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 March, I provided predictions for 14 dividend growth companies that have historically announced annual payout increases in April.
There were two other long-term dividend growth companies that announced increases in April as well: Artesian Resources (ARTNA) announced its 23rd annual boost to 98.36 cents; this year's increase was 1.5%. The utility now has a forward yield of 2.71%. In addition, AptarGroup (ATR) grew its dividend by 5.9% to $1.44. The company now yields 1.29%.
Let's take a look at how well I did with my 14 predictions from April and the one that I carried over from March before we go to my predictions for May (you can see the article with the original predictions here):
(All yields are based on stock prices at the market close on Tuesday, April 30th.)
Results for the 15 Dividend Increase Predictions from April
Prediction: 13.7 - 18.5% increase to $3.32 - $3.46
Actual: 5.5% increase to $3.08
Forward yield: 1.53%
This is the first of several disappointments this month. Although 2018 EPS grew by 30%, the first quarter EPS were down 5% year-over-year. No doubt, this was one of the primary reasons that Apple's 8th year of dividend growth was half the 5-year average of 11%.
Cullen/Frost Bankers (CFR)
Prediction: 17.2 - 21.6% increase to $3.14 - $3.26
Actual: 6.0% increase to $2.84
Forward yield: 2.79%
I really expected (and hoped for) a double-digit dividend boost from the Texas-based financial company. But, despite EPS growth of 25%, Cullen/Frost's 26th year of dividend growth was in line with the 10-year average.
Costco Wholesale (COST)
Prediction: 13.2 - 19.3% increase to $2.58 - $2.72
Actual: 14.0% increase to $2.60
Forward yield: 1.06%
The warehouse retailer's 16th year of dividend growth was right in line with the 10-year average growth rate of 13.5%.
H. B. Fuller (FUL)
Prediction: 6.5 - 9.1% increase to $0.66 - $0.68
Actual: 3.1% increase to $0.64
Forward yield: 1.31%
Despite seeing an EPS boost from a recent acquisition, the specialty chemical company's 50th year of dividend growth was muted.
W. W. Grainger (GWW)
Prediction: 2.9 - 9.6% increase to $5.60 - $5.96
Actual: 5.9% increase to $5.76
Forward yield: 2.04%
I gave a wide berth on my prediction for the business wholesaler and went with their guidance of paying out between $310 and $325 million in dividends. The increase ended up right in the middle of the range. Grainger has grown dividends for 48 years.
Prediction: 3.8 - 5.1% increase to $6.52 - $6.60
Actual: 3.2% increase to $6.48
Forward yield: 4.62%
I had lowered my expectations for Big Blue, but apparently not enough. This is IBM's 24th year of dividend growth.
Johnson & Johnson (JNJ)
Prediction: 6.7 - 8.9% increase to $3.84 - $3.92
Actual: 5.6% increase to $3.80
Forward yield: 2.69%
Just like IBM above, the health care giant missed my prediction by just a bit, but for a company as big as JNJ, this isn't too shabby. This is Johnson & Johnson's 57th year of dividend growth.
People's United Financial (PBCT)
Prediction: 1.4 - 2.9% increase to $0.71 - $0.72
Actual: 1.4% increase to $0.71
Forward yield: 4.11%
Despite a good year of earnings growth, People's United decided to stick with another year of 1-cent dividend growth. This makes 11 years of 1-cent dividend growth and 27 years of dividend growth overall.
Procter & Gamble (PG)
Prediction: 4.0 - 6.0% increase to $2.9836 - $3.0409
Actual: 4.0% increase to $2.9836
Forward yield: 2.80%
Procter & Gamble's 63rd straight dividend boost isn't massive, but it's solid for a business as old and stable as this consumer products company.
Prediction: 7.3 - 10.5% increase to $2.66 - $2.74
Actual: Deferred to May
I had expected Qualcomm to announce in March, but I'm still waiting. I'll push my prediction to May.
Southern Company (SO)
Prediction: 1.7 - 3.3% increase to $2.44 - $2.48
Actual: 3.3% increase to $2.48
Forward yield: 4.66%
This is the third straight 8-cent dividend boost and the 18th year of dividend growth from the utility.
Sonoco Products Company (SON)
Prediction: 4.9 - 6.1% increase to $1.72 - $1.74
Actual: 4.9% increase to $1.72
Forward yield: 2.73%
As expected, packaging company Sonoco's 37th year of dividend growth was right in line with its 10-year average.
UGI Corporation (UGI)
Prediction: 3.8 - 5.8% increase to $1.08 - $1.10
Actual: 15.4% increase to $1.20
Forward yield: 2.20%
Well, this was a surprise! Despite a drop in EPS and a history of mid-single digit dividend growth, UGI's 32nd straight annual dividend increase was twice the 10-year average of 7%.
Prediction: 11.1 - 15.3% increase to $1.60 - $1.66
Actual: 2.7% increase to $1.48
Forward yield: 1.23%
This was another disappointment for me this month. Although integrated chip designer and manufacturer Xilinx is looking at double-digit EPS growth this year, their 16th year of dividend growth was minimal.
Exxon Mobil (XOM)
Prediction: 4.9 - 6.7% increase to $3.44 - $3.50
Actual: 5.7% increase to $3.48
Forward yield: 4.33%
Exxon Mobil's 37th dividend boost was nearly identical to the company's 5-year average of 5.6%.
15 Announcements of Dividend Increases Expected in May
Here are my predictions for the 15 dividend increases I expect in May:
Bunge Limited (BG)
Agribusiness company Bunge saw adjusted EPS growth of 40% in 2018 to a total of $2.72. The earnings growth was driven by strong growth in the company's agribusiness segment, as the segment's earnings more than doubled year-over-year. This should bode well for Bunge, but with a current dividend of $2.00 and the associated payout ratio of nearly 75%, the company doesn't have much headroom for its 18th straight year of growth. Nevertheless, the company will keep its growth streak up, but this year's increase will probably be in the mid-single digits, which is about half the 10-year average of 11%.
Prediction: 4.0 - 7.0% increase to $2.08 - $2.14
Predicted Forward Yield: 3.97 - 4.08%
Cardinal Health (CAH)
Global healthcare company Cardinal Health is facing headwinds in both its pharmaceutical and medical segments. Earnings are down despite positive (albeit small) growth in revenues over the first half of the year. The company is guiding 2019 full year EPS growth to a range of flat to up a modest 3%. Historically, Cardinal Health has rewarded dividend growth investors well, with a 5-year growth average of 10% and a 10-year average of 13%. Unfortunately, I think the small EPS growth that the company is expecting means that it's more likely that Cardinal Health's 35th year of dividend growth will be a repeat of last year's 3% jump than a payout increase along the historical averages.
Prediction: 2.0 - 4.0% increase to $1.9433 - $1.9814
Predicted Forward Yield: 3.99 - 4.07%
Cracker Barrel Old Country Store (CBRL)
Restaurant and specialty retail operator Cracker Barrel skipped its dividend increase in 2018 due to earnings pressure. Despite this, the company kept its year-over-year dividend streak alive since it has traditionally boosted its payout in mid-year. This year, though, it's make-or-break time - Cracker Barrel needs a dividend boost at some point this year. Theoretically, the company could defer its boost to the 4th quarter to save some money. Given that the company is guiding EPS growth this year to between 1% and 3%, I expect Cracker Barrel to post a very modest boost to make 2019 the 17th straight year of year-over-year dividend growth.
Prediction: 2.1 - 4.2% increase to $4.90 - $5.00
Predicted Forward Yield: 2.90 - 2.96%
The Clorox Company (CLX)
Last year's 14% dividend increase from Clorox was driven by a 17% increase in EPS in 2018. However, this year the consumer goods company is looking at flat to low-single digit EPS growth. Despite a growth rate of 10% over the last decade and a payout ratio of 60% - which means there's some room for a nice dividend boost - the company's heavy debt-to-equity ratio of 340% will limit Clorox's 42nd year of dividend growth. Still, I think Clorox will reward investors with another dividend boost in the latter half of May.
Prediction: 1.6 - 3.6% increase to $3.90 - $3.98
Predicted Forward Yield: 2.44 - 2.49%
Connecticut Water Service (CTWS)
For the New England-based utility, the focus is on the upcoming merger with San Jose-based SJW Group. And the merger isn't just distracting company management, but also hitting earnings: the company's net income was reduced by $10.8M in 2018 due to merger costs. Adjusting for this, net income grew by nearly 9%. Normally, I'd see this as a good sign - the 9% income growth should support a nice dividend increase. But since the merger planning is extending into 2019, expect the merger-related costs to continue and the cash available for a dividend increase to be impacted. I expect Connecticut Water to announce its 50th year of dividend increases to be in line with the 10-year average of 3.5%.
Prediction: 3.2 - 4.8% increase to $1.29 - $1.31
Predicted Forward Yield: 1.88 - 1.91%
Expeditors International (EXPD)
Expeditors International is a global logistics company that has grown dividends for 23 years. The company has a good dividend growth record - over the past decade, Expeditors has averaged a dividend growth rate of nearly 11%. With year-over-year revenue growth of 18% and EPS growth of 30%, the company is firing on all cylinders. And as one of the few dividend growth companies with zero debt on the books and a payout ratio near 25%, Expeditors is in a good position to continue rewarding shareholders with significant dividend boosts. I'm expecting Expeditors' 24th year of dividend growth to be above the 10-year average and in the mid-teens.
Prediction: 13.3 - 17.8% increase to $1.02 - $1.06
Predicted Forward Yield: 1.28 - 1.33%
FactSet Research Systems (FDS)
Dividend growth investors have been rewarded for owning FactSet Research, a financial analytics and technology company - over the past decade, the company has compounded its payout by more than 14%. The company is poised to continue its growth record this year: FactSet is guiding adjusted EPS growth to between 11 and 13% in 2019. The company boasts a very modest payout ratio of 30% (based on adjusted EPS), so there's plenty of room for FactSet's 21st year of dividend growth. I'm expecting something around last year's 14.3% boost.
Prediction: 12.5 - 14.8% increase to $2.88 - $2.94
Predicted Forward Yield: 1.04 - 1.07%
Flowers Foods (FLO)
The owner of the Tastykake and Wonder Bread brands has grown dividends for 17 years. Pastries aren't the only sweet thing that Flowers Foods serves up - dividend investors have been rewarded with an average growth rate of nearly 11% over the last decade. Over each of the last two years, however, the company has grown dividends by only 4 cents, and things don't look much better this year. Flowers Foods is guiding sales growth to between 2 - 4% and adjusted EPS growth to a wide range between zero growth and nearly 9% growth. The company isn't burdened with too much debt, but the current payout ratio of 77% limits the dividend growth this year. I'll go out on a limb here and say that this will be the third straight year of 4-cent dividend growth.
Prediction: 5.6% increase to $0.76
Predicted Forward Yield: 3.50%
Leggett & Platt (LEG)
Leggett & Platt manufactures furniture and bedding for the residential and commercial market, and seats for the automotive market. The company has grown dividends for 47 years with modest results for dividend growth investors - the company has compounded dividends between 4 and 5% over the last 5 and 10 years. The company recently released its 2018 results and provided guidance for 2019. Adjusted EPS growth in 2018 was 1%, but the company is guiding adjusted EPS growth in 2019 to between 8% and 17%. With a debt-to-equity ratio of 100% and a payout ratio of close to 70%, the company headroom for a payout boost is limited, but I think the company will base this year's increase on last year's small EPS growth and reward investors with an increase around the 10-year average of 4%.
Prediction: 2.6 - 5.3% increase to $1.56 - $1.60
Predicted Forward Yield: 3.96 - 4.07%
Lowe's Companies (LOW)
The outlook is mixed for Lowe's, operator of more than 2100 home improvement stores around the world. The company saw good adjusted EPS growth in 2018 but is guiding to a drop of 20% in its adjusted EPS in 2019. Still, even with the expected EPS, the company's payout ratio of 32% is very modest and leaves room for a nice announcement this month. Lowe's has an excellent track record for a dividend growth stock - a 21% growth rate over the last 5 years and 35 straight years of dividend boosts. It looks to me like we'll see another year of double-digit growth similar to last year's 17% boost.
Prediction: 14.6 - 18.8% increase to $2.20 - $2.28
Predicted Forward Yield: 1.94 - 2.02%
MSA Safety Incorporated (MSA)
MSA Safety, developer and manufacturer of safety products, has grown dividends for 47 years. Last year's 9% boost was nearly double the 10-year average growth rate of 5%, and it looks like we'll see another above average boost this year. The company grew its revenue by 13% in 2018, which drove EPS growth to 23%. That and the full year impact of the acquisition of firefighting gear company Globe Manufacturing led EPS to $4.50. The company is using its free cash flow to pay down debt, further strengthening MSA's financial position. Given the strong growth, I expect MSA's 48th year of dividend growth to be similar to last year's boost in the high single digits, with the possibility of something in the low double digits.
Prediction: 7.9 - 10.5% increase to $1.64 - $1.68
Predicted Forward Yield: 1.49 - 1.53%
Northrop Grumman (NOC)
As one of the big three defense contractors (Boeing and Lockheed Martin are the other two), Northrop Grumman's fortunes turn on Government expenditures. The boost in defense spending continues to be good news for Northrop; EPS were up 13.2% in 2018 and another 6% year-over-year in the first quarter of 2019. Beware though: there are warning signs on the horizon. The company began reporting mark-to-market (MTM) EPS, which includes effects from pension expenditures, and on that score, things look less pleasant. Northrop is guiding full year 2019 MTM EPS to a drop of 10% from 2018. So, will this affect this year's dividend boost? Well, this is a one-time change and given the current payout ratio of 25% and the decade-long growth rate of nearly 12%, I expect Northrop's 16th year of dividend growth to be around the same as last year's 9% boost.
Prediction: 8.3 - 10.0% increase to $5.20 - $5.28
Predicted Forward Yield: 1.79 - 1.82%
RLI Corporation (RLI)
Casualty and property insurer RLI has grown dividends for 44 years and with its recent earnings release, is well-positioned for its 45th year. The company recently announced 1st quarter net EPS of $1.46, more than quadrupling its net EPS year-over-year. More importantly, the company's operating EPS (EPS from its core insurance business) was up 18%, nicely reversing 2018's 11% decline. Over each of the last 7 years, the insurer has grown its dividend by 4 cents, giving RLI a 10-year average growth rate of 5.8%. While not a blockbuster growth rate, the company has paid out a special dividend in the 4th quarter of each of the last 9 years. Most recently in November 2018, RLI paid a $1.00 special dividend. This was the smallest of the special dividends (the rest ranged between $1.50 and $3.50) and, if included in the company's dividend, would increase the company's current yield to 2.31%. I'm expecting another 4-cent increase this year with the possibility of a slightly larger increase, but income investors might want to look past the regular dividend yield and take a second look at RLI.
Prediction: 4.5 - 6.8% increase to $0.92 - $0.94
Predicted Forward Yield: 1.13 - 1.16%
Tiffany & Company (TIF)
The jewelry designer and manufacturer is continuing to fire on all cylinders. The company increased its year-over-year sales in 2018 by 7% and saw EPS grow by 60% to $4.75, driven mostly by higher margins and a lower effective tax rate. Tiffany has grown dividends by 16 years and last year boosted its payout by 10%, which was right in line with its 5-year growth average. For 2019, the company is expecting sales and EPS growth in the low single digits. All of this means we'll see Tiffany's 17th year of dividend growth in 2019; I'm expecting another increase right around the 5-year average.
Prediction: 9.1 - 12.7% increase to $2.40 - $2.48
Predicted Forward Yield: 2.23 - 2.30%
Weyco Group (WEYS)
The owner of footwear brands like Florsheim and Stacy Adams, Weyco has grown dividends for 37 years. For the most part, the annual increases have been modest - over each of the last 10 years, the company has increased its annual dividend by 4 cents, giving it a 10-year dividend growth rate of 5.6%. The company recently reported 2018 year-over-year sales growth of 12% and EPS growth of 23%, which was powered mostly by growth in North America, which overcame a drop in overseas sales. So, will this be the year that ends the streak of 4-cent annual increases? I think there's a good chance that it will be - the company sports almost no debt and has a payout ratio of less than 50%, so there's lots of headroom for a good increase. It's hard for companies to break long-standing habits, so the possibility for an 11th year of a 4-cent increase remains.
Prediction: 4.3 - 10.9% increase to $0.96 - $1.02
Predicted Forward Yield: 2.80 - 2.97%
While many of April's increases were where I expected them to be, I was really disappointed that some of the larger dividend boosts didn't materialize. In particular, Apple's, Cullen/Frost's and Xilinx's increases were much smaller than I expected and what I feel the EPS growth could justify.
Nevertheless (and in what is perhaps a triumph of optimism over experience), I'm looking for good dividend growth in May from Expeditors International, FactSet Research and Lowe's Companies. There's also the possibility of double-digit increases from MSA Safety, Northrop Grumman, Tiffany's, and Weyco.
If you enjoyed this article and would like to find out how my predictions turn out at the end of May, 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, XOM. 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.