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 November, I provided predictions for 11 dividend growth companies that have historically announced annual payout increases in December.
In addition to the 11 stocks for which I gave predictions, two other companies also announced their annual dividend increases. Investment manager Franklin Resources (BEN) announced a 13% increase to 92 cents, giving the company a forward yield of 3.57% and utility Dominion Energy (D) announced a 10% increase to an annual rate of $3.34. Dominion now has a forward yield of 5.01%.
Let’s take a look at how well I did with my predictions from December before we go to my predictions for January (you can see the article with the original predictions here):
(Note: all yields are based on stock prices at the end of Friday, December 28th.)
ABM Industries (ABM)
Prediction: 2.9 – 5.7% increase to $0.72 - $0.74
Actual: 2.9% increase to $0.72
Forward yield: 2.32%
Note: I incorrectly calculated the dividend growth percentages in last month’s article. I’ve corrected the numbers above.
Facilities maintenance company ABM’s 53rd annual dividend increase was limited by expectations that the tight labor market will increase future profitability.
Prediction: 12.5 – 16.1% increase to $1.26 - $1.30
Actual: 14.3% increase to $1.28
Forward yield: 1.80%
The health care company returned to its usual rate of dividend growth. Abbott’s 47th year of dividend growth is right in line with the 5-year average rate of 15%.
CH Robinson Worldwide (CHRW)
Prediction: 9.8 – 14.1% increase to $2.02 - $2.10
Actual: 8.7% increase to $2.00
Forward yield: 2.40%
I expected EPS growth of 36% to lead to a double-digit (or near double-digit) increase from the 3rd party logistics provider. Although the company’s 21st year of dividend growth was above the 5-year average of 5%, I’m disappointed that C. H. Robinson didn’t boost its dividend more.
Prediction: 7.3 – 12.2% increase to $1.76 - $1.84
Actual: 12.2% increase to $1.84
Forward yield: 1.27%
Ecolab’s 31st year of dividend growth was in the middle of this year’s guidance of EPS growth, and right at the 10-year average growth rate.
Graco Inc. (GGG)
Prediction: 11.3 – 20.8% increase to $0.59 - $0.64
Actual: 20.8% increase to $0.64
Forward yield: 1.56%
Graco, manufacturer of fluids and coatings management products, hit the high end of my expectations in its 20th year of dividend growth. Investors were also rewarded with a simultaneous announcement that the company would repurchase up to 18 million shares on the open market.
Pentair plc (PNR)
Prediction: 7.1 – 14.3% increase to $0.75 - $0.80
Actual: 2.9% increase to $0.72
Forward yield: 1.93%
The spin-off of Pentair’s electrical business into nVent Electrical plc (NVT) back in May clearly impacted this year’s dividend growth. Despite expectations that adjusted EPS growth would be in the double-digits, the water and fluids technology company held its 42nd year of payout growth to below 3%.
SEI Corporation (SEIC)
Prediction: 13.3 – 20.0% increase to $0.68 - $0.72
Actual: 10.0% increase to $0.66
Forward yield: 1.45%
SEI’s 28th year of dividend growth missed my expectations but was still in the double-digits. Note that the investment manager pays dividends semi-annually, not quarterly like most dividend-paying companies.
Stryker Corporation (SYK)
Prediction: 12.8 – 17.0% increase to $2.12 - $2.20
Actual: 10.6% increase to $2.08
Forward yield: 1.34%
I had expected medical device manufacturer Stryker to reward investors with a payout boost in the mid-teens. Although I was disappointed, Stryker’s 26th dividend increase was still in the low double-digits.
Prediction: 2.0 – 5.0% increase to $2.04 - $2.10
Actual: 2.0% increase to $2.04
Forward yield: 7.17%
It was another year of a 4-cent dividend growth for telecommunications stalwart AT&T. This is AT&T’s 34th year of dividend growth.
Urstadt Biddle Properties (UBA)
Prediction: 1.9 – 5.6% increase to $1.10 - $1.14
Actual: 1.9% increase to $1.10
Forward yield: 5.66%
This is the 4th straight year of 2-cent dividend increases, and the 25th year of dividend growth overall for the retail-focused REIT.
Waste Management (WM)
Prediction: 10.8 – 15.1% increase to $2.06 - $2.14
Actual: 10.8% increase to $2.06
Forward yield: 2.34%
Waste Management’s 16th year of dividend growth came along with authorization to repurchase up to $1.5 billion of stock.
11 Announcements of Dividend Increases Expected in January
Here are my predictions for the 11 dividend increases I expect in December:
Investors have been well rewarded by AFLAC: 36 years of dividend growth, two dividend increases in the last 15 months, and a 2-for-1 stock split back in March. The two dividend increases were an out-of-cycle boost of 4.7% in October 2017 and a 15.6% increase back in January. Expected EPS growth should allow AFLAC to repeat last January’s dividend boost – the company is guiding adjusted EPS growth to nearly 17% at the midpoint of the range. I’m expecting AFLAC’s 37th year of dividend growth to be roughly twice the 5- and 10-year average growth rates of 8%.
Prediction: 13.5 – 17.3% increase to $1.18 - $1.22
Predicted Forward Yield: 2.63– 2.71%
Air Products (APD)
Air Products had an outstanding year – the industrial gases company expanded into India, Saudi Arabia and China, won new projects in those three countries and in South Korea, and announced three new China-based projects. With all of that, the company saw adjusted EPS jump 18% to $7.45 a share in fiscal year 2018. Even better, the company is guiding next year’s EPS growth to 10% at the midpoint. Air Products has grown dividends for 36 years and over the last decade has compounded dividends by nearly 10% annually. Last year, the company increased its payout by nearly 16%. With a current payout ratio of 60%, the company has room for another nice increase; I expect 2019 to bring something around the 10-year average.
Prediction: 9.1 – 11.4% increase to $4.80 - $4.90
Predicted Forward Yield: 2.99 – 3.05%
Cincinnati Financial (CINF)
Insurer Cincinnati Financial will enter 2019 with 57 years of dividend growth under its belt. Catastrophe losses this year increased, but were more than offset by increases in smaller business lines such as management liability and surety. The company generally grows its dividend in the mid-single digits, and has a 5-year growth average of 5%. However, the company might pleasantly surprise investors in January – adjusted EPS are up more than 30% over the first 9 months of the year. While I think there’s a chance for a large increase, history suggests otherwise, as you’d have to go back to 2005 for a double-digit increase. Despite the good EPS growth, I expect another increase in the mid-single digit range.
Prediction: 4.5 – 6.6% increase to $2.22 - $2.26
Predicted Forward Yield: 2.90 – 2.95%
After a rough few years, Chevron has returned to its usual level of profitability. EPS are up 80% over the first 3 quarters of the year and, at $5.79, have already exceeded the EPS for all of 2017. Projecting forward, the oil giant will see double-digit EPS growth this year, which should power a nice dividend increase. This will be the company’s 32nd year of dividend growth and I’m looking for an increase in the high single digits or low teens.
Prediction: 7.1 – 13.4% increase to $4.80 - $5.08
Predicted Forward Yield: 4.42 – 4.68%
California Water Service Group (CWT)
CWT provides water and wastewater services to customers in California, Washington State, New Mexico, and Hawaii. After seeing a jump in earnings last year from a rate increase in California, EPS are on track to fall 13% this year. Assuming 4th quarter EPS are flat from last year, the utility is looking at full year EPS of $1.22. CWT has a current payout ratio of around 60%, leaving room for the company’s 52nd year of dividend growth, but I expect a smaller increase than last year’s 4% boost - something more along the lines of the company’s 10-year growth average of 2.5%.
Prediction: 1.3 – 2.6% increase to $0.76 - $0.77
Predicted Forward Yield: 1.61 – 1.63%
Consolidated Edison (ED)
Consolidated Edison provides electric and gas service to New York City and surrounding areas. Like most utilities, Con Ed’s dividend growth hasn’t been particularly spectacular: the company’s 5-year and 10-year dividend growth rates are 3% and 2%, respectively. Last year, Con Ed rewarded investors with a larger-than-normal payout boost of 3.6%. I think investors can look forward to another slightly larger boost. The company is guiding 2018 full year EPS growth to around 4.4%. I expect this will power the company’s 45th straight dividend bump to around 4%.
Prediction: 3.5 – 4.9% increase to $2.96 - $3.00
Predicted Forward Yield: 3.87 – 3.92%
J. B. Hunt Corporation (JBHT)
Shipping and logistics company J. B. Hunt saw a 34% increase in EPS over the first 9 months of the year, powered by a 66% jump in income from its intermodal segment. Assuming a flat 4th quarter, the company is looking at a 15% year-over-year increase in full-year EPS. Although last year’s payout boost of 4.4% was far below the company’s 5-year average growth rate of 10%, the nice gains in EPS this year means that we can look forward to – possibly – a double-digit increase. This will be J. B. Hunt’s 16th straight year of dividend growth.
Prediction: 8.3 – 12.5% increase to $1.04 - $1.08
Predicted Forward Yield: 1.12 – 1.16%
Kimberly-Clark, manufacturer of well-known personal products brands like Kleenex, Scott, and Huggies, will enter 2019 with a 46-year history of dividend growth. The company’s recent dividend growth has been very modest – over the last 5 years, Kimberly-Clark has averaged a payout growth rate of 4.3%. Will this be the year investors get a nice surprise? It’s possible, as the company is projecting adjusted EPS growth of between 6% and 9% for the full year. However, I think it’s unlikely – Kimberly Clark doesn’t have a lot of cash on hand and has a negative shareholder’s equity. I expect another year of low single-digit growth.
Prediction: 3.0 – 4.0% increase to $4.12 - $4.16
Predicted Forward Yield: 3.64 – 3.67%
Polaris Industries (PII)
Polaris, manufacturer of all-terrain and other power sports vehicles, disappointed investors last year with a 3.5% dividend increase. Part of the reason for that was the company’s then-impending acquisition of privately-held Boat Holdings, LLC. Well, the company completed the merger and is now seeing its benefits. Much of the 12% growth in sales is from the acquisition, and it’s also responsible for part of the expected 35% growth in adjusted full-year EPS. With adjusted EPS guidance of $6.53 at the midpoint and a current dividend of $2.40, Polaris has plenty of room for its 24th year of dividend growth. I’m expecting an increase around the 10-year average of 12%.
Prediction: 11.7 – 15.0% increase to $2.68 - $2.76
Predicted Forward Yield: 3.56 – 3.66%
SJW Corporation (SJW)
The water and wastewater utility is seeking to merge with another dividend growth stock, Connecticut Water Service (CTWS) and is awaiting regulatory approval. The merger would expand SJW’s service area to the east coast; the California-based company currently serves about 1 million customers in northern California and Texas. In order to help fund the merger, SJW is looking to sell up to an additional 7.75 million shares. Issuing additional shares will decrease the EPS, which are already under pressure this year from increased water production expenses. Year-to-date EPS are down nearly 30% over the same period in 2017; projecting forward, full-year EPS should be in the range of $2.06 to $2.29. This downward pressure on earnings should temper SJW’s 52nd year of dividend growth to something around the 5-year average of 6%.
Prediction: 5.4 – 7.1% increase to $1.18 - $1.20
Predicted Forward Yield: 2.16 – 2.19%
S&P Global (SPGI)
Last year, financial information firm S&P Global rewarded investors with a 22% payout boost. Investors can look forward to another good year – despite just a 6% increase in revenues year-to-date, the company has improved profit margins to the point where it is guiding full year adjusted EPS growth to 24%. S&P Global has built a nice dividend growth record, with a 5-year growth rate of more than 12% and has accelerated the payout boosts in recent years, from a 7% increase in 2014 to the previously mentioned 22% increase last year. I’m looking for S&P Global’s 46th year of dividend growth to be around the same amount as last year.
Prediction: 20.0 – 25.0% increase to $2.40 - $2.50
Predicted Forward Yield: 1.43 – 1.49%
I was pretty happy with my predictions from last month. Of the 11 predictions, I was accurate with seven of them, but overestimated four of them. Of the four I missed, I was very surprised with Pentair’s minimal increase.
All in all, it was a good month for dividend growth investors. Of the 11 companies, six of them announced 10%+ annual increases. Abbott, Graco and Stryker continued to build excellent dividend growth histories.
There’s a lot of companies that announce their annual increase in February – so many that, in the past, I’ve broken my February predictions into two articles. I’ll be back at the end of January with my results from this article and my predictions for the first half of February.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.
Additional disclosure: Disclosure: I have no positions in any of the stocks mentioned in this article. However, I may take a position in any of them in the near future.