Those of you who follow this series of articles know that I track the dividend increases of a variety of long-term dividend growth companies. Back at the end of April, I provided predictions for 13 dividend growth companies that have historically announced annual payout increases in May.
I'll point out two dividend increases that I missed in my predictions: West Pharmaceuticals (WST) announced a 7.1% increase to an annualized rate of 60 cents. The stock has a forward yield of 0.66%. And restaurant company Cracker Barrel (CBRL) announced a 4.2% dividend increase, for a new annual rate of $4.80. The company's new forward yield is 3.00%. The company also announced a special dividend in the third quarter for the 4th straight year; at $3.75, this year's special dividend from Cracker Barrel is larger than all the others.
Let's take a look at how well I did with my predictions from May before we go to my predictions for June (you can see the article with the original predictions here):
Artesian Resources Corporation (ARTNA)
Prediction: 1.0 - 3.1% increase to $0.95 - $0.97
Actual: 1.5% increase to $0.9548
Forward yield: 2.47%
Despite being accurate in my prediction, I had really hoped that Artesian's 7% EPS growth would motivate the water utility to announce a semi-annual dividend increase closer to 3%. Unfortunately, the company stuck with its traditional annual growth rate in its 22nd year of dividend growth.
Bunge Limited (BG)
Prediction: 1.1 - 2.2% increase to $1.86 - $1.88
Actual: 8.7% increase to $2.00
Forward yield: 2.86%
I was really surprised by agribusiness company Bunge's increase this month. Bunge's EPS had fallen dramatically in the wake of a restructuring, putting the payout ratio close to 100%. The board of directors must see the light at the end of the tunnel; the company's 17th year of dividend growth was closer to its 5-year average of 11%.
Cardinal Health (CAH)
Prediction: 1.0 - 3.0% increase to $1.8680 - $1.9052
Actual: 3.0% increase to $1.9052
Forward yield: 3.63%
As expected, Cardinal Health's slow EPS growth last year and this year pushed the company's 33rd year of dividend growth well below the 5-year average of 14%.
Connecticut Water Service (CTWS)
Prediction: 2.5 - 4.2% increase to $1.22 - $1.24
Actual: 5.0% increase to $1.25
Forward yield: 1.96%
Despite an impending merger with SJW Group and fighting off a potential hostile takeover from Eversource Energy (NYSE:ES), the water and wastewater service utility beat its 10-year average growth rate of 3% in its 49th year of dividend growth.
Expeditors International of Washington (EXPD)
Prediction: 9.5 - 14.3% increase to $0.92 - $0.96
Actual: 7.1% increase to $0.90
Forward yield: 1.22%
With the economy rebounding and freight shipments up, I expected Expeditors to return to its average growth rate of 11 - 12%. Unfortunately, my optimism was unwarranted and I didn't expect the 7% increase from the logistics company. The company pays dividends semi-annually; this is Expeditors' 24th year of dividend growth.
Prediction: 11.6 - 15.2% increase to $2.50 - $2.58
Actual: 14.3% increase to $2.56
Forward yield: 1.27%
The financial information and research company beat its 5-year average growth rate of 13% in its 20th year of dividend growth.
Flowers Foods (FLO)
Prediction: 2.9 - 5.9% increase to $0.70 - $0.72
Actual: 5.9% increase to $0.72
Forward yield: 3.60%
Flowers Foods' 17th year of dividend growth came in at about half the company's 5-year average of 10%, due to last year's 4% drop in EPS.
Leggett & Platt (LEG)
Prediction: 4.2 - 6.9% increase to $1.50 - $1.54
Actual: 5.6% increase to $1.52
Forward yield: 3.65%
Although last year's EPS fell slightly, the bright outlook for this year and next meant that the furniture company's 47th year of dividend growth was right in line with its 10-year average.
Lowe's Companies (LOW)
Prediction: 12.2 - 17.1% increase to $1.84 - $1.92
Actual: Deferred to shareholders' meeting on June 1st.
Lowe's Companies should announce its 35th year of dividend growth at the shareholders' meeting on June 1st. I'll carry forward my prediction to next month.
MSA Safety Incorporated (MSA)
Prediction: 8.6 - 11.4% increase to $1.52 - $1.56
Actual: 8.6% increase to $1.52
Forward yield: 1.68%
MSA Safety hit the low end of my prediction, powered by 30% EPS growth in 2017. This is the company's 47th year of dividend growth.
RLI Corporation (RLI)
Prediction: 6.0 - 9.5% increase to $0.89 - $0.92
Actual: 4.8% increase to $0.88
Forward yield: 1.32%
In spite of what I hoped for, the drop in the specialty insurer's EPS last year and in the 1st quarter kept RLI's 43rd year of dividend growth below the 5-year average of 6%.
Tiffany & Company (TIF)
Prediction: 9.0 - 11.0% increase to $2.18 - $2.22
Actual: 10.0% increase to $2.20
Forward yield: 1.70%
Tiffany's 16th year of dividend growth was right on the nose with the 5-year average growth rate of 10%.
Weyco Group (WEYS)
Prediction: 4.5% increase to $0.92
Actual: 4.5% increase to $0.92
Forward yield: 2.69%
Footwear designer and marketer Weyco extended its streak of 4-cent increases to 7 years and its dividend growth record to 37 years.
9 Announcements of Dividend Increases Expected in June
Here are my predictions for the 9 dividend increases I expect in June:
Casey's General Stores (CASY)
With 28 years of dividend growth under its belt and a 5-year compounded growth rate of 10%, the Midwest-based chain of convenience stores has been a solid stock for dividend investors. With respect to EPS over the first 3 quarters of the year, the good news is that Casey's is seeing year-over-year EPS growth of more than 100%. The bad news, however, is that the bulk of this growth is from the one-time effects of the tax cut law; excluding this, EPS in the first 3 quarters is down 12% year-over-year. Despite this, the company continues to grow, opening a store in Ohio for the first time and planning for another 116 sites in the next year. With a current dividend of $1.04, Casey's has room for another dividend increase around 10%.
Prediction: 7.7 - 11.5% increase to $1.12 - $1.16
Predicted Forward Yield: 1.16 - 1.21%
This prospective S&P 500 Dividend Aristocrat (2018 is the 25th straight year of dividend growth for the company) has gone through a rough patch over the last couple of years. Caterpillar skipped its dividend increase in 2016 and limited its annual increase to below 1.5% in 2017. This will probably be the year that changes, with 1st quarter EPS growth of 120%. Beyond that, the heavy machinery company is guiding to adjusted EPS growth of more than 50%, to a midpoint of $10.75. With a current payout ratio of 30% based on Caterpillar's guidance, there's lots of room for the company to return to its long-term dividend growth of around 10%.
Prediction: 9.6 - 12.2% increase to $3.42 - $3.50
Predicted Forward Yield: 2.19 - 2.25%
FedEx has been an outstanding investment for people looking for income growth. The company has one of the best long-term dividend growth rates: over the last 5 and 10 years FedEx has compounded dividends at more than 28% and 17% respectively. Last June, the company increased its dividend by 25%; this year should bring another massive increase. FedEx is guiding fiscal 2018's full year adjusted EPS to between $15.00 and $15.40. At the midpoint, this is an increase of 23% over last year's $12.30. I am expecting another 20%+ increase in FedEx's 17th straight year of dividend growth.
Prediction: 20.0 - 25.0% increase to $2.40 - $2.50
Predicted Forward Yield: 0.95 - 0.99%
General Mills (GIS)
Dividend growth has slowed over the last several years for cereal and food manufacturer General Mills. From a 15% increase in 2013 to last year's 2% increase, the company's slowing EPS growth is forcing a corresponding slowing in its dividend growth. This year will be no different; General Mills is guiding full year EPS growth to between flat and 1%. Given this, I think we'll see the company's 15th year of dividend growth to be about the same as last year.
Prediction: 1.0 - 3.1% increase to $1.98 - $2.02
Predicted Forward Yield: 4.64 - 4.74%
John Wiley & Sons (JW.A)
John Wiley & Sons is in the research and learning business. It publishes scientific and professional journals and books, and provides program management services for universities and colleges. The company has not been good for dividend growth investors, increasing its dividend by only 4 cents a year for each of the last three years. With a lot of international business, the company's earnings fluctuate based on currency rates. So, the company's adjusted EPS over the first 3 quarters of the fiscal year are up 13.8% to $2.49 but, up only 1% when based on constant currency rates. John Wiley is guiding full year adjusted EPS to $3.01, basically flat from 2017, but is looking at a low single-digit percent decline based on constant currency rates. Because of the EPS pressure, I'm looking at another year of a 4-cent increase. This is John Wiley's 25th year of dividend growth.
Prediction: 3.1% increase to $1.28
Predicted Forward Yield: 1.89%
2018 will be the 41st year of dividend growth for this Dublin-based medical technologies company. With a 10-year dividend growth average of 14%, Medtronics has been good for investors. The good times will keep on rolling - although the company just reported middling adjusted EPS growth of 3.7%, Medtronics is guiding next year's EPS growth to more than 7%. I expect this year's dividend growth to be on par with last year's 7% increase.
Prediction: 6.5 - 8.7% increase to $1.96 - $2.00
Predicted Forward Yield: 2.27 - 2.32%
National Fuel Gas (NFG)
National Fuel Gas transports and sells natural gas to about 750,000 customers in western New York and northwestern Pennsylvania. The company has grown dividends for 47 straight years, but the last 9 years have seen minimal dividend growth with 4-cent increases each year. Last year's 2.5% increase was in spite of a nearly 7% increase in EPS. This year, National Fuel is guiding to EPS that are flat to slightly down. With a current dividend of $1.66 and a projected payout ratio around 50%, National Fuel has room for its 48th year of dividend growth but I think we'll see another year of a 4-cent increase.
Prediction: 2.4% increase to $1.70
Predicted Forward Yield: 3.33%
Target Corporation (TGT)
The retailer has been pushing into digital sales and has seen some results, with year-over-year digital sales growth of 28% in the most recent quarter. This, along with 3% sales growth in mature stores, helped power overall sales growth in the first quarter of the fiscal year to 9%. In its most recent earnings report, Target reiterated its guidance of 2018 adjusted EPS growth to a range of 9% and 15%. Based on this growth, Target has a current payout ratio of less than 50% at the midpoint. All this bodes well for current investors. I'm looking for some acceleration in Target's dividend growth rate, although not to the 5-year average of 13%. This will be Target's 47th straight year of dividend growth.
Prediction: 5.6 - 8.1% increase to $2.62 - $2.68
Predicted Forward Yield: 3.68 - 3.76%
United Technologies (UTX)
Like Caterpillar above, 2018 will be the 25th straight year of dividend growth for United Technologies making it a prospective S&P 500 Dividend Aristocrat. The defense and aerospace contractor's last dividend increase of 6% was right in line with the 5-year average of 6.3%. With United Technologies guiding FY18 EPS growth to 6% at the midpoint, I expect another in-line dividend increase in the middle of June.
Prediction: 5.7 - 8.6% increase to $2.96 - $3.04
Predicted Forward Yield: 2.33 - 2.39%
I did better this month with my predictions, getting 8 out of 11 correct. I was quite surprised by Bunge's increase - in retrospect, I should have realized that, despite the flat EPS growth, the company wasn't likely to go from averaging 11% dividend growth to 2% dividend growth.
For those of you who benefited from May's dividend increases - well done! Next month brings increases from several well-known companies, Target and FedEx among them. And FedEx should reward investors with another outstanding dividend increase. Will they? We'll see!
If you enjoyed this article and would like to find out how my predictions turn out at the end of June, please follow me by clicking the "Follow" button next to my name at the top of the article. Thanks!
Disclosure: I am/we are long EXPD. 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.
Additional disclosure: I may take a position in any of the stocks mentioned in this article in the near future.