I review the list of dividend increases every single week as part of my portfolio monitoring process. It is helpful to see dividend growth in action for companies I own and also for companies I may consider owning at the right valuation. I usually focus my attention on companies which have rewarded shareholders with a raise for at least ten years in a row. I ignore the rest for a few years (until they meet the required dividend streak).
In the past week, there were five dividend-paying companies that raised dividends to their shareholders that met the criteria stated above. I reviewed every company, outlining their dividend track record in terms of length and rate of change. I also reviewed the changes in fundamentals, in order to determine if the dividend growth is sustainable. Last, but not least, I also review the valuation for attractiveness. All of these points should be viewed all at once in order to get the best picture of investment reality.
The companies include:
The Southern Company (SO), through its subsidiaries, engages in the generation, transmission, and distribution of electricity. Southern Company increased its dividend for the 17th consecutive year by raising the quarterly dividend by 3.40% to 60 cents/share. The ten-year dividend growth rate is 3.70%/year.
"Southern Company has an outstanding 70-year track record of dividends and dividend growth," said Southern Company Chairman, President and CEO Thomas A. Fanning. "Today's action by the board speaks to the long-term strength of our business."
This dividend achiever earned $2.14/share in 2008 and is expected to earn $2.90/share in 2018. Therefore, the dividend increases have been supported by solid growth in earnings per share. I would have preferred if the forward dividend payout ratio was lower than 82.50%, but for a utility, a high payout is expected. Currently, the stock is selling at 15.70 times forward earnings and yields 5.30%. For retirees looking for high current income, a company like Southern may be a good choice for further research.
Sonoco Products Company (SON) manufactures and sells industrial and consumer packaging products in North and South America, Europe, Australia, and Asia. The company operates through four segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions. The company's Board of Directors declared a 5.10% increase in its quarterly dividend to $0.41 per share. This is the 36th consecutive year that Sonoco has grown common stock dividends. Over the past ten years, this dividend aristocrat has increased dividends by approximately 4.20 percent per year. Sonoco has managed to grow earnings per share from $1.73 in 2008 to an estimated $3.16/share in 2018. Currently, the stock is selling at 16.20 times forward earnings and yields 3.20%.
Parker-Hannifin Corporation (PH) manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates in two segments, Diversified Industrial and Aerospace Systems. This dividend king raised its quarterly dividends by 15.10% to 76 cents/share. This marked the 62nd consecutive annual dividend increase by Parker-Hannifin Corporation. PH fiscal year is on June 30, which is how "annual" dividend payments are calculated in this case. If you look at calendar year 12/31, you get different results. Over the past decade, the company has managed to increase its dividends at a rate of 13.20%/year. Earnings per share have increased from $4.67 in 2007 to $7.25/share for 2017. Currently, the stock is selling at 17.70 times forward earnings and yields 1.70%. I may need to put it on my list for further research.
Unilever PLC (UL)(UN) operates in the fast-moving consumer goods industry worldwide. It operates through Personal Care, Home Care, Foods, and Refreshment segments. The company raised its quarterly dividend by 8% to €0.3872 per share. In addition, it announced a new 6 billion euro share buyback program, which was announced after the sale of its Spreads division. The latest distribution hike marked the 23rd consecutive annual dividend increase for this international dividend achiever. Unilever has managed to hike its annual dividends at a rate of 7.40%/year over the past decade. The company has managed to grow its earnings per share from 1.23 euro in 2007 to 2.24 euro in 2017. Currently, the stock is slightly overvalued at 20.20 times earnings and yields 3.40%. For US investors, it is better to own the British shares (NYSE:UL), rather than the Dutch ones (NYSE:UN), since the former do not come with a dividend withholding tax at the source. That makes the British shares a better deal for retirement accounts as well. Given Unilever's desire to move its headquarters from a dual UK-Netherlands exclusively to the Netherlands, it is possible that all share classes with come with a tax withholding. There is some discussion that the Dutch will eliminate the withholding tax on dividends at the source too.
ONEOK, Inc. (OKE), through its general partner interests in ONEOK Partners, L.P., engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. The company raised its quarterly dividend to 79.50 cents/share. This is a 29.30% increase over the dividend paid during the same time last year. ONEOK has rewarded shareholders with a dividend raise for 16 consecutive years. Over the past decade, the company has managed to hike those dividends at an annual rate of 16.10%. The stock yields 5.30%.
Today, we reviewed five companies that have raised dividends for at least a decade. Each company had approved a dividend hike in the past week. We checked the latest dividend increase and also the number of consecutive annual dividend increases. We then evaluated the dividend increase relative to the history of dividend increases and fundamentals. This is a monitoring exercise that I perform on a weekly basis in order to check my portfolio holdings as well as companies I am interested in at the right valuation.
Disclosure: I am/we are long UL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.