- As expected, Apple came in with a nice dividend increase on the last day in April.
- Other companies that rewarded income investors in April included First Financial and Tetra Tech, both of which increased their payouts by more than 15%.
- The first half of May will bring increases from long-term dividend growth companies Leggett & Platt and MSA. Northrop Grumman and PetMed Express will reward investors with double-digit growth.
This is the latest in my series of articles where I provide predictions of annual dividend increases for a variety of long-term dividend growth companies. Back at the middle of April, I provided predictions for 12 dividend growth companies that have historically announced annual payout increases in the second half of April. In this article I’ll look at 12 more dividend growth companies for the first half of May.
Before I get to my predictions, there were three dividend growth companies that announced their latest annual increases:
- Packaging company Sonoco (SON) boosted its dividend by 4.7% to an annualized $1.80. The company’s 38th year of growth gives the company a forward yield of 2.75%.
- Mega-cap energy company Chevron (CVX) announced its 34th year of dividend growth with a 3.9% increase, giving the company a forward yield of 5.20%.
- Finally, W.W. Grainger (GWW) hit the half-century mark for dividend growth with a 5.9% boost, giving the industrial wholesaler a forward yield of 1.49%.
Here are the results from the second half of April (the original predictions are available here), followed by my predictions for the dividend increases that I expect to be announced in the first half of May:
(All yields are based on stock prices at the market close on Friday, April 30th.)
Results for Dividend Increase Announcements from the Second Half of April
Apple (AAPL) – 10 years of increases
Prediction: 8.5 – 14.6% increase to $0.89 - $0.94
Actual: 7.3% increase to $0.88
Forward yield: 0.67%
Although it didn’t hit my expectations, Apple’s dividend growth accelerated with a larger increase than last year’s.
Ameriprise Financial (AMP) – 16 years
Prediction: 4.8 – 6.7% increase to $4.36 - $4.44
Actual: 8.7% increase to $4.52
Forward yield: 1.75%
The financial advisory and planning firm beat my expectations in its 16th year of dividend growth.
American Water Works Company (AWK) – 14 years
Prediction: 9.1 – 12.7% increase to $2.40 - $2.48
Actual: 9.5% increase to $2.41
Forward yield: 1.54%
Although it’s part of the normally sleepy utilities index, American Water Works announced another big dividend increase in April.
First Financial Bankshares Inc. (FFIN) – 11 years
Prediction: 5.8 – 11.5% increase to $0.55 - $0.58
Actual: 15.4% increase to $0.60
Forward yield: 1.22%
First Financial’s boost was well above the company’s 9% average growth rate.
International Business Machines (IBM) – 26 years
Prediction: 0 – 0.6% increase to $6.52 - $6.56
Actual: 0.6% increase to $6.56
Forward yield: 4.62%
Big Blue kept its dividend growth streak going with this minimal increase.
Independence Holding Company (IHC) – 8 years
Prediction: 0 – 4.5% increase to $0.44 - $0.46
Actual: Deferred until May
Insurer Independence Holding continues to defer its 2nd quarter dividend announcement.
Johnson & Johnson (JNJ) – 59 years
Prediction: 5.9 – 7.4% increase to $4.28 - $4.34
Actual: 5.0% increase to $4.24
Forward yield: 2.61%
My prediction was a little optimistic for this widely held health care company.
Lazard Limited (LAZ) – 13 years
Prediction: 5.3 – 7.4% increase to $1.98 - $2.02
Actual: 0% increase to $1.88
Forward yield: 4.18%
Although Lazard saw 10% EPS growth in 2020, the financial advisory firm held its dividend steady.
Lakeland Bancorp (LBAI) – 10 years
Prediction: 6.0 – 10.0% increase to $0.53 - $0.55
Actual: 8.0% increase to $0.54
Forward yield: 2.98%
As expected, the bank holding company’s excellent financial situation allowed for a good increase despite a drop in EPS in 2020.
MetLife Inc. (MET) – 9 years
Prediction: 3.3 – 4.3% increase to $1.90 - $1.92
Actual: 4.3% increase to $1.92
Forward yield: 3.02%
With minimal debt and a low payout ratio, the insurer’s flat EPS growth didn’t postpone its latest dividend increase.
People’s United Financial (PBCT) – 29 years
Prediction: 0 – 1.4% increase to $0.72 - $0.73
Actual: 1.4 % increase to $0.73
Forward yield: 4.03%
Despite the impending merger with M&T Bank (MTB), People’s United continued its pattern of penny-per-share annual increases.
Pool Corporation (POOL) – 11 years
Prediction: 12.9 – 17.2% increase to $2.62 - $2.72
Actual: Deferred until May
Pool Corporation should announce its latest dividend boost in early May.
Portland General Electric Company (POR) – 16 years
Prediction: 3.1 – 4.9% increase to $1.68 - $1.71
Actual: 5.5% increase to $1.72
Forward yield: 3.38%
Despite trading losses in 2020, the utility still managed to maintain its historical dividend growth rate of 5%.
Southern Company (SO) – 21 years
Prediction: 3.2 – 4.7% increase to $2.64 - $2.68
Actual: 3.2% increase to $2.64
Forward yield: 3.99%
The Atlanta-based utility hit the low end of my expectations with its latest dividend increase.
The Travelers Companies (TRV) – 17 years
Prediction: 5.9 – 8.2% increase to $3.60 - $3.68
Actual: 3.5% increase to $3.52
Forward yield: 2.28%
This is the 2nd straight annual dividend increase in the 3 – 4% range for the insurer.
Tetra Tech, Inc. (TTEK) – 8 years
Prediction: 8.8 – 11.8% increase to $0.74 - $0.76
Actual: 17.6% increase to $0.80
Forward yield: 0.63%
What the engineering consulting firm lacks in dividend yield, it makes up for in growth. This year’s increase was twice the company’s 5-year growth rate.
UGI Corporation (UGI) – 34 years
Prediction: 6.1 – 9.1% increase to $1.40 - $1.44
Actual: Deferred until May
Investors will have to wait for the dividend increase announcement from the natural gas utility.
Exxon Mobil (XOM) – 38 years
Prediction: 0 – 1.1% increase to $3.48 - $3.52
Actual: 0% increase to $3.48
Forward yield: 6.08%
It looks like we’ll have to wait until later in the year to see if Exxon Mobil keeps its dividend growth streak alive.
Predictions for Dividend Increases in the First Half of May
Here are my predictions for 12 dividend increases that I expect in the first half of May:
Cardinal Health (CAH) – 24 years of increases
Dividend growth has been slowing at healthcare company Cardinal Health. While the company has a decade-long growth average of nearly 10%, over the last 5 years dividend growth has slowed to 4%, with last year’s 1% increase the smallest in the company’s history. But things may be changing. While 2020 EPS grew only 3%, the company is projecting 2021 EPS growth between 7% and 12%. The company is still weighed down by a lot of debt (300% debt-to-equity), and although business is starting to pick up, I think Cardinal Health will hold its payout increase to something close to the 5-year average.
Prediction: 3.0 – 5.0% increase to $2.0019 - $2.0408
Predicted Forward Yield: 3.32 – 3.38%
CNO Financial Group (CNO) – 9 years
CNO Financial is a newcomer to the dividend growth list of companies. The company provides health and life insurance, and retirement plans through its insurance subsidiaries: Bankers Life, Colonial Penn and Washington National. The company has routinely boosted its payout by double digits and it’ll be another good year for investors. Although net EPS in 2020 fell 20%, operating income was up 37%, and with a payout ratio below 25%, CNO Financial has room for another year of double-digit growth.
Prediction: 12.5 – 16.7% increase to $0.54 - $0.56
Predicted Forward Yield: 2.12 – 2.19%
Chesapeake Utilities (CPK) – 17 years
The Oklahoma-based natural gas and electric utility continues to post good earnings growth, with EPS from continuing operations up 13% in 2020. Furthermore, the company is providing guidance out through 2025, and is expecting compounded earnings growth of nearly 8% over the next 5 years. This EPS growth should power continued dividend growth for the foreseeable future.
Prediction: 6.8 – 9.1% increase to $1.88 - $1.92
Predicted Forward Yield: 1.59 – 1.62%
Expeditors International (EXPD) – 26 years
Logistics and shipping company Expeditors International posted 20% earnings growth last year on increased volume and acquisitions. In addition to a low payout ratio of 25%, the company has no debt on the books, leaving plenty of cash flow for this year’s dividend increase. After last year’s modest 4% increase, I’m looking for a dividend increase closer to the 5-year growth rate of 8%.
Prediction: 7.7 – 11.5% increase to $1.12 - $1.16
Predicted Forward Yield: 1.02 – 1.06%
FactSet Research System (FDS) – 22 years
FactSet Research provides financial information to investment advisors and professionals. The company has done a good job rewarding income investors, compounding its dividend by 12% over the past 5 years. However, last year’s 7% increase was below average. The question this year is whether the company will boost the payout based on 2020’s EPS growth of 6% or on the company’s expected 2021 EPS growth of 11 – 15%. FactSet’s debt-to-equity load of 60% isn’t terribly large, so I expect a boost at the low end of the expected EPS growth this year.
Prediction: 9.1 – 11.0% increase to $3.36 - $3.42
Predicted Forward Yield: 1.00 – 1.02%
Leggett & Platt Inc. (LEG) – 48 years
Like many companies, bedding products manufacturer Leggett & Platt got hit by the pandemic, with sales down 10% in 2020. Adjusted EPS were down as well, coming in at $2.13, down 17% from 2019. The company’s dividend growth record is modest, with 5- and 10-year averages of 4%. With nearly half a century of dividend growth, the company isn’t likely to break the streak. I’m looking for a minimal increase, in line with the historical average, from Leggett & Platt.
Prediction: 2.5 – 5.0% increase to $1.64 - $1.68
Predicted Forward Yield: 3.30 – 3.38%
MSA Safety Inc. (MSA) – 49 years
The safety equipment manufacturer’s 2.4% dividend increase last year was well below the company’s 5-year average of 6%. Although the payout ratio of 40% supports another increase, with 2020 revenues down 3% and adjusted EPS down 6%, it’ll be another year of a sub-average increase from MSA Safety.
Prediction: 2.3 – 3.5% increase to $1.76 - $1.78
Predicted Forward Yield: 1.09 – 1.11%
National HealthCare Corporation (NHC) – 16 years
National HealthCare is a REIT that focuses on skilled nursing facilities. The company saw expenses outpace revenue increases in 2020 and, as a result, saw adjusted EPS fall 2% year-over-year. Although National HealthCare has a dividend growth history, the company skipped its increase last year and with the drop in EPS might defer its increase this year. Last year, the company boosted its dividend by 4%. This year, I think it’ll be smaller – if it occurs at all.
Prediction: 0 – 1.9% increase to $2.08 - $2.12
Predicted Forward Yield: 2.96 – 3.02%
Northrop Grumman (NOC) – 17 years
The massive aerospace and defense contractor had revenue growth in all sectors, but particularly in the Space Systems sector where revenue and earnings grew at double-digits. Overall, year-over-year EPS growth in 2020 was 11.5%. Despite the company’s debt, this earnings growth should allow Northrop Grumman to announce a dividend boost around the company’s 5-year average of 13%.
Prediction: 11.0 – 13.1% increase to $6.44 - $6.56
Predicted Forward Yield: 1.82 – 1.85%
PetMed Express, Inc. (PETS) – 12 years
PetMed Express grew sales by 13% and EPS by 25% over the first 9 months of the fiscal year. With zero debt on the books, the pet medication retailer is in a great position to announce another dividend increase. I think the company can beat its 5-year average of 9% and has a decent chance of a good double-digit boost.
Prediction: 10.7 – 14.3% increase to $1.24 - $1.28
Predicted Forward Yield: 4.21 – 4.35%
RLI Corporation (RLI) – 45 years
Specialty insurer RLI’s net EPS took a hit last year due to losses on its investment portfolio, while operating EPS were flat. RLI has returned to EPS growth in the first quarter of 2021, with operating EPS up 32%. The company’s dividend growth history shows a regular pattern of quarterly increase of a penny a share, so the question is whether RLI will break this pattern. I think it’s unlikely, but I’ll leave the possibility open.
Prediction: 4.2 – 6.3% increase to $1.00 - $1.02
Predicted Forward Yield: 0.90 – 0.92%
Weyco Group, Inc. (WEYS) – 38 years
The designer and marketer of footwear got hit hard by the pandemic, swinging to a loss in 2020 and with sales down 40%. Weyco skipped its annual increase last year, and it may skip it this year or at least defer the increase until later in the year in order to maintain its year-over-year dividend growth record. This year will be make-or-break for Weyco as a dividend growth company.
Prediction: 0 – 4.2% increase to $0.96 - $1.00
Predicted Forward Yield: 4.88 – 5.08%
For the most part, it was a good two weeks for income investors with dividend increases from popular stocks Apple and Johnson & Johnson. Other widely held companies boosted dividends by smaller amounts, if at all. Specifically, IBM’s increase was less than 1% but was enough to keep its streak alive. And Exxon Mobil held its dividend steady for the 2nd straight year. The oil giant’s record of year-over-year dividend growth is up to 37 years as of 2020, and the question is whether it will announce an increase later in the year. With a rebound in oil prices, I think it will, if only to extend the streak to 38 years.
In many cases, income investors with a long time horizon can find hidden gems in the small and mid-cap indices. Mid-cap companies Tetra Tech and First Financial both boosted dividends by double digits, and I expect small-cap PetMed Express (market cap of $600 million) to also announce a double-digit increase in the first half of May.
Other companies with the potential for large dividend increases in May include defense contractor Northrop Grumman, logistics company Expeditors International, and financial data provider FactSet Research.
This article was written by
Analyst’s Disclosure: I am/we are long PBCT, 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.
I may take a position in any of the stocks mentioned in this article in the near future.
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