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 May, I provided predictions for 9 dividend growth companies that have historically announced annual payout increases in June.
I’ll point out three dividend increases that I missed in my predictions: asset manager Franklin Resources (BEN) announced a 15% dividend increase to 92 cents, giving its stock a forward yield of 2.85%. And monthly dividend payer Realty Income Corporation (O) announced its 2nd dividend increase of the year. The 0.2% increase gives the stock an annual payout of $2.64 and a forward yield of 4.88%. Finally, Walgreens Boots Alliance (WBA) moved its dividend announcement early and rewarded investors with a 10% increase to an annualized $1.76, giving the stock a forward yield of 2.94%.
Let’s take a look at how well I did with my predictions from June before we go to my predictions for July (you can see the article with the original predictions here):
Casey’s General Stores (CASY)
Prediction: 7.7–11.5% increase to $1.12-1.16
Actual: 11.5% increase to $1.16
Forward yield: 1.11%
The Midwest-based convenience store chain hit the upper end of my prediction. This is Casey’s 29th year of dividend growth.
Prediction: 9.6–12.2% increase to $3.42-3.50
Actual: 10.2% increase to $3.44
Forward yield: 2.52%
This is the 25th year of dividend growth for the heavy equipment manufacturer, making it eligible to join the list of S&P 500 Dividend Aristocrats.
Prediction: 20.0–25.0% increase to $2.40-2.50
Actual: 30.0% increase to $2.60
Forward yield: 1.13%
It’s hard to believe that FedEx could build on its 5-year dividend growth rate of 28%, but the shipping and logistics company managed to do just that in its 17th year of dividend growth.
General Mills (GIS)
Prediction: 1.0–3.1% increase to $1.98-2.02
Actual: No increase.
Forward yield: 4.39%
As several folks mentioned in comments to last month’s article, General Mills announced that it would maintain, but not increase its dividend this year.
John Wiley & Sons (JW.A)
Prediction: 3.1% increase to $1.28
Actual: 3.1% increase to $1.28
Forward yield: 2.05%
Under pressure from flat earnings, this is the 4th straight year of 4-cent dividend growth from the education and publishing company. This is John Wiley’s 25th straight year of dividend growth.
Prediction: 6.5–8.7% increase to $1.96-2.00
Actual: 8.7% increase to $2.00
Forward yield: 2.32%
This is the 41st year of dividend growth for Medtronic. This year’s hike is roughly half the 10-year growth average of 14% and at the top end of my expectations.
National Fuel Gas (NFG)
Prediction: 2.4% increase to $1.70
Actual: 2.4% increase to $1.70
Forward yield: 3.21%
Like John Wiley above, National Fuel Gas has a pattern of annual dividend hikes of 4 cents. National Fuel’s 48th year of dividend growth is its 10th year of 4-cent payout increases.
Target Corporation (TGT)
Prediction: 5.6–8.1% increase to $2.62-2.68
Actual: 3.2% increase to $2.56
Forward yield: 3.34%
I didn’t expect a return to the retailer’s 5-year dividend growth average of 13%, but I was disappointed with Target’s minimal increase for its 47th year of dividend growth.
United Technologies (UTX)
Prediction: 5.7–8.6% increase to $2.96-3.04
Actual: No increase.
Forward yield: 2.23%
The defense and aerospace contractor held its dividend steady this quarter. The company may decide to increase it later this year but, either way, 2018 will be United Technologies’ 25th consecutive year of year-over-year dividend growth. This makes it eligible to join the list of S&P 500 Dividend Aristocrats in January 2019.
6 Announcements of Dividend Increases Expected in July
Here are my predictions for the 6 dividend increases I expect in July:
Maxim Integrated (MXIM)
Maxim Integrated designs and manufactures analog and mixed analog-digital sensors for a variety of uses, including in the automotive and healthcare industries. The company has a nice dividend growth rate, compounding its dividend at more than 7% over the last decade. EPS took a hit in the quarter ending in December 2017 due to the provisions for the new tax law, reducing the full-year guidance to a midpoint of $1.55. This represents a drop of more than 10% from last year’s EPS of $1.98 and results in a current payout ratio of more than 90%. The impact may be temporary, but I expect this will limit this year’s (Maxim’s 17th straight year) dividend increase to about half the 10-year growth rate.
Prediction: 2.8–5.6% increase to $1.48-1.52
Predicted Forward Yield: 2.52–2.59%
National Retail Properties (NNN)
National Retail Properties REIT focuses on retail properties; the company currently has 2,800 properties across 48 states. It has a modest dividend growth rate of less than 4% over the last 5 years and less than 3% over the last decade. Over each of the last two years, National Retail has increased its dividend by around 4.5%. Investors shouldn’t get used to any changes – the company grew its adjusted funds from operations (AFFO – a metric used by REITs in lieu of earnings) last year by 5.4% and is guiding this year’s AFFO growth to the mid-4%s. I expect National Retail’s 29th year of dividend growth to be around 5%.
Prediction: 4.2–5.3% increase to $1.98-2.00
Predicted Forward Yield: 4.50–4.55%
Occidental Petroleum (OXY)
In each of the last two years, Occidental Petroleum has had minimal dividend growth – about 1.3% annual growth – due to low energy prices and a restructuring process. The lean times appear to be over for the oil and gas company, which just reported first-quarter EPS of 92 cents, more than 6 times the 2017 first-quarter results of 15 cents/share. Things have improved so much that Occidental announced it is resuming its share buyback program, although it didn’t set a specific amount for the buyback program. The downside for dividend growth investors is that the current dividend of $3.08 implies a very high payout ratio, limiting the size of this year’s increase. I expect that Occidental will limit the dividend increase this year (the company’s 16th year of dividend growth); investors looking for a large dividend increase will probably have to wait for next year.
Prediction: 1.3–2.6% increase to $3.12-3.16
Predicted Forward Yield: 3.73–3.77%
PPG Industries (PPG)
Last year’s 12.5% dividend increase from sealant, coatings, and paint manufacturer PPG was well above its 5-year growth average of 7%. I don’t think that PPG will repeat this feat this year. While EPS is still growing, the growth rate slowed to less than 4% in 2017. On the side of the dividend growth investor is the payout ratio of around 30%, giving plenty of room for a decent increase. I expect these two factors to balance out and for PPG’s 47th year of dividend growth to be right in line with the 5-year average.
Prediction: 5.6–8.9% increase to $1.90-1.96
Predicted Forward Yield: 1.83–1.89%
The J. M. Smucker Company (SJM)
The owner of its eponymous brand and many other food, coffee, and pet snacks brands finished 2017 with two decades of dividend growth under its belt. The 5-year average growth rate of nearly 9% has come in fits and starts, with increases as low as 4–5% (as in 2015 and 2017) and as high as 11% (as in 2013 and 2016). SJM just announced FY2018 adjusted EPS growth of 3% and guided FY2019 EPS growth to a midpoint of 7%. I think that the company will grow its dividend by a little more than last year’s 4% but nowhere near the 5-year average rate of 9%.
Prediction: 5.1–6.4% increase to $3.28-3.32
Predicted Forward Yield: 3.05–3.09%
Stanley Black & Decker (SWK)
The machinery and toolmaker is poised to complete half a century of dividend growth in 2018. Although Stanley Black & Decker generally grows its dividend at a rate in the mid-single-digit percentages, investors might see a little more in 2018. The company is guiding adjusted EPS growth to 13% in 2018 and with a payout ratio of 33%, I expect Stanley Black & Decker’s 50th year of dividend growth to be close to last year’s 9% increase.
Prediction: 7.1– 9.5% increase to $2.70-2.76
Predicted Forward Yield: 2.03–2.08%
I was disappointed with the lack of increases from General Mills and United Technologies, but FedEx continues to be a dividend powerhouse. General Mills and United Technologies were two of the stocks I overestimated, contributing to my 56% accuracy rate this month.
We’re moving into the quiet summer period, with only 6 payout increases expected in July. With most of these in the mid-to-high single digits, they aren’t the big flashy increases that make headlines; instead, they’re the slow drip-drip-drip that can build wealth over time.
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Disclosure: I am/we are long WBA. 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.