- Apple, J&J and IBM were the largest companies that announced dividend hikes in the second half of April.
- While IBM’s small increase and J&J mid-single digit increase were as expected, Apple’s 4.5% increase was below my expectations.
- The first half of May brings another eight companies announcing annual increases, including W. W. Grainger, Northrop Grumman, and Chesapeake Utilities.
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. In mid-April, I provided predictions for 11 dividend growth companies that have historically announced annual payout increases in the second half of the month. In this article I’ll look at another 8 dividend growth companies that I expect will announce their annual dividend increases in the first half of May.
Before I get to the predictions, there were a couple of dividend growth companies that announced their annual increase over the last two weeks:
- Nasdaq, Inc. (NDAQ), the owner and operator of the eponymous stock exchange completed their first decade of dividend growth with an 11.1% boost to an annualized $2.40. Nasdaq, Inc.’s forward yield is now 1.53%.
- Financial data and research company FactSet Research Systems (FDS) announced its 24th year of dividend growth with an 8.5% boost to an annualized $3.56, giving the company a forward yield of 0.88%.
Here are the results from my last article (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 May:
(All yields are based on stock prices at the market close on Friday, April 29th.)
Results for Dividend Increase Announcements from the Second Half of April
Apple (AAPL) – 10 years of dividend growth
Prediction: 9.1 – 13.6% increase to $0.96 - $1.00
Actual: 4.5% increase to $0.92
Forward yield: 0.58%
The widely held mega-cap stock came in with a dividend boost of about half of its long term average.
Ameriprise Financial (AMP) – 17 years
Prediction: 12.8 – 15.0% increase to $5.10 - $5.20
Actual: 10.6% increase to $5.00
Forward yield: 1.88%
The asset and wealth manager announced a double-digit boost as expected, but slightly below my prediction.
American Water Works Company (AWK) – 13 years
Prediction: 7.9 – 10.0% increase to $2.60 - $2.65
Actual: 8.7% increase to $2.62
Forward yield: 1.70%
Although dividend growth continues to slow at American Water Works, a 9% increase from a utility is still impressive.
First Financial Bankshares (FFIN) – 12 years
Prediction: 10.0 – 13.3% increase to $0.66 - $0.68
Actual: 13.3% increase to $0.68
Forward yield: 1.70%
The Texas based mid-cap bank continued its record of double-digit dividend growth.
W. W. Grainger (GWW) – 51 years
Prediction: 6.8 – 10.5% increase to $6.92 - $7.16
Actual: 6.2% increase to $6.88
Forward yield: 1.38%
Grainger continues to grow its dividend in the 6% range while focusing on stock buybacks.
IBM (IBM) – 27 years
Prediction: 0.6 – 1.2% increase to $6.60 - $6.64
Actual: 0.6% increase to $6.60
Forward yield: 4.99%
IBM continues its minimal dividend growth while focusing on paying down debt.
Johnson & Johnson (JNJ) – 60 years
Prediction: 6.6 – 8.0% increase to $4.52 - $4.58
Actual: 6.6% increase to $4.52
Forward yield: 2.50%
The health care giant extends its track record of dividend growth in the 6 – 7% range.
Lakeland Bancorp (LBAI) – 12 years
Prediction: 7.4 – 14.8% increase to $0.58 - $0.62
Actual: 7.4% increase to $0.58
Forward yield: 3.86%
Between acquisitions and an improving economy, Lakeland Bancorp announced a dividend boost in line with its 5-year growth average.
MetLife (MET) – 10 years
Prediction: 4.2 – 6.3% increase to $2.00 - $2.04
Actual: 4.2% increase to $2.00
Forward yield: 3.05%
The insurance company concludes its first decade of dividend growth with a modest increase.
Pool Corporation (POOL) – 11 years
Prediction: 25.0 – 31.3% increase to $4.00 - $4.20
Actual: Deferred until the first half of May
The wholesale distributor of swimming pool products should announce its annual increase in the first week of May.
Portland General Electric (POR) – 16 years
Prediction: 4.7 – 5.8% increase to $1.80 - $1.82
Actual: 5.3% increase to $1.81
Forward yield: 3.82%
The Oregon-based utility continued its record of mid-single digit growth.
The Southern Company (SO) – 21 years
Prediction: 2.3 – 4.5% increase to $2.70 - $2.76
Actual: 3.0% increase to $2.72
Forward yield: 3.71%
The company’s current high payout ratio limited the dividend growth from the utility.
The Travelers Companies (TRV) – 20 years
Prediction: 9.1 – 11.4% increase to $3.84 - $3.92
Actual: 5.7% increase to $3.72
Forward yield: 2.17%
Although dividend growth rebounded from last year’s 3.5% boost, Travelers’ increase this year was still below its long-term growth rate.
Tetra Tech, Inc. (TTEK) – 7 years
Prediction: 12.5 – 17.5% increase to $0.90 - $0.94
Actual: Deferred until the first half of May
The engineering and consulting company should announce its dividend increase when it releases earnings on May 4th.
UGI Corporation (UGI) – 34 years
Prediction: 5.8 – 8.7% increase to $1.46 - $1.50
Actual: Deferred until the first half of May
The natural gas utility should announce its next annual dividend increase in the first week of May.
Value Line (VALU) – 8 years
Prediction: 4.5 – 6.8% increase to $0.92 - $0.94
Actual: 13.6% increase to $1.00
Forward yield: 1.53%
Financial analysis company Value Line announced a very nice increase. The boost this year is more than three times the company’s long-term growth rate.
Predictions for Dividend Increases for the First Half of May
Here are my predictions for the 8 dividend increases I expect in the first half of May:
Cardinal Health, Inc. (CAH) – 26 years of dividend growth
Cardinal Health distributes pharmaceuticals, manufactures medical products worldwide, and provides support for health care facilities. The company had grown quickly in recent years, but last year recorded a loss as the pandemic took its toll. This year, Cardinal Health is expecting to return to positive earnings but is already hedging by reducing its expected Fiscal Year 2022 EPS. With dual hits from inflation and supply chain woes, the growth of the company’s Medical Segment will be down by up to 45%. This should cause Cardinal Health to announce another year of 1 – 2% dividend growth.
Prediction: 1.0 – 2.0% increase to $1.9828 - $2.0025
Predicted Forward Yield: 3.42 – 3.45%
CNO Financial Group (CNO) – 9 years
The financial services and insurance company will be completing its first decade of dividend growth. CNO Financial grew operating income (which excludes investment income) by 10% in 2021, which will set it up well for its annual increase. In addition to paying out a dividend, CNO has spent significant funds buying back its shares; the number of outstanding shares has dropped by nearly 25% since 2017. The company will continue to focus on this, which means that CNO will probably continue its pattern of 4-cent annual increases; expect this to be the 8th straight year of a 4-cent increase.
Prediction: 7.7% increase to $0.56
Predicted Forward Yield: 2.32%
Chesapeake Utilities Corporation (CPK) – 18 years
The natural gas utility has a good earnings growth record, with the dividend growth to match. The company has compounded its dividend by more than 7% over the last decade, culminating in a 9% boost last year. This year might be even better for investors, as Chesapeake grew EPS by more than 12%, driven by the company’s acquisitions of multiple smaller natural gas utilities like Elkton Gas and Western Natural Gas. The company also reaffirmed its EPS goal of between $6.05 and $6.25 for 2025 – a compounded growth rate of 6.5% over the next four years. Although the long-term guidance is smaller than last year’s EPS growth, investors can look forward to another increase like last year’s boost.
Prediction: 7.3 – 9.4% increase to $2.06 - $2.10
Predicted Forward Yield: 1.65 – 1.68%
Expeditors International of Washington, Inc. (EXPD) – 27 years
Expeditors International is a shipping and logistics company. The company pays its dividend in semi-annual payouts, with the increase usually coming in the Spring. Expeditors has a good dividend growth record, compounding its dividend at more than 9% over the last decade. With earnings more than doubling in 2021, the company will grow its dividend once again in May. There are some interesting items in the company’s earnings report from February – revenues were up, mostly on a 13% increase in airfreight tonnage. However, ocean container volume was down 4% in the 4th quarter, primarily because of difficulties in securing shipping capacity; this seems to confirm information that’s been reported elsewhere. Regardless of whether the supply chain issues that the world is currently experiencing get resolved, the earnings boost will give Expeditors an opportunity to reward investors with another double-digit boost.
Prediction: 10.3 – 13.8% increase to $1.28 - $1.32
Predicted Forward Yield: 1.29 – 1.33%
Leggett & Platt, Inc. (LEG) – 50 years
Diversified manufacturer Leggett & Platt grew sales by 19% last year, led by 20% increases in the Bedding Segment and Furniture, Flooring & Textile Products Segment. With a reduction in expenses, this led to a 60% increase in EPS for the full year. However, despite the massive earnings growth I expect that investors will see another year of modest dividend growth from Leggett & Platt. The company has historically grown dividends in the mid-single digits and is expecting 2022 EPS to be flat to slightly lower. Investors can expect another year of 5% dividend growth.
Prediction: 4.8 – 7.1% increase to $1.76 - $1.80
Predicted Forward Yield: 4.94 – 5.05%
MSA Safety Inc. (MSA) – 50 years
The manufacturer of safety equipment used by industrial employees and first responders saw sales rise in 2021. Profits, however, fell due to the company putting away funds into a product liability reserve to account for possible lawsuits from the company’s products. First quarter profits rebounded in 2022, as both sales and adjusted earnings were up. The headwinds are continuing for MSA Safety; free cash flow was down by about 50%, as the company made investments to deal with supply chain issues. Although the company has an average growth rate in the mid-single digits, it looks like investors will probably see a third year of 4-cent annual dividend growth.
Prediction: 2.3 – 4.5% increase to $1.80 - $1.84
Predicted Forward Yield: 1.49 – 1.52%
Northrop Grumman Corporation (NOC) – 18 years
Dividend growth has been slowing recently at the defense contractor: last year’s 8% boost was below the company’s long-term growth rate of 12%. Despite massive government spending, Northrop will continue to struggle to return to its usual growth rate. Adjusted EPS were up only 8% in 2021 and the company is guiding to a drop of 2% to 4% for 2022. It looks like last year’s increase will be the high end of what to expect this year.
Prediction: 4.5 – 8.3% increase to $6.56 - $6.80
Predicted Forward Yield: 1.49 – 1.55%
PetMed Express (PETS) – 12 years
Dividend growth at PetMed Express is decelerating quickly. Last year’s 7% boost was below the company’s 5-year growth average of 9%. Things don’t look any better this year. Sales in the first 9 months of fiscal 2022 are down 12% and with the company spending funds to change the business’ focus, net income is down 30%. In fact, the company paid out more in dividends in the first three quarters of fiscal 2022 than they made in profit. With the current challenges, investors should expect dividend growth to continue to decelerate.
Prediction: 3.3 – 6.7% increase to $1.24 - $1.28
Predicted Forward Yield: 5.66 – 5.84%
Some big names announced their annual dividend increases in the latter half of April. Apple and J&J announced mid-single digit boosts, while IBM announced a minimal dividend increase as it continues to focus on paying down debt.
Utilities Portland GE, American Water Works and Southern Company all announced annual increases in April. Their increases ranged from a low of 3% for Southern to nearly 9% for American Water Works.
Three of the companies that I expected to announce increases deferred to May. These three will join eight more that traditionally announce in the first half of the month. Notable among these are Cardinal Health and defense contractor Northrop Grumman. But a big boost should come from logistics firm Expeditors International, while utilities UGI and Chesapeake announce mid-to-high single digit increases.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of IBM either through stock ownership, options, or other derivatives. 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.