Summary
- Things were mixed for dividend growth investors in August. While Nordson rewarded investors with a 30% boost, several other companies came in with very small increases.
- These increases were enough to keep those companies’ growth streaks going, in hopes for better earnings growth in the future.
- Microsoft and Accenture should announce double-digit boosts in September. Investors can expect increases from nine other long-term income growth companies.
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. Back at the end of July, I provided predictions for 16 dividend growth companies that have historically announced annual payout increases in August. In this article I’ll look at 11 more dividend growth companies for September.
In addition to the companies I reviewed, insurer American Financial Group (AFG) marked its 16th year of dividend growth with a 12% increase. The annual payout of $2.24 gives the company a forward yield of 1.63%.
Here are the results from the August article (the original predictions are availablehere), followed by my predictions for the dividend increases that I’m expecting to be announced in September:
(All yields are based on stock prices at the market close on Friday, September 3rd.)
Results for Dividend Increase Announcements from August
BancFirst Corporation (BANF) – 28 years
Prediction: 10.3 – 14.7% increase to $1.50 - $1.56
Actual: 5.9% increase to $1.44
Forward yield: 2.59%
This is the Oklahoma-based bank’s 2nd year of 6% dividend growth.
Badger Meter (BMI) – 29 years
Prediction: 9.7 – 13.9% increase to $0.79 - $0.82
Actual: 11.1% increase to $0.80
Forward yield: 0.76%
The flow meter designer and manufacturer returned to its normal level of dividend growth.
Broadridge Financial Solutions (BR) – 15 years
Prediction: 13.0 – 16.5% increase to $2.60 - $2.68
Actual: 11.3% increase to $2.56
Forward yield: 1.50%
I had hoped that the technology company would reward investors with a larger increase. Nevertheless, it’s another year of double-digit growth for Broadridge.
Cboe Global Markets (CBOE) – 12 years
Prediction: 11.9 – 19.0% increase to $1.88 - $2.00
Actual: 14.3% increase to $1.92
Forward yield: 1.52%
The strong stock market is powering strong dividend growth from the operator of options markets.
Carlisle Companies (CSL) – 45 years
Prediction: 10.5 – 14.3% increase to $2.32 - $2.40
Actual: 2.9% increase to $2.16
Forward yield: 1.04%
Although the company’s earnings grew at double digits in the first half of the year, Carlisle’s latest increase was well below its long-term growth rate.
Dover Corporation (DOV) – 66 years
Prediction: 11.1 – 16.2% increase to $2.20 - $2.30
Actual: 1.0% increase to $2.00
Forward yield: 1.14%
Dover kept its dividend streak – one of the longest among all publicly traded companies – going with its 2nd year of 1% increases.
Federal Realty Investment Trust (FRT) – 54 years
Prediction: 1.9 – 3.8% increase to $4.32 - $4.40
Actual: 0.9% increase to $4.28
Forward yield: 3.48%
The hit to urban real estate from the pandemic impacted Federal Realty, which focuses on regions like Washington, D.C., Boston, San Francisco, and Los Angeles.
International Flavors & Fragrances (IFF) – 19 years
Prediction: 2.6 – 3.9% increase to $3.16 - $3.20
Actual: 2.6% increase to $3.16
Forward yield: 2.09%
This is the 2nd year of 3% dividend growth for the specialty chemical company.
Intuit Inc. (INTU) – 11 years
Prediction: 11.9 – 15.3% increase to $2.64 - $2.72
Actual: 15.3% increase to $2.72
Forward yield: 0.48%
The financial software firm continued its history of annual double-digit payout growth.
Illinois Tool Works (ITW) – 47 years
Prediction: 11.4 – 14.0% increase to $5.08 - $5.20
Actual: 7.0% increase to $4.88
Forward yield: 2.14%
Illinois Tool’s heavy debt load held down the company’s latest dividend increase.
Altria Group (MO) – 52 years
Prediction: 1.7 – 3.5% increase to $3.50 - $3.56
Actual: 4.7% increase to $3.60
Forward yield: 7.06%
Altria’s latest increase is an improvement over last year’s 2.4% boost.
Nordson Corporation (NDSN) – 58 years
Prediction: 10.3 – 15.4% increase to $1.72 - $1.80
Actual: 30.8% increase to $2.04
Forward yield: 0.84%
Nordson’s 34% EPS growth this year powered a dividend boost that more than made up for last year’s small 3% increase.
Ritchie Bros. Auctioneers (RBA) – 21 years
Prediction: 9.1 – 13.6 % increase to $0.96 - $1.00
Actual: 13.6% increase to $1.00
Forward yield: 1.59%
This is Ritchie Bros.’ 3rd straight year of 10%+ dividend growth.
Steris plc (STE) – 17 years
Prediction: 8.8 – 12.5% increase to $1.74 - $1.80
Actual: 7.5% increase to $1.72
Forward yield: 0.79%
Although Steris’ earnings growth came in at nearly 10%, I overestimated what the healthcare company’s latest increase would be.
Verizon Communications (VZ) – 17 years
Prediction: 3.2 – 5.2% increase to $2.59 - $2.64
Actual: 2.0% increase to $2.56
Forward yield: 4.62%
Verizon’s latest increase is consistent with its slow growth over the last 5 years.
Westlake Chemical Corporation (WLK) – 18 years
Prediction: 7.4 – 11.1% increase to $1.16 - $1.20
Actual: 10.2% increase to $1.19
Forward yield: 1.37%
Westlake Chemical’s increase this year beat the company’s 5-year average growth rate of 8%.
Predictions for Dividend Increases in September
Here are my predictions for the 12 dividend increases I expect in September:
Accenture (ACN) – 16 years of dividend growth
Delivering consulting services to its customers, Accenture has grown rapidly over the last decade, compounding its dividend at more than 16% annually. The company’s dividend growth has slowed in recent years, but it still managed a 10% boost in 2020. With no debt, a payout ratio below 40%, and expected adjusted EPS growth this year of 17%, the company is poised for another year of double-digit dividend growth.
Prediction: 11.4 – 14.8% increase to $3.92 - $4.04
Predicted Forward Yield: 1.14 – 1.18%
Brady Corporation (BRC) – 35 years
Despite the resurgence of the COVID delta variant, business is returning to normal for Brady. The company manufactures and markets labeling and identification products. Although earnings per share fell 14% in 2020, the company is projecting a return to good growth in 2021, with EPS growth since 2019 of between 5 and 9%. The question is whether this return to normal growth means a larger payout boost than last year’s 1% increase. Although the company is debt free and has a payout ratio below 40%, the company has historically grown dividends very slowly. I think investors are looking at another small increase.
Prediction: 2.3 – 4.5% increase to $0.90 - $0.92
Predicted Forward Yield: 1.74 – 1.78%
The First of Long Island Corporation (FLIC) – 24 years
The parent company for the First National Bank of Long Island, this regional banking company serves customers on Long Island and in New York City. After growing earnings per share by 3% in 2020, growth accelerated to 14% in the first half of 2021. This is due primarily to improving economic conditions as the pandemic recedes, which allowed the company to reduce the amount held for credit losses. Historically, the company has compounded dividends at 7% over the last decade, although the uncertainty with the resurgence of the virus will make that the most that investors can expect.
Prediction: 3.9 – 6.6% increase to $0.79 - $0.81
Predicted Forward Yield: 3.83 – 3.93%
Honeywell International (HON) – 10 years
Industrial machinery company Honeywell, with business in aerospace and defense, and building and industrial control, is seeing renewed growth. The company has expanded margins and increased sales across most of its business lines, and is projecting EPS growth of between 12 and 14% for 2021. This will help the company return to its normal dividend growth of around 10% after last year’s 3% boost.
Prediction: 9.1 – 11.3% increase to $4.06 - $4.14
Predicted Forward Yield: 1.78 – 1.81%
Ingredion (INGR) – 10 years
A drop in EPS last year forced the maker of natural food ingredients to report out a minimal dividend increase of less than 2%, well below the average growth rate of 7% over the last 5 years. The company is expecting earnings growth to return this year, with projections in a wide range between 3 and 10% for 2021. With a projected payout ratio below 50%, investors can expect a return to faster dividend growth.
Prediction: 4.7 – 6.3% increase to $2.68 - $2.72
Predicted Forward Yield: 3.04 – 3.09%
Lockheed Martin Corporation (LMT) – 18 years
With sales growth across all four business sectors – Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space – Lockheed Martin produced year-over-year earnings growth in the 1st half of the year. The company has boosted its outlook for the full year and is now expecting EPS growth of 10%. Although the defense contractor has a heavy debt load, this hasn’t kept the company from quickly growing its dividend in the past. Investors should expect a boost around the 5-year growth average of 9.5%.
Prediction: 8.7 – 11.5% increase to $11.30 - $11.60
Predicted Forward Yield: 3.17 – 3.26%
McDonald’s Corporation (MCD) – 45 years
The story of McDonald’s in 2020 is one of many restaurants during the pandemic. After a 20% drop in EPS in 2020, the company’s business has rebounded in the first half of 2021 as more people get vaccinated and they start to feel more comfortable going out. Before the emergence of the Delta variant, McDonald’s adjusted EPS had more than doubled over the first 6 months of the year. The new variant makes business uncertain for the restaurant chain; this uncertainty makes it less likely that the company will resume historical levels of dividend growth. However, it looks like McDonald’s will be able to reward investors with a larger boost than last year’s 3% increase.
Prediction: 4.3 – 5.8% increase to $5.38 - $5.46
Predicted Forward Yield: 2.25 – 2.29%
Microsoft Corporation (MSFT) – 18 years
Microsoft is firing on all cylinders and still growing quickly, despite a market cap of more than $2 trillion. The company recently reported double-digit revenue growth across all sectors, including MS Office products (up 20%) and Azure (up 50%). This revenue growth powered EPS growth of 40%. With little debt and a payout ratio below 30%, investors in Microsoft can expect a very nice boost this year.
Prediction: 14.3 – 21.4% increase to $2.56 - $2.72
Predicted Forward Yield: 0.85 – 0.90%
New Jersey Resources (NJR) – 25 years
The natural gas utility hits the quarter-century mark of dividend growth this year. New Jersey Resources has done better than expected in the first half of the year, and recently increased its full-year adjusted EPS growth guidance to between 1.4% and 6.3%. This will give NJR room for its annual increase, although investors can expect a boost below the company’s 10-year growth average of 6%.
Prediction: 3.8 – 5.3% increase to $1.38 - $1.40
Predicted Forward Yield: 3.67 – 3.72%
OGE Energy (OGE) – 14 years
The parent company of Oklahoma Gas & Electric is looking at EPS growth of between 3 and 9% for the full fiscal year. Despite the decent growth for a “boring” utility company, OGE’s payout ratio of nearly 90% limits the company’s dividend growth going forward. Although OGE has a compounded dividend growth rate of 8% over the last decade, investors can expect an announcement of a boost similar to last year’s 4% increase.
Prediction: 3.1 – 5.0% increase to $1.66 - $1.69
Predicted Forward Yield: 4.65 – 4.74%
Philip Morris International (PM) – 13 years
The tobacco company reported 7% adjusted EPS growth in 2020 and is guiding to another 13% growth in 2021. This growth supports the company’s goal of repurchasing up to $7 billion in stock over the next 3 years. It should also support the continuing growth of the company’s dividend despite a payout ratio above 80%. The company has a 5-year growth rate of 3%; investors can expect a boost close to that level.
Prediction: 2.9 – 4.2% increase to $4.94 - $5.00
Predicted Forward Yield: 4.66 – 4.71%
Summary
August’s group of dividend stocks was a mixed bag – while there were some very nice increases for investors, many of them came in below my expectations. The big winners were investors in Nordson; they’re going to benefit from the company’s 30% boost. However, investors in Dover, Federal Realty, and Carlisle are looking at small increases to their income.
Despite some disappointments, I am still optimistic about dividend growth through the rest of the year. Microsoft and Accenture should reward investors with double-digit percent increases, while investors in Lockheed Martin and Honeywell can look forward to percentage increases in the high single digits. Investors in utilities New Jersey Resources and OGE can also look forward to small increases.
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