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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 November, I provided predictions for 15 dividend growth companies that have historically announced annual payout increases in December. In this article, I’ll look at another 15 dividend growth companies that I expect will announce their annual dividend increases in January.
Before I do that, there were several other companies with long-term dividend growth histories that announced increases in December:
– In addition to Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY), Merck (NYSE:MRK), and Bristol Myers (NYSE:BMY), drugmaker Amgen (AMGN) announced their annual dividend increase – a 10.2% increase to $7.76, giving the drug company a forward yield of 3.45%. This is Amgen’s 12th year of dividend growth.
– Utility WEC Energy Group (WEC) announced its 19th year of dividend growth by increasing its payout by 7.4% to $2.91, giving the company a forward yield of 3.00%.
– Industrial company Pentair (PNR) announced its 46th year of dividend growth, when accounting for its recent spinoff of nVent (NYSE:NVT), with a 5.0% boost to an annual rate of 84 cents. Pentair now has a forward yield of 1.15%.
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 January:
(All yields are based on stock prices at the market close on Friday, December 31st)
Results for Dividend Increase Announcements from December
Abbott Laboratories (ABT) – 50 years of dividend growth
Prediction: 20.0 – 25.6% increase to $2.16 – $2.26
Actual: 4.4% increase to $1.88
Forward yield: 1.39%
Abbott Labs decided not to follow up last year’s 25% boost with another large increase but added $5 billion to its existing share buyback program.
Broadcom (AVGO) – 13 years
Prediction: 8.3 – 11.1% increase to $15.60 – $16.00
Actual: 13.9% increase to $16.40
Forward yield: 2.46%
The tech company’s latest dividend increase was larger than last year’s 11% boost.
Balchem Corporation (BCPC) – 12 years
Prediction: 10.3% increase to $0.64
Actual: 10.3% increase to $0.64
Forward yield: 0.38%
It’s the 12th year of double-digit increases for the chemical company.
Franklin Resources (BEN) – 42 years
Prediction: 7.1 – 10.7% increase to $1.20 – $1.24
Actual: 3.6% increase to $1.16
Forward yield: 3.46%
Despite high earnings growth, the investment company boosted its dividend by 3.6% for the 2nd year in a row.
Bristol Myers Squibb Company (BMY) – 16 years
Prediction: 9.2 – 12.2% increase to $2.14 – $2.20
Actual: 10.2% increase to $2.16
Forward yield: 3.46%
The drugmaker’s confidence in its product pipeline is benefitting income investors. This increase follows last year’s 9% boost.
Ecolab Inc. (ECL) – 30 years
Prediction: 2.1 – 5.2% increase to $1.96 – $2.02
Actual: 6.1% increase to $2.04
Forward yield: 0.87%
This is the first time in three years that Ecolab boosted its annual dividend by more than 4 cents.
Eastman Chemical Company (EMN) – 13 years
Prediction: 7.2 – 10.9% increase to $2.96 – $3.06
Actual: 10.1% increase to $3.04
Forward yield: 2.51%
The specialty material company is able to pass on increased costs to customers and higher dividends to investors.
Graco (GGG) – 25 years
Prediction: 10.5 – 15.8% increase to $0.84 – $0.88
Actual: 10.5% increase to $0.84
Forward yield: 1.04%
The industrial equipment manufacturer’s latest dividend boost was powered by 33% EPS growth in 2021.
Eli Lilly and Company (LLY) – 9 years
Prediction: 8.8 – 11.2% increase to $3.70 – $3.78
Actual: 15.2% increase to $3.92
Forward yield: 1.42%
Like Bristol Myers, Eli Lilly is showing confidence in its drug pipeline with a very nice dividend increase for investors.
Mastercard Incorporated (MA) – 11 years
Prediction: 15.9 – 20.5% increase to $2.04 – $2.12
Actual: 11.4% increase to $1.96
Forward yield: 0.55%
The payment processor’s 11.4% boost this year is below its 5-year average growth rate of 18%.
McCormick & Company (MKC) – 23 years
Prediction: 8.8 – 11.8% increase to $1.48 – $1.52
Actual: 8.8% increase to $1.48
Forward yield: 1.53%
The flavoring and seasoning company’s latest dividend increase is in line with its 9% average growth rate over the last decade.
Merck & Co., Inc. (MRK) – 12 years
Prediction: 4.6 – 7.7% increase to $2.72 – $2.80
Actual: 6.2% increase to $2.76
Forward yield: 3.60%
Despite a small earnings drop this year, drugmaker Merck continues to be committed to annual dividend increases.
Nucor Corporation (NUE) – 49 years
Prediction: 2.5 – 4.9% increase to $1.66 – $1.70
Actual: 23.5% increase to $2.00
Forward yield: 1.75%
Nucor gets the surprise of the month award for December. After many years of minimal dividend growth, the iron and steel company announced a massive increase to its dividend.
Pfizer (PFE) – 12 years
Prediction: 10.3 – 15.4% increase to $1.72 – $1.80
Actual: 2.5% increase to $1.60
Forward yield: 2.71%
Despite benefitting from its development of a Covid vaccine, Pfizer’s dividend boost this year was disappointing as it didn’t even meet the company’s usual dividend growth rate.
SEI Investments Company (SEIC) – 31 years
Prediction: 8.1 – 10.8% increase to $0.80 – $0.82
Actual: 8.1% increase to $0.80
Forward yield: 1.31%
With the return of EPS growth after a rebranding, SEI Investments resumed its usual rate of dividend growth.
Stryker Corporation (SYK) – 29 years
Prediction: 10.3 – 13.5% increase to $2.78 – $2.86
Actual: 10.3% increase to $2.78
Forward yield: 1.04%
The medical manufacturer resumed its pattern of double-digit dividend growth after last year’s 9% increase.
The Hanover Insurance Group (THG) – 18 years
Prediction: 7.1 – 10.0% increase to $3.00 – $3.08
Actual: 7.1% increase to $3.00
Forward yield: 2.29%
Investment gains offset a drop in operating earnings at the insurer in 2021.
The Toro Company (TTC) – 19 years
Prediction: 12.4 – 18.1% increase to $1.18 – $1.24
Actual: 14.3% increase to $1.20
Forward yield: 1.20%
The manufacturer of residential and industrial equipment kept its record of double-digit payout growth going in 2021.
Predictions for Dividend Increases in January
Here are my predictions for the 15 dividend increases I expect in January:
Archer-Daniels-Midland Company (ADM) – 46 years of dividend growth
Agricultural processor and S&P 500 component ADM saw good growth across all business segments in the first three quarters of the fiscal year, which boosted adjusted EPS to $3.69. Even with zero growth in the 4th quarter, this pace has the company looking at 37% growth year-over-year. Investors can look at a decent dividend boost this year after a small 3% increase in 2020 – something closer to the company’s 10-year growth rate of 10%.
Prediction: 9.2 – 11.8% increase to $1.66 – $1.70
Predicted Forward Yield: 2.46 – 2.52%
Anthem (ANTM) – 11 years
The health insurer has been raising its earnings guidance all year and, after a small drop in EPS last year, is looking at EPS growth of 37% for 2021. With this level of earnings growth, the 60% debt-to-equity ratio is not an issue for Anthem. The earnings growth is being driven by a membership increase of 5.6% and by acquisitions of multiple companies. Although the company continues to buy back stock, investors can look forward to a dividend boost on the order of last year’s 19% boost.
Prediction: 18.6 – 20.4% increase to $5.36 – $5.44
Predicted Forward Yield: 1.16 – 1.17%
Air Products and Chemicals (APD) – 39 years
Air Products is in the middle of restructuring its business segments but continues to hit home runs when it comes to earnings. As it approaches its 40th year of dividend growth, the company has an outstanding record of rewarding investors. With 5- and 10-year dividend growth rates of 10 – 11% per year, investors have seen their yield on cost double every 7 years. Air Products grew adjusted EPS by 7.6% to $9.02 last year, giving the company a payout ratio of 67%, and is guiding to adjusted EPS growth of 13 – 15% in fiscal year 2022. With this continued growth, investors can look forward to another double-digit dividend boost.
Prediction: 10.0 – 11.3% increase to $6.60 – $6.68
Predicted Forward Yield: 2.17 – 2.20%
Apogee Enterprises (APOG) – 11 years
Small cap Apogee Enterprises ($1.24 billion market cap) gets most of its revenue from the architectural market. The company’s three largest business segments are the Framing Systems, Glass and Services segments, which provide aluminum framing products, high-performance architectural glass, and installation services to customers, respectively. The company’s adjusted EPS were flat in fiscal 2021 and are expected to be flat in 2022. But with a reasonable debt-to-equity level of 35% and a payout ratio around 40%, the company will be able to extend its dividend growth streak to 12 years in January. Unfortunately, for investors, it won’t be at the 9% compounded growth rate that they’ve come to expect over the last decade. Investors should expect a boost closer to last year’s 7% increase.
Prediction: 5.0 – 7.5% increase to $0.84 – $0.86
Predicted Forward Yield: 1.74 – 1.79%
Booz Allen Hamilton Holding Company (BAH) – 9 years
As a consulting company that serves the military and other government agencies, Booz Allen’s fortunes rise and fall on Federal Government spending. With Government spending exploding over the last several years, Booz Allen has seen its consulting headcount grow, resulting in EPS growth. Adjusted EPS in fiscal 2021 (which ended March 31, 2021) grew 23% as the company’s contract base expanded and the company is looking at another 8% adjusted EPS growth in fiscal 2022. Given the slowing earnings growth, I doubt that investors will see another 20% boost like last year, but they’ll still see a double-digit boost.
Prediction: 13.5 – 16.2% increase to $0.84 – $0.86
Predicted Forward Yield: 0.99 – 1.01%
Blackrock (BLK) – 12 years
As the giant in the financial industry, with more than $9 trillion in assets under management, Blackrock is benefitting from the run-up in the stock market. After 2020 EPS growth of 19%, EPS are up another 27% in the first 9 months of 2021. The company is in a good financial position, with little debt and a payout ratio slightly below 50%. Long-term investors in Blackrock have grown accustomed to double-digit dividend growth and they’ll be able to look forward to another year, one which likely exceeds last year’s 14% boost.
Prediction: 13.8 – 18.0% increase to $18.80 – $19.50
Predicted Forward Yield: 2.05 – 2.13%
Church & Dwight Company (CHD) – 25 years
Like many manufacturers of consumer products, Church & Dwight – owners of the Arm & Hammer and Oxiclean brands, among others – is seeing increases in the costs of the commodities and other inputs needed to manufacture their products. The company has been able to pass these costs along, but with the effect of reducing sales. This is resulting in a deceleration of EPS growth in 2021; after growing adjusted EPS by nearly 15% in 2020, Church & Dwight is expecting 6% growth in 2021. Investors should expect that the company will begin its 2nd quarter century of dividend growth with a boost around that of last year’s 5% increase.
Prediction: 4.0 – 6.9% increase to $1.05 – $1.08
Predicted Forward Yield: 1.02 – 1.05%
Cincinnati Financial Corporation (CINF) – 61 years
Things are looking up for Cincinnati Financial. Over the first 9 months of 2021, the company’s non-GAAP EPS have more than doubled and its combined ratio dropped from 102% to below 90% year-over-year. (The combined ratio is the ratio between the sum of insurance losses and business expenses and the total premiums collected, and is a measure of profitability for insurance companies. The lower the percentage, the higher the profitability.) Cincinnati Financial is a conservatively managed company – as demonstrated by a 61-year dividend growth history – so although the company is seeing dramatically higher profitability, the company is likely to boost its dividend in line with its long-term growth average of 4 – 6%.
Prediction: 4.8 – 6.3% increase to $2.64 – $2.68
Predicted Forward Yield: 2.32 – 2.35%
California Water Service Group (CWT) – 54 years
California Water provides utility services to customers in California, New Mexico, Texas, Washington State, and Hawaii. Last year, investors saw an acceleration in dividend growth, with the 8% boost more than twice the decade-long 4% average growth rate. This increase was driven by a nearly 50% increase in EPS, resulting from rate relief granted by California State. The benefits from that rate relief are continuing into 2021, with EPS up 15% year-over-year in the first 9 months of the year. This means that California Water investors can look forward to another year of good dividend growth.
Prediction: 5.4 – 8.7% increase to $0.97 – $1.00
Predicted Forward Yield: 1.35 – 1.39%
Enterprise Bancorp (EBTC) – 28 years
This Lowell, Massachusetts-based small cap bank ($520 million market cap) has a modest dividend growth rate of 6% over the last decade. The company’s earnings fell in 2020, down 6% to $2.64 a share, due mostly to an increase in the provision for losses on loans due to the pandemic-induced recession. But as the country comes out of the recession and concerns about loans going bad begins to recede, the company has reduced its loan loss provision and earnings are rebounding, with EPS in the first 9 months of 2021 by more than 40% and which, even if Enterprise Bancorp sees no EPS growth in the 4th quarter, would result in overall full year EPS growth of 30%. With that type of EPS growth, investors can look forward to a dividend boost higher than last year’s 6% increase and perhaps something in the double-digits.
Prediction: 6.3 – 10.8% increase to $0.79 – $0.82
Predicted Forward Yield: 1.76 – 1.83%
Consolidated Edison (ED) – 47 years
This electric utility serves customers in New York City and its suburbs, including northern New Jersey. Con Ed has been hit with losses from some of its investments, including a natural gas venture and a renewable electric production project. Excluding these one-time events, EPS fell 5% in 2020 and will be flat in 2021. Given the high (72%) payout ratio and a large debt-to-equity ratio (greater than 100%), investors can expect another small increase from the company, similar to last year’s 4-cent annual boost.
Prediction: 1.3 – 1.9% increase to $3.14 – $3.16
Predicted Forward Yield: 3.68 – 3.70%
Fastenal Company (FAST) – 22 years
The distributor of industrial and construction products has expanded into logistics and supply chain operations. With that expansion and the continuing recovery of the economy from the pandemic, Fastenal’s EPS continues to grow although it is starting to slow. Full year EPS growth in 2020 was 8.4% and is being followed up by 4.4% growth through the first 9 months of 2021. The company historically has rewarded investors with double-digit dividend growth; last year’s 12% boost was slightly below the 10-year growth average of 14%. With the slowing growth, investors can expect to see dividend growth slow as well. I’m expecting an increase in the high single digits, with a small chance of a 10%+ increase.
Prediction: 7.1 – 10.7% increase to $1.20 – $1.24
Predicted Forward Yield: 1.87 – 1.94%
Franklin Electric Company (FELE) – 29 years
Franklin Electric focuses on the manufacturing and distribution of products that move and manage the use of water and fuel. The company has made two all-cash acquisitions this year of companies that supply water purification products – New Aqua, LLC and California-based Puronics – to expand into a new and complimentary business area. With these acquisitions and sales growth across all business segments, EPS growth is expected to be around 40%, giving the company plenty of room for a good dividend increase. The company’s 5-year growth rate is 11%, and it looks like investors can expect at least that large a dividend increase in January.
Prediction: 9.1 – 17.1% increase to $0.77 – $0.82
Predicted Forward Yield: 0.81 – 0.87%
Kimberly-Clark Corporation (KMB) – 49 years
Revenues are up for the personal products and paper company, but earnings are down year-over-year. The main culprit for this is what the company calls “higher input costs” – i.e., inflation is hitting the prices of the products that Kimberly-Clark uses to manufacture its products. While the company is starting to pass those increased costs onto consumers, it will take time for earnings to catch up. The company has slowly decreased its guidance for 2021 EPS over the first three quarters of the year; the company is now looking at a 20% drop in adjusted EPS for the full year. With these headwinds, I expect Kimberly-Clark will mark a half-century of dividend growth with a small dividend boost.
Prediction: 1.3 – 2.6% increase to $4.62 – $4.68
Predicted Forward Yield: 3.23 – 3.27%
S&P Global Inc. (SPGI) – 48 years
S&P Global’s revenues and earnings grew in the first 9 months of the year across all business segments – EPS are up 14% in the Ratings segment; 6% in the Market Intelligence segment; 7% in the Platts segment; and 16% in the Indices segment. While many companies with a nearly half-century dividend growth history have seen their growth rates slow, S&P Global’s dividend growth has been accelerating, with the company’s 5-year growth rate of 16% exceeding its 10-year growth rate of 11.5%. Although S&P Global has a heavy 225% debt-to-equity load, the company’s earnings growth means investors can expect another good payout boost – probably something along the lines of last year’s 15% increase.
Prediction: 13.6 – 16.2% increase to $3.50 – $3.58
Predicted Forward Yield: 0.74 – 0.76%
Summary
The theme for dividend growth investors in December was drugs and health care. Pfizer, Eli Lilly, Bristol Myers, Merck, and Amgen – all announced their annual increases in December and while most were as expected, it was Eli Lilly that surprised to the upside while Pfizer’s annual increase of 4 cents was disappointing, to say the least.
Other health care companies that rewarded investors with a dividend boost included medical device manufacturers Stryker and Abbott Labs. Although EPS growth would have justified it, Abbott limited its dividend boost to below 5%.
January will bring another group of companies with long-term dividend growth histories. Investors can expect double-digit boosts from healthcare insurer Anthem, chemical company Air Products, consulting company Booz-Allen, investment company Blackrock, and financial intelligence company S&P Global. Insurer Cincinnati Financial should extend its record to 62 years, and consumer products company Kimberly-Clark should hit the half-century mark with a small dividend increase.