I monitor dividend increases for stocks on my watch list of dividend growth stocks to identify candidates for further analysis. Companies that regularly increase dividends show confidence in future earnings growth potential. In the past two weeks, 10 companies on my watch list decided to increase their dividends, including three of my DivGro holdings. The following table presents a summary.
The table is sorted by percentage increase, %Incr. Dividends are annualized and in US$, unless otherwise indicated. Yield is the new dividend yield for the market close Price on the date listed. Yrs are years of consecutive dividend increases, while 5-yr DGR is the compound annual growth rate of the dividend over a 5-year period. 1-yr %Incr is the percentage increase from the year-ago dividend. (Some companies increase their dividends more than once a year, so this puts the most recent dividend increase in context).
|Summary of Dividend Increases: June 5-16, 2017|
|Previous Post: 4 Dividend Increases: May 29-June 2, 2017|
• UnitedHealth Group Inc. (NYSE:UNH)
Founded in 1974 and based in Minnetonka, Minnesota, UNH is a diversified health and well-being company with core capabilities in clinical expertise, advanced technology and data and health information. The company provides medical benefits to customers in the United States and more than 125 other countries. UNH operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx.
On Wednesday, June 7, the company increased its quarterly dividend by 20.00% to 75¢ per share. The dividend is payable on June 27 to shareholders of record on June 19. UNH will trade ex-dividend on June 15.
• Horizon Bancorp (NASDAQ:HBNC)
HBNC provides a range of banking services in Northern and Central Indiana and Southwestern and Central Michigan. The company offers commercial and retail banking services, corporate and individual trust and agency services and other services incident to banking. Its loan portfolio consists of commercial loans, real estate loans, mortgage warehouse loans and consumer loans. HBNC was founded in 1873 and is headquartered in Michigan City, Indiana.
The company's board of directors approved an increase in the quarterly dividend of 18.18% to 13¢ per share. All shareholders of record on July 7 can expect the dividend to be paid on July 21.
• United Technologies (NYSE:UTX)
UTX, based in Hartford, Connecticut, provides a broad range of high-technology products and services to the building and aerospace industries. Products include Pratt & Whitney aircraft engines, space propulsion systems, and industrial gas turbines; Carrier heating, air conditioning, and refrigeration; Otis elevator, escalator and people movers; Hamilton Sundstrand aerospace and industrial products; Sikorsky helicopters and International Fuel Cells power systems.
Recently, the board of directors of UTX declared a quarterly dividend of 70¢ per share. The new dividend represents an increase of 6.06%. The dividend is payable on September 10 to shareholders of record at the close of business on August 18.
• Alexandria Real Estate Equities Inc. (NYSE:ARE)
ARE is a self-administered and self-managed REIT (real estate investment trust) engaged in the ownership, operation, management, development, acquisition, and redevelopment of properties for the life sciences industry. Its properties consist of buildings containing scientific research and development laboratories, and other improvements. ARE was founded in 1993 and is based in Pasadena, California.
The board of directors of ARE has declared a quarterly dividend of 86¢ per share. The new dividend is 3.61% above the prior dividend of 83¢ per share. The dividend is payable on July 17 to shareholders of record on June 30. ARE will trade ex-dividend on June 28.
• Target Corporation (NYSE:TGT)
TGT sells a range of general merchandise and discount food products in about 1,800 stores in the United States. The company offers both everyday essentials and fashionable, differentiated merchandise at discount prices. TGT operates as a single business segment and has a fully integrated online business, Target.com. TGT was founded in 1902 and is headquartered in Minneapolis, Minnesota.
Recently, the board of directors of TGT declared a quarterly dividend of 62¢ per share. The new dividend represents an increase of 3.33%. All shareholders of record on August 16 will receive the new dividend on September 10.
• National Fuel Gas (NYSE:NFG)
Founded in 1902 and based in Williamsville, New York, NFG is engaged in the production, gathering, transportation, distribution, and marketing of natural gas. It also develops and produces oil reserves, primarily in California. As of September 30, 2014, NFG owned approximately 93,000 acres of timber property and manages an additional 3,000 acres of timber cutting rights.
Recently, the board of directors of NFG declared a quarterly dividend of 41.5¢ per share. The new dividend represents an increase of 2.47%. The dividend is payable on July 14 to shareholders of record on June 30.
• Caterpillar Inc. (NYSE:CAT)
CAT was founded in 1925 and is headquartered in Peoria, Illinois. The company manufactures construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. CAT provides technology for construction, transportation, mining, forestry, energy, logistics, electronics, financing and electric power generation.
On June 14, the board of directors declared a quarterly dividend of 78¢ per share. The new dividend represents an increase of 1.30%. The new dividend is payable on August 19 to shareholders of record on June 20. The ex-dividend date will be June 16.
• Universal Health Realty Income Trust (NYSE:UHT)
UHT is a publicly owned real estate investment trust. The company invests in healthcare and human service related facilities in the United States, including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub-acute care facilities, surgery centers, childcare centers and medical office buildings. UHT was founded in 1986 and is based in King of Prussia, Pennsylvania.
On June 7, the company declared a dividend of 66¢ per share. The new dividend represents a 0.76% increase. The dividend is payable June 30, with an ex-dividend date of June 15.
• W.P. Carey, Inc. (NYSE:WPC)
Founded in 1973 and based in New York, WPC is an independent equity REIT (real estate investment trust) engaged in providing long-term sale-leaseback and build-to-suit financing for companies. WPC primarily invests in commercial properties that are generally triple-net leased to single corporate tenants, including office, warehouse, industrial, logistics, retail, hotel, R&D and self-storage properties.
The company's board of directors approved an increase in the quarterly dividend of 0.50% to 100¢ per share. The new dividend is payable on July 14 to shareholders of record on June 30. The ex-dividend date will be June 28.
• Realty Income Corporation (NYSE:O)
Known as The Monthly Dividend Company®, O is an equity real estate investment trust dedicated to providing shareholders with dependable monthly income. The company earns income from nearly 4,500 properties owned under long-term lease agreements with regional and national retail chains and other commercial tenants. Realty Income Corporation was founded in 1969 and is based in Escondido, California.
The company increased its monthly dividend by 0.24%, from 21.1¢ per share to 21.15¢ per share. All shareholders of record on July 3 can expect the dividend to be paid on July 14.
Please note that I'm not recommending any of these stocks. Readers should do their own research on these companies before buying shares.
As a bonus, I'm including F.A.S.T. Graphs charts for two of this week's dividend raisers, UNH, TGT, and O, which happen to be stocks I already own.
In these charts, the black line represents the share price and the blue line represents the calculated P/E multiple at which the market has tended to value the stock over time. The orange line is the primary valuation reference line. It is based on one of three valuation formulas depending on the earnings growth rate achieved over the time frame in question. (The adjusted earnings growth rate represents the slope of the orange line in the chart).
First, let's look at UNH. According to F.A.S.T. Graphs, an investment in UNH in January 2007 would have returned 12.9% on an annualized basis (with dividends included).
UNH's price line is well above the stock's normal P/E ratio line (in blue) and the primary valuation line (in orange). Based on F.A.S.T. Graphs' price-earnings correlation analysis, the stock is trading at a premium to fair value.
Morningstar's fair value estimate is $130, also indicating that UNH is trading at a premium to fair value. On the other hand, Finbox.io's fair value estimate is $182.61, based on the average of six different valuation models:
Notice that the average of 23 Wall Street analyst targets is $191.65, suggesting an upside of 5.5%.
Clearly, there is disagreement on UNH's fair value. I'm working on my next DivGro Pulse article in which I'll provide my own fair value estimates for every stock in my portfolio, including UNH.
TGT's price line is below its normal P/E ratio and the primary valuation line, so the stock is trading at a discount to fair value. Morningstar's fair value is $58.00 and Finbox.io's fair value is $69.17, so there is a consensus that TGT is trading below fair value.
An investment in TGT in January 2007 would have returned only 1.4% on an annualized basis (with dividends included). After Friday's price decline, TGT is my poorest performing stock out of 51 positions.
Finally, let's look at O, a REIT (real estate investment trust):
In the case of REITs, I use AFFO (adjusted funds from operations) instead of earnings. O's price line is just above its normal P/AFFO ratio and well above the primary valuation line, indicating that O is trading above fair value.
Morningstar has their fair value estimate of O under review, but Finbox.io lists a fair value estimate of $53.40, suggesting the stock is overvalued by about 6%. Notice that the average of 26 Wall Street analyst targets is $59.53, higher than O's stock price of $56.67:
According to F.A.S.T. Graphs, an investment in O in January 2007 would have returned 10.2% on an annualized basis (with dividends included).
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Disclosure: I am/we are long UNH, TGT, O.
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.