Thirteen Companies Boosting Distributions For Long-Term Shareholders

As part of my monitoring process, I look at the list of dividend increases every week. I use this exercise to monitor existing portfolio holdings and to identify companies to add for further research. 

I follow a few guidelines when I review dividend-paying stocks. Namely, I look for a long streak of annual dividend increases. I used 9 years in this review in order to reduce the list of companies to a manageable level. I usually use ten years, but today I wanted to see what is upcoming.

I focus on the rate of latest dividend increase, relative to the five or ten-year average. Recent dividend increases tell me a lot about management sentiment towards the near term business prospects of the company. An increase that is well below the rate of dividend growth indicates caution, while an increase that is close to or higher than the average indicates optimism. 

We can’t look at dividend growth rates in isolation of course. Management teams could be wrong about their assessment of business conditions. This is why I like to look at the trends in earnings per share, in order to determine if there is enough fuel for future dividend increases. I want dividend growth which is based on solid growth in earnings per share. I do not want a high double-digit dividend growth, which is created by expanding the dividend payout ratio. I also look skeptically at companies which achieve a streak of dividend increases through token raises to the distributions. 

I also like to review valuation, because even the best company in the world is not worth overpaying for. I look for a P/E below 20 for companies I am interested in, as a good starting yardstick. However, I also take into consideration the growth, dividend safety, and dividend yields. As you can see the process of evaluating dividend growth companies is nuanced, and not mechanical.

The companies that raised dividends last week, which we are valuating today include:

Realty Income (O), The Monthly Dividend Company is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 5,600 real estate properties owned under long-term lease agreements with regional and national commercial tenants.

Last week, the REIT raised its monthly dividends to 22.10 cents/share. This represents a 4%  increase over the dividend paid during the same time last year. If Realty Income continues raising dividends in 2019, it will join the dividend champions list. This is what management had to say about it in their announcement:

"We remain committed to our company's mission of paying dependable monthly dividends to our shareholders that increase over time," said Sumit Roy, President and Chief Executive Officer of Realty Income. "Our Board of Directors has once again determined that we are able to increase the amount of the monthly dividend to our shareholders, marking the 99th increase since our company's public listing in 1994. With the payment of the January dividend, we will have made 582 consecutive monthly dividend payments throughout our 49-year operating history."

The ten-year dividend growth is 4.40%/year. This was supported by growth in FFO/share from $1.89 in 2007 to $3.06 in 2017.  

The REIT yields 4% and is selling at 21.70 times FFO. I would prefer Realty Income below $53/share, as I find it to be a little overvalued today. Check my analysis of Realty Income for more information about the REIT.

AT&T Inc. (T) provides communications and digital entertainment services. The company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility, and International.

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Disclaimer: I am not a licensed investment adviser, and I am not providing you with individual investment advice on this site. Please consult with an investment professional before you invest ...

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