Kimberly White
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 June, I provided predictions for 18 dividend growth companies that have historically announced annual payout increases during July. In this article I’ll look at another 15 dividend growth companies that I expect will announce their annual dividend increases in August.
Going forward, I’m going to change the format of this series. Rather than provide a paragraph or two for each stock, I’ll do that for only a few of the more interesting stocks (by which I mean companies that are either well-known or broadly held, or are going through unique events). I will still provide predictions for all the stocks I cover, but my explanation will be limited to 1 – 2 sentences for each. Let me know what you think about the new format!
Before we get to my predictions, there were several other companies that announced their annual dividend increases in July:
– Irish medical instrument company STERIS plc (STE) boosted its dividend by 9.3% to $1.88. This is the company’s 18th year of dividend growth and gives the company a forward yield of 0.83%.
– Regional bank 1st Source (SRCE) boosted its dividend by 3.2%. The company now has a forward yield of 2.65% as it posts its 36th year of dividend growth.
– Bank of America (BAC) extended its streak to 10 years of dividend growth with a 4.8% boost to give the company a forward yield of 2.60%.
– Investment mega-company Goldman Sachs (GS) raised its dividend for the 11th straight year. The 25% increase gives the company a forward yield of 3.00%.
– And Healthcare Services Group (HCSG) continued its pattern of quarterly dividend increases by boosting its dividend by 0.6%. With 19 years of dividend growth under its belt, HCSG now yields 5.96%.
And with that… here are the results from my last article (as always, the original predictions are available here), followed by my predictions for the dividend increases that I’m expecting to be announced in August:
(All yields are based on stock prices at the market close on Friday, July 29th.)
Results for Dividend Increase Announcements from July
Community Bank System, Inc. (CBU) – 30 years of dividend growth
Prediction: 1.2 – 3.5% increase to $1.74 – $1.78
Actual: 2.4% increase to $1.72
Forward yield: 2.55%
This New York State-based bank extended its dividend growth streak, despite the drop in EPS in the first quarter of its fiscal year.
The Clorox Company (CLX) – 45 years
Prediction: 0 – 0.9% increase to $4.64 – $4.68
Actual: 1.7% increase to $4.72
Forward yield: 3.33%
Revenues and EPS fell for the consumer products company, resulting in a minimal dividend boost.
Cintas Corporation (CTAS) – 39 years
Prediction: 23.7 – 28.9% increase to $4.70 – $4.90
Actual: 21.1% increase to $4.60
Forward yield: 1.08%
In addition to yet another outstanding dividend boost, the business services company increased its stock buyback program by another $1B.
Community Trust Bancorp, Inc. (CTBI) – 42 years
Prediction: 3.8 – 6.3% increase to $1.66 – $1.70
Actual: 10.0% increase to $1.76
Forward yield: 4.06%
Despite a drop in earnings, the Kentucky-based bank rewarded investors with a good dividend increase this year.
Duke Energy Corporation (DUK) – 18 years
Prediction: 1.5 – 2.5% increase to $4.00 – $4.04
Actual: 2.0% increase to $4.02
Forward yield: 3.66%
As expected, the mega-utility announced a modest payout boost.
Green County Bancorp, Inc. (GCBC) – 9 years
Prediction: 7.7 – 10.3% increase to $0.56 – $0.58
Actual: 7.7% increase to $0.56
Forward yield: 1.22%
It’s another 4-cent annual increase (this is the 4th year in a row) for investors in the New York State-based bank.
The Hershey Company (HSY) – 13 years
Prediction: 11.1 – 13.3% increase to $4.00 – $4.08
Actual: 15.0% increase to $4.144
Forward yield: 1.82%
Between acquisitions and the country’s sweet tooth, Hershey continues to reward investors with a growing dividend.
Landstar System, Inc. (LSTR) – 9 years
Prediction: 12.0 – 20.0% increase to $1.12 – $1.20
Actual: 20.0% increase to $1.20
Forward yield: 0.77%
The transportation management company doubled its EPS in 2021 and followed through with another 66% growth in the first quarter of 2022, leading to this year’s 20% boost.
McKesson Corporation (MCK) – 15 years
Prediction: 10.6 – 12.8% increase to $2.08 – $2.12
Actual: 14.9% increase to $2.16
Forward yield: 0.63%
As McKesson transforms itself into a diversified healthcare company, earnings growth is ramping up. The company beat my expectations for its dividend increase this year.
Mondelez International, Inc. (MDLZ) – 9 years
Prediction: 8.6 – 11.4% increase to $1.52 – $1.56
Actual: 10.0% increase to $1.54
Forward yield: 2.40%
Like Hershey above, the maker of Oreo cookies is benefitting from the world’s sweet tooth.
MGE Energy, Inc. (MGEE) – 46 years
Prediction: 3.9 – 5.2% increase to $1.61 – $1.63
Actual: Deferred to August
The operator of Madison Gas & Electric should announce its annual dividend boost in early August.
Marsh & McLennan Companies, Inc. (MMC) – 13 years
Prediction: 13.1 – 16.8% increase to $2.42 – $2.50
Actual: 10.3% increase to $2.36
Forward yield: 1.44%
The consulting company’s latest dividend increase is higher than its long-term average growth rate of 9%.
Altria Group, Inc. (MO) – 12 years
Prediction: 3.3 – 4.4% increase to $3.72 – $3.76
Actual: Deferred to August
The tobacco company reaffirmed its 4 – 7% expected growth rate in 2022 in its latest quarterly earnings report. Altria also marked down the value of its JUUL holdings by 70% due to regulatory actions. The company should announce its annual dividend increase in late August.
PPG Industries, Inc. (PPG) – 51 years
Prediction: 4.2 – 5.9% increase to $2.46 – $2.50
Actual: 5.1% increase to $2.48
Forward yield: 1.92%
With uncertainties in the supply chain and inflationary pressures, the specialty chemical company’s annual increase was lower than its average growth rate.
Republic Services, Inc. (RSG) – 19 years
Prediction: 7.6 – 8.7% increase to $1.98 – $2.00
Actual: 7.6% increase to $1.98
Forward yield: 1.43%
The waste management services company’s latest dividend increase is right in line with its long-term growth rate.
The J. M. Smucker Company (SJM) – 25 years
Prediction: 5.5 – 7.1% increase to $4.18 – $4.24
Actual: 3.0% increase to $4.08
Forward yield: 3.08%
Dividend growth slowed more than I expected at Smuckers as the company goes through a restructuring.
The ScottsMiracle-Gro Company (SMG) – 12 years
Prediction: 1.5 – 3.0% increase to $2.68 – $2.72
Actual: Deferred to August
ScottsMiracle-Gro should announce its dividend increase in the first week of August.
Stanley Black & Decker, Inc. (SWK) – 55 years
Prediction: 4.4 – 5.7% increase to $3.30 – $3.34
Actual: 1.3% increase to $3.20
Forward yield: 3.29%
Between inflation and the closure of its Russian business operations, Stanley, Black and Decker is retrenching.
Skyworks Solutions, Inc. (SWKS) – 7 years
Prediction: 11.6 – 15.2% increase to $2.50 – $2.58
Actual: Deferred to August
The chip manufacturer should announce its annual increase when it reports quarterly earnings on August 4th.
Walgreen Boots Alliance (WBA) – 47 years
Prediction: 2.1 – 3.7% increase to $1.95 – $1.98
Actual: 0.5% increase to $1.92
Forward yield: 4.85%
Walgreen Boots Alliance continues to suffer with slow earnings growth, forcing minimal annual payout increases as the company keeps its dividend growth streak alive.
Essential Utilities, Inc. (WTRG) – 30 years
Prediction: 6.0 – 7.0% increase to $1.1372 – $1.1479
Actual: Deferred to August
The water and natural gas utility company should announce its annual payout boost when it reports earnings on August 3rd.
Predictions for Dividend Increases for August
There are 15 companies I expect to announce their annual dividend increases in August. Here are my predictions for three featured companies:
Intuit Inc. (INTU) – 10 years of dividend growth
The financial software company began with the development of the TurboTax and QuickBooks brands. Since then, Intuit has incorporated the Mint, Credit Karma, and Mailchimp brands into its business lines, with the latter two being acquired in 2020 and 2021 respectively in combined cash and stock deals. And while the acquisition of Mailchimp, with its ability to help companies engage with their customer base through email, doesn’t seem to fit with the financial themes of the other brands, it does support Intuit transitioning to a small and medium business services company. The acquisitions have required an explosion of outstanding shares, but the company is still projecting adjusted EPS growth in the 20% range for fiscal 2022, boosted by 30% year-over-year revenue growth. With the continued earnings growth, investors can look forward to another year of good dividend growth.
Prediction: 14.7 – 17.6% increase to $3.12 – $3.20
Predicted Forward Yield: 0.68 – 0.70%
Illinois Tool Works Inc. (ITW) – 47 years
The diversified industrial manufacturer pulled back on its dividend growth last year, boosting its payout by 7% – roughly half the company’s long-term growth rate. Investors should see the dividend growth return to normal rates soon – Illinois Tool Works saw EPS grow by 28% in fiscal 2021, and is guiding to 7 – 10% growth in fiscal 2022. Organic revenues are up in six of the company’s seven business segments, and the company is responding to supply chain issues by increasing its inventory. While this may pull revenue from future years, it positions the company to respond to customer’s needs better than some of its competitors. In addition to using free cash flows to prepare for the future and boost its dividend, Illinois Tool Works has also bought back 8% of its outstanding shares over the last 5 years. All this bodes well for investors, who should see an increase this year in the low teens.
Prediction: 12.3 – 13.9% increase to $5.48 – $5.56
Predicted Forward Yield: 2.64 – 2.68%
Verizon Communications Inc. (VZ) – 17 years
The telecommunications company continues to make massive investments, and is expecting to spend roughly $23 billion on capital improvements, including $5 – $6 billion to deploy the C-band 5G network. So while the company’s continues to generate free cash flow, much of it is dedicated to capital spending. This is an ongoing theme from Verizon, which explains the minimal dividend growth that investors have received. Although the company’s outsized dividend somewhat makes up for that, it’ll take nearly four decades of 2% annual growth to double your yield-on-cost.
Investors can expect another year of minimal growth. Although adjusted EPS rose 10% in fiscal 2021, Verizon has lowered its guidance for fiscal 2022 and is now expecting a drop of 3%, primarily due to lowered expected revenues. Watch for Verizon to announce another 2%-ish dividend boost – enough to keep the dividend growth streak alive but not enough to keep up with inflation.
Prediction: 1.6 – 3.1% increase to $2.60 – $2.64
Predicted Forward Yield: 5.63 – 5.72%
My predictions for 12 other companies which should announce annual increases in August is below:
| Company | Years of Dividend Growth | Industry | Prediction (%) | New Annual Rate |
| American Financial Group (AFG) | 16 | Insurance | 11.6% – 13.4% | $2.50 – $2.54 |
| AFG consistently boosts dividend by ~12%. The insurer has paid out $16 in special dividends over the last 12 months, including an $8 special dividend in May. | ||||
| BancFirst Corporation (BANF) | 28 | Regional Banking | 2.8% – 5.6% | $1.48 – $1.52 |
| The regional banking company saw increased margins from the Fed’s interest rate hikes, but lower fees from the end of the paycheck protection program. | ||||
| Badger Meter (BMI) | 29 | Electrical Equipment | 5.0% – 10.0% | $0.84 – $0.88 |
| The company, which has zero debt, has consistently increased its annual dividend by 4 – 8 cents. | ||||
| Broadridge Financial Solutions (BR) | 15 | IT Services | 9.4% – 12.5% | $2.80 – $2.88 |
| Broadridge is guiding to 14% revenue and EPS growth in 2022. The company has consistently boosted its dividend by double-digits. | ||||
| CBOE Global Markets (CBOE) | 12 | Financial Data | 10.4% – 14.6% | $2.12 – $2.20 |
| CBOE Global has little debt and is guiding to 10% revenue growth for 2022. | ||||
| Carlisle Companies (CSL) | 45 | Building Materials | 4.6% – 7.4% | $2.26 – $2.32 |
| Carlisle is coming off small increases in 2020 and 2021 after a 25% increase in 2019. Full year 2021 EPS grew by 36%, and EPS have more than tripled in the first 6 months of 2022. The stock recently broke out to new highs. | ||||
| Dover Corporation (DOV) | 66 | Specialty Industrial Machinery | 3.0% – 6.0% | $2.06 – $2.12 |
| The diversified manufacturer has one of the longest records of dividend growth among all publicly traded companies. However, the growth has been very small, with four straight years of 4-cent annual growth. With 2021 adjusted EPS up 35% and guidance for 2022 between 10 and 13%, I expect Dover to break that streak this year. | ||||
| Federal Realty Investment Trust (FRT) | 54 | Retail REIT | 2.8% – 4.7% | $4.40 – $4.48 |
| Federal Realty is guiding to 5 – 9% growth in funds from operation (FFO is used by REITs as a proxy for earnings). I expect the company to increase its dividend growth rate above last year’s 1% boost. | ||||
| International Flavors & Fragrances (IFF) | 19 | Specialty Chemicals | 3.8% – 6.3% | $3.28 – $3.36 |
| IFF swung to earnings growth in the first quarter of fiscal 2022 after posting a loss in the same period last year. However, 2021 full year EPS growth was flat year-over-year. | ||||
| Nordson Corporation (NDSN) | 58 | Specialty Industrial Machinery | 13.7% – 19.6% | $2.32 – $2.44 |
| Nordson saw strong demand for its products. However, foreign currency conversion and China’s COVID shutdowns are hurting earnings in the first quarter of fiscal 2022. | ||||
| Ritchie Bros. Auctioneers (RBA) | 21 | Specialty Business Services | 5.0% – 8.0% | $1.05 – $1.08 |
| 2021 revenue and EPS were up 3%, with higher services revenue offsetting lower auction revenue. I expect this year’s boost to be in line with the company’s average growth rate of 6.5 – 8%. | ||||
| Westlake Corporation (WLK) | 18 | Specialty Chemicals | 14.3% – 21.0% | $1.36 – $1.44 |
| Westlake was able to pass on price increases in the strong housing market in 2021, and posted a more than five-fold increase in EPS. | ||||
Summary
So much for a slow summer. Even as the economy slips into recession, there are still many companies that are building on their dividend growth history to extend their record. While not every company will end up like Dover – which has been growing its dividend since the Eisenhower administration – the predictability of a consistently growing dividend can provide at least some protection against inflation. And although some companies’ increases won’t keep up with inflation, even smaller increases help mitigate the effects of inflation. The pressures on a company to continue growing its payout, once it has established itself as a dividend growth company, are immense and freezing or cutting a dividend is usually a last resort. (Although it does happen – witness AT&T earlier this year.)
July brought a good number of dividend increases, many of which more than offset inflation. Double-digit boosts came in from Cintas, Community Trust Bancorp, Hershey, Landstar System, McKeesson, Mondelez, and Marsh & McClellan.
The double-digit boosts will continue into August, as American Financial Group, CBOE Global Markets, Intuit, Illinois Tool Works, Nordson, and Westlake Corporation are all expected to come in with 10%+ increases. Long time dividend growth company Dover should extend its streak to 67 years with a modest boost.
I hope that the new format makes it easier for you to go through the article. Please let me know what you think in the comments!
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