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 end of February, I provided predictions for 10 dividend growth companies that have historically announced annual payout increases in March. In this article I'll look at another 10 dividend growth companies that I expect will announce their annual dividend increases in the first half of April.
Here are the results from my predictions (the original predictions are available here), followed by my predictions for the dividend increases that I'm expecting to be announced in the first half of April:
(All yields are based on stock prices at the market close on Friday, March 25th.)
Best Buy (BBY) - 19 years of dividend growth
Prediction: 17.1-21.4% increase to $3.28-$3.40
Actual: 25.7% increase to $3.52
Forward yield: 3.66%
The electronics retailer followed up last year's 27% boost with an equally large increase this year.
Colgate-Palmolive Company (CL) - 59 years
Prediction: 2.2-4.4% increase to $1.84-$1.88
Actual: 4.4% increase to $1.88
Forward yield: 2.51%
This is only the second year out of the last seven that the household products company boosted its annual dividend by more than 4 cents.
CareTrust REIT (CTRE) - 8 years
Prediction: 5.7-9.4% increase to $1.12-$1.16
Actual: 3.8% increase to $1.10
Forward yield: 5.78%
Dividend growth from the senior care-focused REIT continues to slow, falling from last year's 6% boost.
Dollar General Corporation (DG) - 8 years
Prediction: 9.5-11.9% increase to $1.84-$1.88
Actual: 31.0% increase to $2.20
Forward yield: 0.99%
Dollar General continues to knock it out of the park with its dividend growth. This year's increase was nearly double last year's 17% boost.
General Dynamics Corporation (GD) - 31 years
Prediction: 4.2-5.9% increase to $4.96-$5.04
Actual: 5.9% increase to $5.04
Forward yield: 2.06%
The defense contractor's dividend increase this year was right in line with its EPS growth of 5%. General Dynamics continues to buy back shares in addition to growing its payout.
Horace Mann Educators Corporation (HMN) - 13 years
Prediction: 3.2-4.8% increase to $1.28-$1.30
Actual: 3.2% increase to $1.28
Forward yield: 3.07%
After initially growing its dividend by double digits, payout growth has settled down to 3 - 4% increases over the last 5 years.
Hurco Companies (HURC) - 9 years
Prediction: 3.6-7.1% increase to $0.58-$0.60
Actual: 7.1% increase to $0.60
Forward yield: 1.91%
This is the second straight year of 7% boosts for the small cap machine tooling manufacturer.
Kadant Inc. (KAI) - 10 years
Prediction: 8.0-10.0% increase to $1.08-$1.10
Actual: 4.0% increase to $1.04
Forward yield: 0.54%
This is the 5th straight year of 4-cent annual increases from Kadant.
SpartanNash Company (SPTN) - 12 years
Prediction: 7.5-12.5% increase to $0.86-$0.90
Actual: 5.0% increase to $0.84
Forward yield: 2.44%
Although dividend growth has slowed over the last 5 years, the 5% increase is an improvement over the food distributor's 4% boost last year.
TE Connectivity Ltd. (TEL) - 13 years
Prediction: 10.0-13.0% increase to $2.20-$2.26
Actual: 12.0% increase to $2.24
Forward yield: 1.69%
As expected, TE Connectivity returned to its usual levels of dividend growth this year.
Here are my predictions for the 10 dividend increases I expect in the first half of April:
AptarGroup (ATR) - 28 years of dividend growth
The manufacturer of drug, food & beverage dispensing products aims for a payout ratio of 30 - 40%. Historically, AptarGroup has grown its dividend in the mid-single digits, like last year's 5.6% boost. Although the company grew its EPS by 12.5% in 2021, 1st quarter EPS growth is expected to drop 22% or so year-over-year. This still results in two-year growth of 14%, consistent with AptarGroup's historical dividend growth rate. Investors can look forward to another mid-single digit boost.
Prediction: 3.9-7.9% increase to $1.58-$1.64
Predicted Forward Yield: 1.35-1.40%
American Water Works Company (AWK) - 12 years
The New Jersey-based water and wastewater utility serves 14 million customers across 24 states. The company recently reaffirmed its long-term EPS growth target of 7 - 9%, which is consistent with 2021's EPS growth of 8.7%. It doesn't look like American Water Works will meet its goals next year, as the company is guiding to EPS growth of 3 - 6%. However, with a long-term dividend growth rate of more than 12% I think that the company will take advantage of its modest payout ratio of 56% to keep its dividend growth rate up and announce a boost close to last year's 9.5% increase.
Prediction: 7.9-10.0% increase to $2.60-$2.65
Predicted Forward Yield: 1.63-1.66%
Costco Wholesale Corporation (COST) - 17 years
The operator of warehouse stores has built an outstanding dividend growth history, compounding its payout by 13% over the last decade. And while many companies would have trouble keeping that growth rate going, Costco continues to grow quickly despite a quarter-trillion market cap. The company sales were up more than 17% in 2021, and EPS were up by 25% year-over-year. Costco then followed up in the first 6 months of fiscal 2022 with 24% year-over-year EPS growth. With this type of EPS growth, the company is poised to build on its dividend growth record with a payout boost in the teens.
Prediction: 13.9-17.7% increase to $3.60-$3.72
Predicted Forward Yield: 0.65-0.67%
H.B. Fuller (FUL) - 52 years
H.B. Fuller is a specialty chemical company that focuses on adhesives and sealants. The company's products are used in a wide variety of industries and sold worldwide. Dividend growth has slowed in recent years, with Fuller's 10-year average of 9% falling to nearly 4% over the last 5 years, culminating in a small 3% boost last year. This has been due to Fuller's focus on acquisitions; the company completed two acquisitions just a few months ago. But the acquisitions are starting to pay off, resulting in good earnings growth. After growing EPS by more than 20% in 2021, Fuller is guiding to another 20% EPS growth in 2022. While I don't think that investors will see 20% dividend growth, they should be able to look forward to growth in the high single digits and possibly even above 10% this year.
Prediction: 7.5-11.9% increase to $0.72-$0.75
Predicted Forward Yield: 1.08-1.12%
Johnson & Johnson (JNJ) - 59 years
Despite having annual sales close to $100 billion, the health care giant had a blowout year. Powered by growth in its pharmaceuticals and medical devices segments, J&J sales grew by 14% and adjusted EPS by 22% in 2021. The pharma growth was led by multiple drugs, including those to treat plaque psoriasis, prostate cancer, and inflammatory diseases, while the medical devices segment benefitted from the increase in medical procedures from the recovery from the pandemic. Although J&J plans to split into two separately traded companies, that won't happen until 2023 and shouldn't impact this year's increase. And with the superior growth, modest debt and a payout ratio below 45%, J&J investors can look forward to a dividend boost above the company's 6% long-term growth rate.
Prediction: 6.6-8.0% increase to $4.52-$4.58
Predicted Forward Yield: 2.55-2.59%
Lindsay Corporation (LNN) - 19 years
Lindsay manufactures and distributes irrigation and infrastructure equipment worldwide. After quickly growing the dividend into 2014, the payout growth has slowed, with 4-cent annual increases the norm over the last 7 years. This year may change that; 2021 sales were up nearly 20% and EPS was up 9% in 2021, boosted by international sales of irrigation equipment. Although the company doesn't offer earnings guidance, first quarter EPS were up another 10% year-over-year. This bodes well for this year's dividend boost, and I think that investors have a chance of seeing a mid-to-high single digit percent increase.
Prediction: 4.5-9.1% increase to $1.38-$1.44
Predicted Forward Yield: 0.88-0.92%
The Procter & Gamble Company (PG) - 65 years
After hitting a bump in 2019, earnings at the consumer products giant have returned, as has earnings growth. Full year EPS were up 11% year-over-year in the fiscal year that ended June 30th, which drove a 10% dividend boost last April. Procter & Gamble is guiding to core EPS growth of between 3 and 6% in fiscal 2022 (despite flat earnings growth in the first 6 months). I expect that P&G will reward investors with a payout boost in line with the expected EPS growth.
Prediction: 3.0-5.0% increase to $3.5836-$3.6532
Predicted Forward Yield: 2.34-2.39%
The Southern Company (SO) - 20 years
With a payout ratio of 80%, the Atlanta-based electric utility's dividend growth will be limited to earnings growth. Fortunately for investors, Southern aims for long term adjusted EPS growth of between 5 and 7%, and the company hit the low end of this goal with 5% growth in 2021. The company's expectation for 2022 falls a little short; Southern is looking for adjusted EPS growth of between 2.6% and 5.6%. Although the company boosted its dividend by 6.5% last year, investors will see Southern begin its third decade of dividend growth with an increase closer to the company's long-term growth rate of 3.5%.
Prediction: 2.3-4.5% increase to $2.70-$2.76
Predicted Forward Yield: 3.81-3.89%
The Travelers Companies (TRV) - 19 years
Travelers is well positioned to close out its 2nd decade of dividend growth. After modest growth in 2020, the company's EPS exploded by more than 30% in 2021, with core income up 33% to $13.94 per share. Driving the higher profitability was lower catastrophe costs along with increased premiums. The company has a long-term dividend growth rate of around 9%, but growth has been slowing lately and the dividend growth fell to 3.5% last year. I think that will be the nadir and that investors will see higher payout growth this year - I'm expecting an increase around 10%.
Prediction: 9.1-11.4% increase to $3.84-$3.92
Predicted Forward Yield: 2.05-2.09%
Value Line (VALU) - 7 years
One of the leading investment research firms, Value Line is relatively new to the list of dividend growth companies. Over the last 5 years, the company has compounded its payout at 5.5%. Although the company reported EPS growth of 55% in fiscal 2021 (which ended June 30, 2021) and another 16% growth over the first 9 months of fiscal 2022, much of the earnings growth came from one-time events like new reporting regulations and the forgiveness of the company's Paycheck Protection Program loan. However, some of the earnings growth did result from revenue growth in Value Line's mutual funds. With the bulk of the earnings growth coming from one-time events, investors should expect Value Line to continue the pattern of mid-single digit dividend growth.
Prediction: 4.5-6.8% increase to $0.92-$0.94
Predicted Forward Yield: 1.37-1.40%
After a very busy February, things quieted down in March. Of the 10 companies for which I made predictions, half of them turned out to be accurate. The big news from March was the two massive dividend increases - a 25% boost from Best Buy and a 31% increase from Dollar General. The announcements from the companies overshadowed the announcements of other increases, including the 12% increase from TE Connectivity.
There are a number of dividend growth announcements expected in April, and I've split up the month into two parts; the first two weeks of April will bring another 10 dividend increases. The big increase will come from wholesale retailer Costco, which should reward investors with an increase in the mid-teens. Other companies that may announce double-digit boosts include specialty chemical company H.B. Fuller, insurer Travelers, and utility American Water Works. Two widely-held companies will also announce their annual increases: healthcare company Johnson & Johnson should announce a high single digit increase, while consumer products company Procter & Gamble should continue its pattern of dividend increases in the low single digits.
This article was written by
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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: I may take a position in any of the stocks mentioned in this article in the near future.