E Dividends, Dividends, Dividends

A key task of management is to carefully allocate a company’s capital between investments in the growth of the business and distributions to shareholders. With strong cash flows and sturdy balance sheets, our high-quality companies have the financial flexibility to simultaneously reinvest for growth while also returning value to shareholders. Although we do not require a dividend before making an investment, most of our companies have the financial strength to pay a dividend. A good example is Apple (AAPL), which did not pay a dividend when we initially purchased the stock. Today, Apple is the world’s biggest dividend payer having paid nearly $78 billion in dividends since fiscal 2012 along with spending $247 billion on share repurchases. 
 
The 20 HI-quality companies in the accompanying table demonstrate desirable dividend traits in terms of current yield, inflation-beating growth and consistent annual increases. In fact, several of the companies, such as Genuine Parts (GPC), Hormel (HRL), Johnson & Johnson (JNJ) and 3M (MMM), have increased their dividends each year for more than half a century. Thanks to record earnings and cash flows, Hormel announced a meaty 12% increase in its annual dividend, marking the 53rd consecutive year of dividend increases. This is the 10th consecutive year of double-digit dividend increases and the 90th year Hormel has paid a dividend. Paying a dividend every year since 1948, Genuine Parts increased its dividend 6%, representing the 63rd straight year of dividend increases.  
 
3M recently boosted its dividend 6%, marking 61 consecutive years of dividend hikes. 3M has paid dividends without interruption for more than 100 years. UPS recently increased its dividend by 6% resulting in a current yield of 3.5%. Since 2000, UPS’s dividend has more than quadrupled. The TJX Companies increased its 2018 dividend a dressy 25%, marking 22 consecutive years of dividend increases with the dividend impressively compounding at a 23% annual rate for more than two decades. Further rewarding shareholders, several of the companies also periodically pay special dividends  
like Brown-Forman, Fastenal, Microsoft, T. Rowe Price and United Technologies. Companies which boost their dividends on a regular basis signal management’s confidence in the future of the firm. With durable competitive advantages, all these firms have shared theirprofits with investors no matter what the economic climate, whether it be inflation, deflation, recession and/or popped asset bubbles. Steadily growing dividends provide powerful returns to long-term investors while mitigating volatile market conditions—a divine dividend combination!

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