Dividend growth investing is a simple but effective strategy. It is widely misunderstood too.
As a Dividend Growth Investor, I look for companies with a long history of annual dividend increases.
A long streak of consecutive annual dividend increases is typically an indication of a business with strong competitive advantages, good growth prospects, high returns on invested capital, and strong and recurring cash flows. A long streak of annual dividend increases is typical for companies with wide moats, which have tended to grow earnings per share for decades. As a long-term dividend investor, my goal is to identify such a business early in the game, buy it at an attractive price, and ride the economic trend for as long as possible. In other words, I am after companies that can grow earnings and dividends over time. I buy and hold forever, or in my case, for as long as they do not cut dividends.
Before doing so of course, I always review the company, its fundamentals and check the qualitative aspect of the business as well. Once I initiate a position, I also monitor the company for any major developments. But as part of my risk management process, I keep portfolio weights in check, and I very rarely would sell an existing position. I may not add to it if it stops meeting my entry criteria, which is guaranteeing a low allocation, as I build positions slowly and over time.
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One of my favorite monitoring exercises is to check the list of dividend increases every week. That way, I get to see if my existing investments continue raising dividends, and if my thesis is still working. I also get to identify companies for future research through this exercise. In addition, I get to read the press releases and gauge managements sentiment towards the near-term prospects of the business.
My weekly review focuses on companies that have increased distributions for at least ten years in a row. During the past week, the four companies that raised dividends include:
Lowe’s Companies Inc (NYSE: LOW)
Lowe’s Companies, Inc. (LOW) operates as a home improvement retailer in the United States, Canada, and Mexico.
The company increased its quarterly dividend by 9.10% to 60 cents/share. This marked the 58th year of consecutive annual dividend increases for this dividend king. During the past decade, Lowe’s has managed to increase dividends at an annualized rate of 19.40%.
Between 2010 and 2020, Lowe’s managed to grow earnings from $1.21/share to $5.49/share. Lowe’s is expected to generate $8.31/share in 2021.
The stock is selling for 19.50 times forward earnings and yields 1.50%. Check my analysis of Lowe’s for more information about the company.
Atrion Corporation (NASDAQ: ATRI)
Atrion Corporation (ATRI) develops, manufactures, and sells products for fluid delivery, cardiovascular, and ophthalmology applications in the United States, Germany, and internationally.
ATRI increased its quarterly dividend by 12.90% to $1.75/share. This marked the 18th consecutive annual dividend increase for this dividend achiever. Over the past decade, Atrion has managed to increase dividends at an annualized rate of 15.95%.
ATRI managed to grow earnings from $8.36/share in 2009 to $19.73/share in 2019.
The ATRI stock is selling for 35 times earnings and yields 1.05%
Community Bank System, Inc. (NYSE: CBU)
Community Bank System, Inc. (CBU) operates as the bank holding company for Community Bank, N.A. that provides various banking and other financial services to retail, commercial, and municipal customers. It operates through three segments: Banking, Employee Benefit Services, and All Other.
The company raised its quarterly dividend by 2.45% to 42 cents/share, marking the 29th year of annual dividend increases for this dividend champion. During the past decade, it has managed to increase dividends by 5.80%/year.
The company managed to grow earnings from $1.26/share in 2009 to $3.23/share in 2019. Community Bank System is expected to generate $3.01/share in 2020.
The stock sells for 19.40 times forward earnings and yields 2.90%
American Financial Group Inc (NYSE: AFG)
American Financial Group, Inc. (AFG) is an insurance holding company, provides property and casualty insurance products in the United States. The company operates through three segments: Property and Casualty Insurance, Annuity, and Other.
The company hiked its quarterly dividend by 11.10% to 50 cents/share, marking the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, it has managed to increase dividends at an annualized rate of 12.20%.
Between 2009 and 2019, earnings rose from $4.45/share to $9.85/share. American Financial Group is expected to generate $6.60/share in 2020.
The stock sells for 9.55 times forward earnings and yields 3.10%.