Hershey, Skyworks Scheduled To Announce Annual Dividend Boosts In July

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 beginning of June, I provided predictions for 10 dividend growth companies that have historically announced annual payout increases during the month. In this article I’ll look at another 18 dividend growth companies that I expect will announce their annual dividend increases in July.

Here are the results from my last article (the original predictions are available here), followed by my predictions for the dividend increases that I’m expecting to be announced in July:

(All yields are based on stock prices at the market close on Friday, July 1st.)

Results for Dividend Increase Announcements from June

Caterpillar (CAT) – 29 years of dividend growth

Prediction: 7.7-9.9% increase to $4.78-$4.88

Actual: 8.1% increase to $4.80

Forward yield: 2.69%

The heavy equipment manufacturer benefitted from product demand that was deferred during the pandemic.

The Clorox Company (CLX) – 44 years

Prediction: 0-0.9% increase to $4.64-$4.68

Actual: Deferred to late July or early August

Investors are still waiting for the announcement of the dividend increase from Clorox.

H&R Block (HRB) – 6 years

Prediction: 3.7-7.4% increase to $1.12-$1.16

Actual: 0% increase to $1.08

Forward yield: 2.94%

The tax preparation firm skipped its annual increase this year. H&R Block has until the 4th quarter of 2023 to increase its dividend and maintain the dividend growth streak.

The Kroger Company (KR) – 16 years

Prediction: 4.8-7.1% increase to $0.88-$0.90

Actual: 23.8% increase to $1.04

Forward yield: 2.16%

The supermarket chain operator announced another double-digit boost, continuing its excellent dividend growth record.

Matson (MATX) – 9 years

Prediction: 13.3-18.3% increase to $1.36-$1.42

Actual: 3.3% increase to $1.24

Forward yield: 1.69%

Apparently last year’s 30% increase was a one-off for the shipping company as Matson returned to its pattern of 4-cent annual boosts.

National Fuel Gas Company (NFG) – 52 years

Prediction: 2.2-6.6% increase to $1.86-$1.94

Actual: 4.4% increase to $1.90

Forward yield: 2.81%

National Fuel Gas’ earnings benefitted from acquisitions and higher commodity prices.

Oil-Dri Corporation of America (ODC) – 19 years

Prediction: 0-0.9% increase to $1.08-$1.09

Actual: 3.7% increase to $1.12

Forward yield: 3.62%

Despite dealing with the impacts of inflation and trying to push prices increases to its customers, this micro-cap dividend growth stock continued its pattern of 4-cent annual increases.

Target Corporation (TGT) – 55 years

Prediction: 1.6-3.3% increase to $3.66-$3.72

Actual: 20.0% increase to $4.32

Forward yield: 3.03%

Unlike Oil-Dri above, Target is handling the inflationary environment well and followed up a 32% boost last year with a 20% boost this year.

UnitedHealth Group Inc. (UNH) – 13 years

Prediction: 14.5-17.2% increase to $6.64-$6.80

Actual: 13.8% increase to $6.60

Forward yield: 1.28%

As expected, the health care management company announced a double-digit boost but slightly missed my expectations.

Walgreens Boots Alliance (WBA) – 46 years

Prediction: 2.1-3.7% increase to $1.95-$1.98

Actual: Deferred to mid-July

Walgreens Boots Alliance will likely announce its annual increase in mid-July.

John Wiley & Sons (WLY) – 29 years

Prediction: 4.3-7.2% increase to $1.44-$1.48

Actual: 0.7% increase to $1.39

Forward yield: 2.89%

It was the 2nd straight year of 1-cent annual dividend growth as the technical and scientific publisher continues to struggle.

Predictions for Dividend Increases for July

Here are my predictions for the 18 dividend increases I expect in July:

Community Bank System, Inc. (CBU) – 29 years of dividend growth

This New York State-based bank has branches across Vermont, upstate New York, western Massachusetts, and northeastern Pennsylvania. After flat year-over-year EPS in 2021, first quarter operating EPS were down 10% over the same period a year ago, due in part to the lack of revenues from the now-ended Paycheck Protection Program. The company has issued stock over the last 5 years, which increases the cost of paying dividends. With the current payout ratio of 40% and no debt, Community Bank has room for another boost, but I expect it to be on the order of last year’s 2.4% increase – well below the company’s 6% average growth rate over the last decade.

Prediction: 1.2-3.5% increase to $1.74-$1.78

Predicted Forward Yield: 2.71-2.77%

Cintas Corporation (CTAS) – 38 years

With a decade-long dividend growth rate of more than 26%, Cintas – which provides uniforms, safety and first aid products, and disinfecting products and services to business around the country – is a dividend growth investor’s best friend (as long as you don’t need current income). This dividend growth rate is powered by massive earnings growth. And while there comes a limit where double-digit earnings growth become unsustainable, Cintas isn’t there yet. The company posted 26% EPS growth in 2021 and is guiding to additional 11 – 13% EPS growth in 2022. Cintas is likely to match last year’s dividend boost of 26% with a similar announcement in July.

Prediction: 23.7-28.9% increase to $4.70-$4.90

Predicted Forward Yield: 1.25-1.30%

Community Trust Bancorp, Inc. (CTBI) – 41 years

This Kentucky-based regional bank got an earnings boost from the temporary reduction in its provision for loan losses in 2021. As the pandemic receded and the economy picked up, the company’s outstanding loan level stayed flat but Community Trust’s balance sheet benefitted. And as the economy has started to turn down, last year’s EPS gains of 47% turned into a year-over-year loss of 17% in the first quarter. Extrapolated to the full year, the bank is looking at 2022 EPS of $4.12, which would leave the company with a payout ratio of 40%. With little debt, Community Trust is likely to boost its dividend towards the high end of its traditional 3 – 5% annual increases.

Prediction: 3.8-6.3% increase to $1.66-$1.70

Predicted Forward Yield: 4.00-4.10%

Duke Energy Corporation (DUK) – 17 years

Duke Energy is one of the largest energy holding companies in the United States. The company has set an aggressive goal of 5 – 7% annual adjusted EPS growth through 2026, based on last year’s numbers. The company is already at risk of falling short of its goal, as the full year guidance for adjusted EPS in 2022 has a mid-point of 4% growth. With a heavy debt load and a payout ratio around 75%, investors won’t see an improvement from Duke’s decade-long growth rate of 3%. I expect we’ll see a third year of 8-cent annual dividend growth.

Prediction: 1.5-2.5% increase to $4.00-$4.04

Predicted Forward Yield: 3.65 – 3.69%

Green County Bancorp, Inc. (GCBC) – 8 years

This Catskills, New York-based bank has boosted its annual dividend by 4 cents for each of the last three years, resulting in percentage increases in the high single digits. It looks like investors will have another good year, as the company grew EPS by 30% year-over-year in the first 9 months of the FY. The increase is due primarily to an increase in assets under management and in debit card fees, and a decrease in cash set aside for loan losses. Despite the massive EPS growth, I expect Green County Bancorp to stick with the pattern and reward investors with another 4-cent annual increase, with a chance for a slightly larger boost.

Prediction: 7.7-10.3% increase to $0.56-$0.58

Predicted Forward Yield: 1.20-1.24%

The Hershey Company (HSY) – 12 years

The chocolate, snack and candy company is continuing to grow through acquisitions. Last year, Hershey’s acquired three smaller snack and candy companies: Pretzels Inc., Dot’s Pretzels, LLC, and Lily’s Sweets LLC. These acquisitions added nearly 5% to Hershey’s sales in the first quarter of fiscal 2022, and helped power adjusted EPS year-over-year growth to 32%. With the increased sales, Hershey’s is guiding full year EPS growth for 2022 to 10-12%. On top of adjusted EPS growth of 14% in 2021, investors can expect another good year of dividend growth. I expect a boost along the lines of last year’s 12% increase.

Prediction: 11.1-13.3% increase to $4.00-$4.08

Predicted Forward Yield: 1.81-1.85%

Landstar System, Inc. (LSTR) – 8 years

Transportation management company Landstar System continues to hit it out of the park for income investors. The company has paid a cash dividend every year since 2005, only breaking its dividend growth streak by skipping its dividend payment in 2013. In addition to the quarterly dividend, Landstar has also paid a special dividend in 4 of the last 5 years. The last special dividend of $2.00, which was paid out in January of this year, is twice the company’s regular dividend. Landstar is poised to continue its dividend streak, as the company’s posted a 100% EPS growth rate in 2021 and another 66% year-over-year growth rate in the first quarter of 2022. Investors will see a good dividend boost this year and I expect the company to announce another large special dividend this December.

Prediction: 12.0-20.0% increase to $1.12-$1.20

Predicted Forward Yield: 0.76-0.82%

McKesson Corporation (MCK) – 14 years

McKesson is in the process of transforming into a diversified healthcare services company. The company has benefitted from the massive COVID-19 testing around the world, having delivered 380 million test kits to the U. S. Government. McKesson also posted double digit revenue gains across all of its domestic business segments in 2021. The company is divesting its European business interests, freeing up cash for dividend growth and stock buybacks. (Since 2017, McKesson has bought back 29% of its outstanding shares.) With adjusted EPS up 38% in the fiscal year ending March 31, 2022, the company is likely to announce another double-digit boost.

Prediction: 10.6-12.8% increase to $2.08-$2.12

Predicted Forward Yield: 0.63-0.64%

Mondelez International, Inc. (MDLZ) – 8 years

International food and snack company Mondelez owns many well-known brands including Oreo, Halls, and Chips Ahoy. And the snack business is going well. The company posted 9% adjusted EPS growth in 2021 and is guiding to mid-to-high single digit growth in 2022. Mondelez has a bit of debt on the books but continues to use its free cash flow for dividend growth and stock buybacks. With a 5-year dividend growth rate of 13% and EPS growth coming in slightly lower than that, investors can expect a boost right around 10%.

Prediction: 8.6-11.4% increase to $1.52-$1.56

Predicted Forward Yield: 2.40-2.46%

MGE Energy, Inc. (MGEE) – 46 years

The Madison, Wisconsin-based energy utility grew its EPS in 2021 by more than 12%, as it benefitted from both an authorized rate increase in its service area, along with the post-pandemic economic recovery. However, these are one-time boosts that don’t create sustainable long-term growth, and MGE Energy saw 1st quarter EPS fall by 2%. MGE Energy has built a consistent dividend growth record, in the range of 4 – 5%. Despite the double-digit earnings growth last year, I expect the company to play it safe and stick with its usual growth rate.

Prediction: 3.9-5.2% increase to $1.61-$1.63

Predicted Forward Yield: 2.02-2.05%

Marsh & McLennan Companies, Inc. (MMC) – 12 years

The Marsh & McLennan Companies are multiple subsidiaries that advise a range of private and public clients on how to manage risk and perform strategic planning. The company’s business has grown with the economic recovery, with 2021 revenue growth of 15% and adjusted EPS growth of 24%. And although the year-over-year growth fell to “only” 16% in the first quarter of 2022, investors have reason to look forward to a good boost this month. The company has a payout ratio of 35% and, while Marsh & McLennan does do share buybacks, there isn’t the focus on repurchasing shares that other companies have – that is, the company focuses its free cash flow on growing its business and continuing the dividend growth streak. With the EPS growth the company has posted, investors should expect to see another mid-teen dividend boost like last year.

Prediction: 13.1-16.8% increase to $2.42-$2.50

Predicted Forward Yield: 1.55-1.60%

Altria Group, Inc. (MO) – 12 years

The manufacturer of tobacco products continues to fight off regulatory actions designed to eliminate tobacco use, the latest being a (currently temporarily suspended) FDA ban on the sales of JUUL cartridges. Despite this, Altria continues to experience modest growth, with adjusted EPS up 6% in 2021 and expectations of another 4 – 7% growth in 2022. Financially, the company has other headwinds to deal with as well – for example, despite retiring some debt, Altria still has more than $25 billion in outstanding debt on the books. In addition, the company’s payout ratio of 80% is uncomfortably high. So, despite the modest earnings growth, Altria’s next dividend increase will probably be south of 5%.

Prediction: 3.3-4.4% increase to $3.72-$3.76

Predicted Forward Yield: 8.80-8.90%

PPG Industries, Inc. (PPG) – 50 years

Specialty chemical company PPG manufactures coatings and paint for retail and industrial customers. The company posted good numbers in 2021 as the economy recovered, but the impacts of inflation and a restricted supply chain are taking their effect in 2022. After posting 11% adjusted EPS growth to $6.77 in the full 2021 year, the first quarter numbers fell 27% year-over-year. While PPG could use its free cash flow to announce a big dividend boost this year, investors are likely to see subdued dividend growth until the company sees the supply chain issues ease and knows that it is able to pass price increases on to customers. Look for an increase in the mid-single digits.

Prediction: 4.2-5.9% increase to $2.46-$2.50

Predicted Forward Yield: 2.09-2.12%

Republic Services, Inc. (RSG) – 18 years

Republic Services provides waste management services, including handling recycled materials, to 14 million customers in 47 states across the United States. The S&P 500 component company has a decent level of debt, but also the earnings growth to justify it. The company posted 17% adjusted EPS growth in 2021 and then followed up with another 23% year-over-year growth in the first quarter. The company’s also guiding full year 2022 EPS growth to nearly 11%. Republic Services has a comfortable payout ratio of 45%. Despite all the positive signs, I expect the company to remain conservative and stick with its traditional 8% annual dividend growth.

Prediction: 7.6-8.7% increase to $1.98-$2.00

Predicted Forward Yield: 1.49-1.50%

The J. M. Smucker Company (SJM) – 24 years

Food company J. M. Smucker’s adjusted EPS were down 3% in fiscal 2022, which ended April 30, 2022, as the company is divesting certain businesses to focus on its core brands. In the past 6 months, J. M. Smucker has sold off its Crisco and Natural Balance brands, as well as some smaller brands, and used the proceeds to pay down debt. In the long term, this will put the company on better financial footing but will impact current earnings. The company is expecting fiscal 2023 adjusted EPS to fall around 8 – 10%. As J. M. Smucker retrenches, I expect that the dividend growth will slow until the growth to its core brands returns.

Prediction: 5.5-7.1% increase to $4.18-$4.24

Predicted Forward Yield: 3.19-3.23%

The Scotts Miracle-Gro Company (SMG) – 12 years

Scotts Miracle-Gro is facing massive headwinds this year. Not only is the stock down 50% (like many others), but the company is not seeing the reorders from retailers that it had expected, forcing the company to cut its EPS guidance. The company also has a very heavy 400% debt-to-equity ratio. So in spite of 27% earnings growth in 2021, the earnings drop that’s expected this year will wipe out those gains and then some. With the expected fall in earnings, the company’s payout ratio will jump to 56% – still modest and with room for another boost – but I expect Scotts Miracle-Gro to hedge on this year’s annual dividend increase.

Prediction: 1.5-3.0% increase to $2.68-$2.72

Predicted Forward Yield: 3.34-3.39%

Stanley Black & Decker, Inc. (SWK) – 54 years

Stanley, Black & Decker has established itself as a leader in tool manufacturing and continues to narrow its focus in this area. The company is in the process of selling off its electronic security business and building up its outdoor power equipment line through acquisitions. Right now, the company is dealing with the effects of inflation and the closure of its Russian business operations, which resulted in the company significantly reducing its 2022 EPS guidance. For all the EPS growth in 2021 (the company grew GAAP EPS 30%), I expect the inflationary pressures to reduce this year’s dividend increase far below last year’s 13% boost.

Prediction: 4.4-5.7% increase to $3.30-$3.34

Predicted Forward Yield: 3.08-3.11%

Skyworks Solutions, Inc. (SWKS) – 7 years

Skyworks Solutions provides analog chips that are used throughout the international 5G infrastructure. As the economy recovered in 2021, demand for Skyworks’ products exploded – net revenues were up 56% and adjusted EPS were up 71% to a record $10.50. The company has little debt, a modest payout ratio of 21%, and a 5-year dividend growth rate of 14%. Investors will see another double-digit boost from Skyworks as even in the face of a small EPS drop in the first 6 months of fiscal 2022.

Prediction: 11.6-15.2% increase to $2.50-$2.58

Predicted Forward Yield: 2.74-2.83%

Essential Utilities, Inc. (WTRG) – 30 years

Essential Utilities is the parent company for water and wastewater company Aqua and natural gas company Peoples. The company has focused on acquiring and consolidating smaller utilities, often entering into agreements with municipalities to operate local utilities. Essential is benefitting from agreed-upon rate increases and multiple acquisitions, and has recommitted to the long-term EPS growth rate goal of 5 – 7%. The guidance that the company has put out is consistent with this – the EPS of $1.75 to $1.80 represents a year-over-year growth rate of 4.8% to 7.8%, so Essential Utilities should be able to maintain its 7% annual dividend growth rate.

Prediction: 6.0-7.0% increase to $1.1372-$1.1479

Predicted Forward Yield: 2.40-2.42%

Summary

After a busy May, things slowed down for dividend growth investors in June. There were significant increases from grocer Kroger, retailer Target, and health insurer UnitedHealth Group. Caterpillar, another widely held stock, also announced its dividend increase.

There were also several disappointing announcements in June, with H&R Block skipping its dividend boost, and John Wiley bumping its annual dividend by only a single penny.

And investors are still waiting on increases from Clorox and Walgreens Boots Alliance.

Things will pick up after the Independence Day holiday – double-digit boosts are expected from Cintas, Hershey, Landstar, March & McLennan Companies, and Skyworks. Several utilities should announce annual increases – Duke Energy, MGE Energy, and Essential Utilities among them. Most of these increases will come in the latter half of the month.