

(NYSE:EL)

Consumer Discretionary

7

1.64

21.6

18.8

18.8

17.4

EMC Insurance Group Inc.

(NASDAQ:EMCI)

Financials

7

3.02

12.5

10.8

8.7

6.1

Endurance Specialty Holdings Ltd.

(NYSE:ENH)

Financials

6

1.64

8.6

5.9

4.8

4.3

Essex Property Trust

(NYSE:ESS)

REITs

23

2.98

11.0

9.7

8.5

6.5

FedEx Corp.

(NYSE:FDX)

Industrials

15

0.82

44.4

30.9

20.6

14.0

First Financial Bankshares Inc.

(NASDAQ:FFIN)

Financials

6

1.64

13.3

10.1

7.8

5.8

Graco Inc.

(NYSE:GGG)

Industrials

20

1.59

10.0

9.7

9.5

8.6

Holly Energy Partners LP

(NYSE:HEP)

Energy

13

6.79

7.0

6.4

6.2

6.0

Hingham Institution for Savings

(NASDAQ:HIFS)

Financials

9

0.68

7.0

5.1

4.5

4.3

Honeywell International Inc.

(NYSE:HON)

Industrials

6

2.14

14.1

13.4

12.3

10.4

HP Inc.

(NYSE:HPQ)

Information Tech

7

3.06

48.2

23.5

21.1

12.5

Hubbell Inc.

(NYSE:HUBB)

Industrials

9

2.36

15.6

11.9

11.2

7.0

Independent Bancorp MA

(NASDAQ:INDB)

Financials

6

1.78

10.8

9.1

8.5

6.0

International Speedway Corp.

(NASDAQ:ISCA)

Consumer Discretionary

11

1.11

57.7

23.1

17.9

17.8

Lakeland Financial Corp.

(NASDAQ:LKFN)

Financials

5

1.67

15.3

13.8

11.9

8.3

Lyons Bancorp Inc.

(OTCPK:LYBC)

Financials

16

2.50

23.4

17.7

15.9

11.0

Mid-America Apartment Communities Inc.

(NYSE:MAA)

REITs

7

3.39

6.5

5.7

5.5

3.3

Matthews International

(NASDAQ:MATW)

Consumer Discretionary

22

1.03

14.8

14.8

13.4

11.7

Minden Bancorp Inc.

(OTCPK:MDNB)

Financials

15

2.78

27.3

18.1

16.8

10.8

MGE Energy Inc.

(NASDAQ:MGEE)

Utilities

41

1.92

4.3

4.0

3.6

2.7

Middlesex Water Co.

(NASDAQ:MSEX)

Utilities

44

2.24

4.0

2.4

2.0

1.7

NextEra Energy

(NYSE:NEE)

Utilities

23

3.00

13.0

9.6

9.6

8.8

NiSource Inc.

(NYSE:NI)

Utilities

6

2.93

24.4

18.5

12.1

5.9

National Retail Properties

(NYSE:NNN)

REITs

27

4.02

4.1

3.6

3.1

3.0

Pinnacle West Capital Corp.

(NYSE:PNW)

Utilities

5

3.19

5.0

4.7

3.8

2.3

Pool Corp.

(NASDAQ:POOL)

Consumer Discretionary

6

1.08

19.0

17.7

16.7

11.4

PPG Industries Inc.

(NYSE:PPG)

Materials

45

1.56

10.2

8.8

6.7

5.0

Reynolds American Inc.

(NYSE:RAI)

Consumer Staples

13

3.31

28.9

13.0

10.4

9.9

RGC Resources Inc.

(NASDAQ:RGCO)

Utilities

14

3.30

5.2

4.0

3.6

3.0

SCANA Corp.

(NYSE:SCG)

Utilities

17

3.53

5.1

4.0

3.3

3.2

Sherwin-Williams Co.

(NYSE:SHW)

Materials

39

1.10

25.4

18.9

18.1

12.9

Tanger Factory Outlet Centers

(NYSE:SKT)

REITs

23

3.84

15.1

12.5

9.7

6.5

Sonoco Products Co.

(NYSE:SON)

Materials

34

2.78

6.6

5.9

4.9

4.3

S&P Global Inc.

(NYSE:SPGI)

Financials

44

1.27

9.1

8.7

7.6

7.1

Spire Inc.

(NYSE:SR)

Utilities

14

3.19

6.5

4.9

3.9

3.3

1st Source Corp.

(NASDAQ:SRCE)

Financials

29

1.54

7.3

5.2

4.4

4.0

South State Corp.

(NASDAQ:SSB)

Financials

6

1.47

23.5

17.8

12.2

6.5

Southwest Gas Corp.

(NYSE:SWX)

Utilities

11

2.31

11.1

10.9

10.7

7.9

Stock Yards Bancorp Inc.

(NASDAQ:SYBT)

Financials

7

1.72

12.0

9.9

8.3

6.5

Tootsie Roll Industries

(NYSE:TR)

Consumer Staples

50

0.92

9.0

7.9

5.8

4.4

Time Warner Inc.

(NYSE:TWX)

Consumer Discretionary

7

1.64

15.0

13.4

12.3

10.3

Vectren Corp.

(NYSE:VVC)

Utilities

57

2.98

5.2

4.4

3.2

2.8

Willis Towers Watson plc

(NASDAQ:WLTW)

Industrials

6

1.65

42.3

16.4

11.0

6.6

West Pharmaceutical Services

(NYSE:WST)

Health Care

24

0.63

8.9

8.4

7.3

7.2

Source: David Fish

It may surprise you to learn that there are 57 companies in that list! To get a better sense of the type of companies increasing their dividend growth rates, let's take a look at sector representation. The following graph demonstrates the sector representation.

Source: David Fish, chart created by the author

As the above graph demonstrates, the majority of these 57 companies are found within two sectors. The financial sector makes up 25% of the 57 companies, while the utilities make up another 30%. This shows that companies with increasing dividend growth are highly concentrated within certain sectors.

Now that I have identified 57 companies with increasing dividend growth rates, I want to narrow down the selection further to find the best choices by filtering these companies using general dividend growth investors' criteria.

FILTERING BY DIVIDEND YIELD

Many of the 57 companies simply do not have current dividend yields that are desirable or meet the income requirement of dividend growth investors. The following graph shows the distribution of stocks based on their current yield.

Source: David Fish, chart created by the author

Out of the 57 stocks found, 28 or nearly half have dividend yields less than 2%. These low yielding stocks may never fulfill the income requirement of investors even after a significant drop. Take for example FDX. Its current dividend yield is 0.82% with an annual payout of $1.60 per share when shares are trading at $195.65. Even if the stock were to fall 20%, it would mean that the dividend yield would rise 1.00%. If the stock was to fall 50%, it would translate into a dividend yield of 1.64%. Is that likely to happen? Probably not. That is why these stocks are likely not going to be found on a wait list by dividend growth investors, because the yield simply may never reach their requirements.

Each dividend growth investor has their own cut offs for what they consider an acceptable yield, but it appears that most seek at least 2.5%. If we use this as a minimum requirement, it would eliminate DDS, WST, HIFS, FDX, TR, APOG, MATW, POOL, SHW, ISCA, CTAS, SPGI, CSL, SSB, SRCE, PPG, BMRC, GGG, ENH, FFIN, TWX, EL, WLTW, LKFN, SYBT, INDB, MGEE, CWT, CTWS, HON, AIZ, MSEX, ATO, SWX and HUBB.

FILTERING BY DIVIDEND GROWTH

What is considered acceptable dividend growth by dividend growth investors is a personal choice, but most appear to look for a minimum of 6% growth. In the list of companies remaining, there are some that offer a dividend yield of 2.5% or more, but the dividend growth is low. When I speak of low growth, I speak of the most recent dividend increase being about 6% while the years prior were less than this (example 10-year DGR of 2-3%). 10 years of 2-3% is very low growth and although the 1, 3, and 5 year rates are improving, it is again only recent and could slip back down. The stocks being filtered out for low growth include VVC, SCG, RGCO, PNW, NNN, MSEX, MGEE, ED, SON, SR and BKH. For your information, most of these stocks are found within the utilities sector.

FILTERING FOR DIVIDEND GROWTH INTERUPTIONS

Many dividend growth investors have rules whereby when a company freezes or cuts its dividend they sell it. Some dividend growth investors see freezes as a warning sign. Others see dividend cuts or freezes as a negative precedent that could be repeated in the future and impact their passive income flow. As a result, some dividend growth investors would never consider these companies if they have frozen their dividends in the past. For this filter, I will filter out any company that has frozen its dividend in the past 10 years. Companies with this kind of history include DTE, EIX, ESS, HEP, and LYBC.

FILTERTING BY PAYOUT RATIO

A company whose payout ratio is too high risks freezing or cutting the dividend unless the growth of the company can match. Also, a high payout ratio may limit future dividend growth. Many dividend growth investors consider anything above 75% to be the upper limit. Using this criterion, MAA and MDNB would be filtered out. The payout ratio cannot be calculated for MDNB as there are no financial statements past 2013 available on multiple websites.

The question now remains: Who is left on the list? Here is a list of the 6 companies that have made the cut to this point.

Ticker

Sector

CCC Yrs

Div. Yield

DGR 1yr

DGR 3yr

DGR 5yr

DGR 10yr

Payout Ratio

EMCI

Financials

7

3.02

12.5

10.8

8.7

6.1

35.45%

HPQ

Information Tech

7

3.06

48.2

23.5

21.1

12.5

32.99%

NEE

Utilities

23

3.00

13.0

9.6

9.6

8.8

55.68%

NI

Utilities

6

2.93

24.4

18.5

12.1

5.9

62.87%

RAI

Consumer Staples

13

3.31

28.9

13.0

10.4

9.9

41.41%

SKT

REITs

23

3.84

15.1

12.5

9.7

6.5

62.69%

Source: David Fish, Old School Value

Now that we are down to 6 stocks, let's take a look at and see if any are presently a good value. For this, I am going to look at analysts' forecasts.

SKT

HPQ

RAI

NI

NEE

EMCI

Source: CNN Money

Based on the current stock prices of each of the six stocks, SKT presents the best value as the range of price estimates for the stock are all above the current price. This suggests that SKT is currently undervalued. This next best value would be NI. The worst value at the moment is RAI, where the current price is above all price estimates, suggesting that the stock is overvalued.

CONCLUSION

This analysis sought to find companies whose dividend growth has been increasing and would meet the criteria of most dividend growth investors. A total of 57 companies out of 813 were found to have increasing dividend growth rates. Out of those 57, only 6 remain as meeting a 2.5% dividend yield or greater, dividend growth rate above 6%, no dividend cuts or freezes within the past 10 years and a payout ratio below 75%. This goes to show that it is difficult to find these kinds of dividend growth gems. There is obviously other due diligence that will be required before investing in any of these stocks.

It is disappointing that so few stocks have increasing dividends that meet dividend growth investors' criteria. It means that many investors will have to invest in companies with a declining dividend growth trend and will likely have to adapt to declining dividend growth over time.

Based on this analysis however, I would consider SKT to be the best pick right now in order to accelerate the dividends of ones DGI portfolio.

I hope you enjoyed this article. If you want to be notified when my future articles are published, please consider following me as a Seeking Alpha author by clicking the "Follow" button at the top of the article beside my name Accelerating Dividends. Thanks for reading.

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SKT over the next 72 hours.

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.

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