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. At the end of February, I provided predictions for 11 dividend growth companies that have historically announced annual payout increases in March. In this article I’ll look at another 11 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 from March (as always, 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 31st.)
Prediction: 9.1 – 11.4% increase to $3.84 – $3.92
Actual: 4.5% increase to $3.68
Forward yield: 4.70%
With falling EPS, the consumer electronics retailer’s dividend growth slowed dramatically.
Prediction: 2.1 – 4.3% increase to $1.92 – $1.96
Actual: 2.1% increase to $1.92
Forward yield: 2.55%
The consumer brands leader begins its 7th decade of dividend growth.
Prediction: 0 – 3.6% increase to $1.10 – $1.14
Actual: 1.8% increase to $1.12
Forward yield: 5.72%
The lack of earnings growth forced the health care REIT to announce a minimal dividend increase.
Prediction: 11.8 – 14.5% increase to $2.46 – $2.52
Actual: 7.3% increase to $2.36
Forward yield: 1.12%
Although the discount retailer continues to grow, the growth is slowing – driving lower dividend growth as compared with last year’s 31% boost.
Prediction: 5.6 – 7.1% increase to $5.32 – $5.40
Actual: 4.8% increase to $5.28
Forward yield: 2.31%
The defense contractor’s 5.5% EPS growth wasn’t enough to meet my prediction.
Prediction: 6.0 – 9.6% increase to $0.88 – $0.91
Actual: 8.4% increase to $0.90
Forward yield: 0.82%
As expected, the insurance company’s dividend boost this year accelerated slightly from last year’s 5% increase.
Prediction: 0 – 3.1% increase to $1.28 – $1.32
Actual: 3.1% increase to $1.32
Forward yield: 3.94%
As EPS continues to fall at Horace Mann and the company’s payout ratio approaches 100%, dividend growth continues to fall.
Prediction: 6.7 – 10.0% increase to $0.64 – $0.66
Actual: 6.7% increase to $0.64
Forward yield: 2.53%
The industrial tools company continued its pattern of 4-cent annual increases.
Prediction: 3.8 – 7.7% increase to $1.08 – $1.12
Actual: 11.5% increase to $1.16
Forward yield: 0.56%
Although the specialty industrial machinery company has traditionally boosted its dividend about 5% annually, this year’s 18% adjusted EPS growth powered a much larger increase.
Prediction: 10.3 – 12.0% increase to $5.16 – $5.24
Actual: 9.0% increase to $5.10
Forward yield: 1.43%
Despite 15% adjusted EPS growth in 2022, dividend growth at the industrial gases company slowed slightly from last year’s 10% boost.
Prediction: 9.5 – 11.9% increase to $0.92 – $0.94
Actual: 2.4% increase to $0.86
Forward yield: 3.47%
With earnings dropping more than 50% in 2022, dividend growth at the food distribution company slowed dramatically.
Prediction: 3.9 – 5.7% increase to $4.76 – $4.84
Actual: 3.9% increase to $4.76
Forward yield: 3.15%
Earnings growth of 5% led to 2nd year of 4% dividend growth at the energy infrastructure company.
Prediction: 20.6 – 26.5% increase to $1.64 – $1.72
Actual: 25.0% increase to $1.70
Forward yield: 1.50%
Continued 30%+ EPS growth powered this year’s massive dividend boost after last year’s 31% boost.
There are 11 long-term dividend growth companies I expect to announce their annual increases in the first half of April. First, here are my predictions for three featured companies:
Costco continues to hit it out of the park for dividend growth investors. The company boosted its dividend by 14% last year, driving its long-term compounded dividend growth rate to 12.6%. Sales grew by 16% in fiscal 2022 (which ended August 28, 2022), resulting in EPS growth of 16.5%. Continuing on this success, the company grew sales another 7% and EPS another 8% in the first half of fiscal 2023.
Costco is well-managed, with only a modest amount of debt. The company does not focus on share buybacks; only $1.6 billion of the recent $4 billion share repurchase authorization that expired in January had been used. Costco did reauthorize the share buyback program with another $4 billion but it appears that the program is used to compensate for stock compensation packages, as the number of shares has remained steady. Costco has consistently boosted its dividend by double-digit percentages.
Will the company continue its pattern of 10%+ payout increases? While the fiscal 2023 results to date don’t support it, Costco’s low payout ratio around 25% and excellent cash flow means that there’s plenty of room for the company to reward investors with another increase in the low teens.
Prediction: 12.2 – 14.4% increase to $4.04 – $4.12
Predicted Forward Yield: 0.81 – 0.83%
Drug manufacturing and consumer health products company Johnson & Johnson has one of the longest dividend growth streaks among all publicly traded companies and a pretty consistent growth record as well. Last year’s 6.6% boost was consistent with both the 5-year and 10-year compounded growth rates (6.0% and 6.4%, respectively). With a market cap of nearly half a trillion dollars and annual sales of almost $100 billion, Johnson & Johnson’s businesses are very mature and the company isn’t going to see massive sales or earnings growth anytime soon.
As expected, the company saw EPS growth of 3.5% in 2022 and is guiding to additional EPS growth of 4% in 2023. The sales growth is coming primarily from the Pharmaceutical and MedTech business segments, with drugs to treat myeloma, prostate cancer, and psoriasis leading the way on sales growth in the Pharmaceutical segment, and contact lenses and wound closure products leading sales growth for the MedTech segment.
So what will this year’s dividend boost bring for J&J investors? While the EPS growth doesn’t support it, with a payout ratio (based on adjusted EPS) below 50%, J&J has plenty of room to keep pace with inflation and maintain the 6% dividend growth rate.
Prediction: 5.3 – 6.6% increase to $4.76 – $4.82
Predicted Forward Yield: 3.07 – 3.11%
Formed by brothers-in-law in 1837, the consumer products company boasts very popular brands like Bounty paper products, Crest toothpaste, Gillette shavers, Tide laundry detergent, and many others. With $80 billion in annual sales and a market cap of more than a third of a trillion dollars, it’s hard for the company to grow quickly, and the dividend growth history reflects that. Over the last decade, the company has compounded its payout at 5%, beating inflation over that time although falling short recently.
With EPS of $5.81 in fiscal 2022 (which ended June 30, 2022), the company now sports a payout ratio of 63%. While that does provide some room to grow, it would still be good to see EPS growth in fiscal 2023. However, Procter & Gamble is dealing with significant cost headwinds from two sources: (1) commodity and material costs from inflation and (2) foreign exchange costs from a strong dollar. These are dealing a severe effect to EPS growth; the net effect of both of these headwinds is around $1.50 a share, hitting EPS growth hard.
Despite the headwinds, with sales growth across all segments and led by the Fabric & Home Care and Health Care segments, Procter & Gamble is guiding to EPS growth of up to 4% in fiscal 2023. Even with zero EPS growth, a 5% dividend increase will only drive the payout ratio to about 66%. I think investors will see another year of 5% dividend growth.
Prediction: 4.1 – 5.2% increase to $3.80 – $3.84
Predicted Forward Yield: 2.56 – 2.58%
Here are my predictions for the 9 other companies which should announce annual increases in the first half of the month:
|Company||# Yrs||Industry||Prediction (%)||New Annual Rate|
|Aon plc (AON)||12||Insurance – Brokers||9.8 – 11.6%||$2.46 – $2/50|
|This Ireland-based insurance broker grew adjusted EPS by 12% in 2022. With a focus on repurchasing stock – having repurchased more than 15% of all outstanding shares since 2017 – the company will maintain its record of 10% dividend growth as long as EPS growth supports it. Predicted Forward Yield: 0.78 – 0.79%|
|AptarGroup, Inc. (ATR)||29||Medical Instruments & Supplies||0 – 2.6%||$1.52 – $1.56|
|AptarGroup designs and manufactures drug delivery and consumer product dispensing systems. In the past, the company has announced its annual dividend increase in April but skipped it last year as earnings stayed flat. (Due to the history of mid-year increases, AptarGroup’s dividends still show growth year-over-year.) One of two things will happen – boosted by adjusted EPS growth of 5%, the company will announce a minimal increase or the company will defer its dividend increase to the 4th quarter to preserve cash. Predicted Forward Yield: 1.29 – 1.32%|
|American Water Works Company, Inc. (AWK)||15||Utilities – Regulated Water||6.9 – 9.2%||$2.80 – $2.86|
|The New Jersey-based water and wastewater utility announced EPS growth guidance of 6% for 2023 and reaffirmed its dividend growth target of 7 – 9%. As long as EPS are able to support it, expect American Water Works to grow its dividend in this range going forward. Predicted Forward Yield: 1.91 – 1.95%|
|H. B. Fuller Company (FUL)||53||Specialty Chemicals||9.2 – 13.2%||$0.83 – $0.86|
|H. B. Fuller is an adhesives company. Despite an 8% compounded dividend growth rate over the last decade, Fuller blew away the average last year with a 13% boost. And with 15% EPS growth in 2022 and guiding to up to 14% growth in 2023, it’ll be another good year for investors. Predicted Forward Yield: 1.21 – 1.26%|
|Lindsay Corporation (LNN)||20||Farm & Heavy Construction Equipment||2.9 – 5.9%||$1.40 – $1.44|
|The irrigation and infrastructure company has boosted its annual dividend by 4 cents for each of the last 4 years. With EPS growth of 53%, Lindsay’s earnings are able to support a larger increase this year, but I believe that the company will stick with its usual increase or possibly something a little larger. Predicted Forward Yield:0.93 – 0.95%|
|The PNC Financial Services Group, Inc. (PNC)||13||Banks – Regional||10.0 – 12.0%||$6.60 – $6.72|
|This component of the S&P 500 has established an outstanding dividend growth record, with a growth rate of 14% over the last decade punctuated by a 20% boost last year. PNC’s adjusted EPS were down 1.5% in 2022, so the payout growth may slow, but with a payout ratio below 50% there’s still room for a double-digit increase. Predicted Forward Yield: 5.19 – 5.29%|
|The Southern Company (SO)||21||Utilities – Regulated Electric||2.9 – 4.4%||$2.80 – $2.84|
|The utility has boosted its annual dividend by 8 cents a year for each of the last 5 years. With EPS growth of 5.6% in 2022, the company is poised for a 6th year of 8-cent dividend growth, with the chance of a slightly larger increase. Predicted Forward Yield: 4.02 – 4.08%|
|The Travelers Companies, Inc. (TRV)||20||Insurance – Property & Casualty||4.3 – 6.5%||$3.88 – $3.96|
|Earnings and margins are down at the insurer as compared to last year. But with a payout ratio of 30%, there’s plenty of room for another dividend increase from Travelers. Investors can expect a boost in the 5% range, similar to last year. Predicted Forward Yield: 2.26 – 2.31%|
After a very busy February, the dividend growth announcements slowed in March. Nevertheless, investors saw 11 more companies announce their annual dividend increases.
Among the most notable announcements was a 25% boost from Steel Dynamics, following up on last year’s 31% boost, and an 11.5% increase from industrial machinery company Kadant. And while not a large increase, the 2.1% boost from Colgate-Palmolive extended the consumer products company’s dividend growth streak to 60 years.
The dividend growth will continue in the first half of April with another 11 companies scheduled to announce annual increases. I expect double-digit boosts from Costco and PNC Bank. And we’ll see another three dividend kings – companies with at least half a century of dividend growth – announce increases. Procter & Gamble, Johnson & Johnson, and H. B. Fuller will extend their streaks to 67 years, 61 years, and 54 years, respectively.
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