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 December, I provided predictions for 11 dividend growth companies that have historically announced annual payout increases in January.
In addition to the 11 companies for which I gave predictions, one other company also announced a dividend increase. Fastenal (FAST) boosted its payout by 7.5% to an annual rate of $1.72. The company now has a forward yield of 2.84%.
Let’s take a look at how well I did with my predictions from January before we go to my predictions for the first half of February (you can see the article with the original predictions here):
(Note: all yields are based on stock prices at the end of Friday, February 1st.)
Results for 11 Dividend Increase Predictions from January
Prediction: 13.5 – 17.3% increase to $1.18 - $1.22
Actual: 3.8% increase to $1.08
Forward yield: 2.25%
This was a big miss from my expectations. Despite an expected 17% growth in EPS this year, the insurance company’s 37th year of dividend growth was about half of its 5-year average of 8%.
Air Products (APD)
Prediction: 9.1 – 11.4% increase to $4.80 - $4.90
Actual: 5.5% increase to $4.64
Forward yield: 2.80%
Despite an 18% growth in EPS, Air Products’ 37th year of dividend growth begins with an increase well below the company’s 10-year average of 10%.
Cincinnati Financial (CINF)
Prediction: 4.5 – 6.6% increase to $2.22 - $2.26
Actual: 5.7% increase to $2.24
Forward yield: 2.75%
Like AFLAC, insurer Cincinnati Financial is seeing a nice jump in earnings this year. In contrast however, Cincinnati Financial has established a consistent pattern of modest annual dividend increases, so my expectations were tempered. Justifiably so, as the company’s 58th year of dividend growth was right in line with its 5-year average of 5%.
Prediction: 7.1 – 13.4% increase to $4.80 - $5.08
Actual: 6.3% increase to $4.76
Forward yield: 4.02%
“Missed it by that much” … as Maxwell Smart used to say. While I had hoped that the oil giant’s return to good EPS growth would mean a dividend increase in the low teens, this year’s 6.3% increase is a nice step up from the last 4 years.
California Water Service Group (CWT)
Prediction: 1.3 – 2.6% increase to $0.76 - $0.77
Actual: 5.3% increase to $0.79
Forward yield: 1.62%
This year’s dividend increase from the water utility (the company’s 52nd straight annual increase) surprised me, especially since EPS are set to drop about 13%. Regardless, the increase is more than twice the 10-year average of 2.5%.
Consolidated Edison (ED)
Prediction: 3.5 – 4.9% increase to $2.96 - $3.00
Actual: 3.5% increase to $2.96
Forward yield: 3.86%
Con Ed’s 45th year of dividend growth was nearly identical to last year’s boost and at the bottom end of my expectations.
J. B. Hunt Corporation (JBHT)
Prediction: 8.3 – 12.5% increase to $1.04 - $1.08
Actual: 8.3% increase to $1.04
Forward yield: 0.96%
Despite a 28% drop in EPS for the year, the shipping and logistics company hit the low end of my expectations for its 16th year of dividend growth.
Prediction: 3.0 – 4.0% increase to $4.12 - $4.16
Actual: 3.0% increase to $4.12
Forward yield: 3.69%
As expected, the consumer goods company’s 47th year of dividend growth was a very modest one, and consistent with Kimberly-Clark’s 5-year growth average of 4.3%.
Polaris Industries (PII)
Prediction: 11.7 – 15.0% increase to $2.68 - $2.76
Actual: 1.7% increase to $2.44
Forward yield: 2.82%
Polaris continues to work off the debt overhang from its acquisition of Boat Holdings, LLC – despite the jump in EPS, the manufacturer of recreational and sports vehicles disappointed in its 24th year of dividend growth.
SJW Corporation (SJW)
Prediction: 5.4 – 7.1% increase to $1.18 - $1.20
Actual: 7.1% increase to $1.20
Forward yield: 2.03%
San Jose-based water utility SJW’s 52nd year of dividend growth came in at the high end of my expectations, despite a 30% drop in EPS this year.
S&P Global (SPGI)
Prediction: 20.0 – 25.0% increase to $2.40 - $2.50
Actual: 14.0% increase to $2.28
Forward yield: 1.18%
Although S&P Global is guiding EPS growth to 24% this year, the financial information company couldn’t quite meet my expectations in its 46th year of dividend growth. Still, a 14% boost is nothing to sneeze at.
Nine Announcements of Dividend Increases Expected in the First Half of February
Here are my predictions for the nine dividend increases I expect in the first half of February:
Bemis Company (BMS)
Packaging company Bemis recently announced that it will merge with Australian company Amcor; the combined company will trade under the Amcor name on the NYSE. Which is a shame, because Bemis is showing very nice EPS growth this year – the company is guiding to adjusted EPS growth of 17%. Normally, I’d expect this to lead to good dividend growth this year. But with the impending merger and the company’s historic growth rates in the mid-3%s, I expect that Bemis’ last dividend increase will be right in line with its historic rates.
Prediction: 3.2 – 4.8% increase to $1.28 - $1.30
Predicted Forward Yield: 2.60 – 2.64%
Church & Dwight (CHD)
Church & Dwight, owner of the Oxiclean, Nair, WaterPik and Trojan brands, has rewarded dividend investors well. Over the last 5 years, the company has compounded dividends at nearly 10% annually, and last year boosted its payout by nearly 15% to 87 cents. Things look good for another nice dividend increase this year – Church & Dwight’s 23rd straight year of dividend growth – as the company is projecting adjusted EPS growth of 17% from organic sales growth and price increases. I’m looking for another dividend increase in the mid-teens.
Prediction: 12.6 – 16.1% increase to $0.98 - $1.01
Predicted Forward Yield: 1.52 – 1.56%
Eversource Energy (ES)
New England-based Eversource is on track to meet its full year EPS growth guidance of 4 – 5%. Through the first 3 quarters of the year, the electric, natural gas and water utility is posting year-over-year EPS growth of 6.8%. With full year EPS expected to land somewhere between $3.20 and $3.30, Eversource has plenty of coverage for its current dividend of $2.02, along with a payout boost around the 5-year average of 6.6%. Watch for the company’s 21st straight boost to be in line with last year’s 6.3% jump.
Prediction: 5.9 – 7.9% increase to $2.14 - $2.18
Predicted Forward Yield: 3.10 – 3.15%
Genuine Parts Company (GPC)
The automotive parts company is blowing things away this year. The company’s looking at sales growth of 14% and is projecting adjusted EPS growth of 20% for the full year. Dating back to 1957, Genuine Parts has one of the longest dividend growth records of all publicly traded companies. Recently, the record has been one of modest growth, with average increases in the 6% range. I expect the company to share some of that 20% EPS growth with investors this year.
Prediction: 8.3 – 12.5% increase to $3.12 - $3.24
Predicted Forward Yield: 3.09 – 3.21%
Jack Henry & Associates (JKHY)
Jack Henry, which joined the S&P 500 in November, provides technical and payment processing services for the financial services industry, primarily small to mid-size banks. The company has been on a tear for dividend growth investors, compounding its payout at more than 17% over the last decade. The company’s 16th consecutive year of dividend growth looks to be another good one. EPS growth was 55% in fiscal 2018, although most of it was from the tax cut legislation; 1st quarter fiscal 2019 EPS growth was more than 25%. Last year’s dividend boost was nearly 20%; look for an announcement of another boost of the same magnitude this year.
Prediction: 16.2 – 21.6% increase to $1.72 - $1.80
Predicted Forward Yield: 1.27 – 1.33%
NextEra Energy (NEE)
Potential future S&P 500 Dividend Aristocrat Next Era should announce its 25th straight year of dividend growth in mid-February. The energy utility has announced its intent to grow adjusted EPS at 6 – 8% over the next several years. Next Era’s off to a good start, with its recent announcement of 15% adjusted EPS growth in 2018. The company continues to acquire smaller municipal energy systems and recently closed on the purchase of Vero Beach, Florida’s electric system. Despite the acquisitions, the company’s debt-to-equity ratio remains below 100%, meaning that investors can look to another nice boost, possibly something around the 5-year growth average of 11%.
Prediction: 10.4 – 13.1% increase to $4.90 - $5.02
Predicted Forward Yield: 2.76 – 2.82%
After dealing with legal issues in China a few years ago, the multi-level marketing beauty products company has been finding its way. The company’s share price more than quadrupled from its low in early 2016 to its high in late 2018; even with the recent decline, NuSkin’s shares have gained more than 150% since the low. The company was hit hard by the 2018 changes to the tax laws, which knocked off 87 cents per share in earnings, resulting in EPS falling by 7.5% in 2017. This year, however, the company is seeing strong EPS growth and is guiding full year EPS growth to nearly 50%. The legal troubles the company found itself back in 2015 forced the company to limit dividend growth to 2 cents a year. I think investors may see a change this year with a decent increase from NuSkin.
Prediction: 8.1 – 15.1% increase to $1.58 - $1.68
Predicted Forward Yield: 2.37 – 2.52%
The soft drink and snack company has been a reliable dividend play for investors for the last 46 years. Despite last year’s 15% boost, PepsiCo’s dividend growth has been good, but not supercharged – over the last 5 years, the company has compounded dividends at nearly 10% annually, and over the last decade, the compounded dividend growth rate has been 8%. Despite being hampered by a heavy debt load, PepsiCo’s expected EPS growth of 8% this year means that we can expect a payout boost around the 10-year average.
Prediction: 7.2 – 8.9% increase to $3.98 - $4.04
Predicted Forward Yield: 3.55 – 3.60%
Perrigo Company plc (PRGO)
Generic drug manufacturer has certainly benefitted from everyone’s desire to keep health care costs down. Dividend growth investors have seen the rewards too, with the company compounding dividends at more than 16% annually over the last 5 years. However, this year investors shouldn’t expect the good times to continue – Perrigo has pulled back on adjusted EPS guidance, finally settling on a midpoint of $4.55 in its last quarterly report. This represents a drop of nearly 8% from last year’s $4.93 adjusted EPS. The good news is that, with a current dividend of 76 cents, the company has lots of headroom for its 17th year of dividend growth. I’m expecting the company to pull back on its payout boost, but not too far – look for an announcement of an increase around 10% in February.
Prediction: 7.9 – 11.8% increase to $0.82 - $0.85
Predicted Forward Yield: 1.77 – 1.84%
Of my 11 predictions from January, I was accurate with five of them, overestimated five and underestimated one. And I have to say, I was really disappointed with AFLAC’s and Polaris’ dividend announcements – despite good EPS growth, both companies rewarded investors with significantly below average increases.
Overall, it was a quiet month for dividend boosts in January. With the exception of S&P Global, none of the payout increases were that significant. (And even S&P Global’s increase was below average.)
Another 11 companies should announce their annual increases in the second half of February; I’ll be back in the middle of the month with my results from this article.
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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.