Every week, I review the list of dividend increases as part of my monitoring process. I usually focus my attention on companies that have managed to boost annual dividends for at least a decade (1). This increases the odds of identifying companies that pay dependable dividends, and are committed to growing them over time.
I then also review the trends in operating performance, such as earnings per share, in order to determine whether the business can support future dividend hikes. I follow a similar, but slightly more detailed process every few weeks or so, when I screen the list of dividend champions (2) and contenders for investment opportunities. All of this helps me familiarize myself with the story of as many companies as possible. That way, when the right quality company is available for sale at a good valuation, I can take action.
There were several companies which raised dividends to shareholders over the past week. The companies include:
3M Co (NYSE:MMM) operates as a diversified technology company worldwide. The company raised its quarterly dividend by 6.80% to $1.175/share. This marked the 59th consecutive annual dividend increase for this dividend king. Over the past decade, 3M Co (NYSE:MMM) has managed to boost annual dividends at a rate of 9.30%/year. This was supported by an increase in earnings per share from $5.60 in 2007 to $8.16/share in 2016. The company is expected to earn $8.61/share in 2017 and $9.38/share in 2018. The stock is overvalued at 20.80 times forward earnings and yields 2.60%. I would be interested in 3M on dips below $163/share. Check my analysis of 3M Co (NYSE:MMM) for more information about the company.
Archer-Daniels-Midland Company (NYSE:ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products. The company raised its quarterly dividend by 6.70% to 32 cents/share. This marked the 42nd consecutive annual dividend increase for this dividend champion (3). Over the past decade, Archer Daniels Midland Company (NYSE:ADM) has managed to boost annual dividends at a rate of 12.70%/year. This rapid growth in dividends was achieved mainly through expansion of its dividend payout ratio.
Earnings per share have decreased from $3.30 in 2006 to $2.98 in 2015. The company is expected to earn $2.21/share in 2016 and $2.90/share in 2017. This explains the slowing of its dividend growth. The stock is at 19.80 times forward earnings and yields 2.90%. Given the lack of earnings growth from Archer Daniels Midland Company (NYSE:ADM), I view this stock as a hold at most at the present time.
Hasbro, Inc. (NASDAQ:HAS), together with its subsidiaries, provides children’s and family leisure time products and services worldwide. It operates through its U.S. and Canada, International, Entertainment and Licensing, and Global Operations segments. The company raised its quarterly dividend by 11.80% to 57 cents/share. This marked the 14th consecutive annual dividend increase for this dividend contender. Over the past decade, Hasbro, Inc. (NASDAQ:HAS) has managed to boost annual dividends at a rate of 18.60%/year. This was supported by an increase in earnings per share from $1.97 in 2007 to $4.43/share in 2016.
The company is expected to earn $4.66/share in 2017 and $4.97/share in 2018. The stock is overvalued at 21 times forward earnings and yields 2.40%. In general, I have been hesitant to buy into companies from that industry, because I view them as cyclical, overly dependent on the success of hit toys and shifts in consumer tastes, and the difficulty in identifying the one player with recurring income streams. Hasbro, Inc. (NASDAQ:HAS) has been a success over the past decade, but its close competitor Mattel has not done as well. In light of the high valuation of the former, I am not interested in it at the moment.