Despite having to continually invest in new technologies, Verizon should announce its 18th year of dividend growth in late August. Cindy Ord
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 20 dividend growth companies that have historically announced annual payout increases in July. In this article I’ll look at another 16 dividend growth companies that I expect will announce their annual dividend increases in August.
Before I get to that, I want to note four other companies that also announced annual dividend increases in July:
– Heavy equipment manufacturer Cummins Inc. (CMI) announced its 19th year of dividend growth with a 7.0% increase to an annual rate of $6.72. Cummins now has a forward yield of 2.60%.
– Real estate investment trust NNN REIT (NNN) announced a 2.7% increase to an annual rate of $2.26. The company’s 34th year of dividend growth gives it a forward yield of 5.26%.
– Kellogg Company (K) started a third decade of dividend growth with a 1.7% increase for a payout of $2.40 a year. The food company has a forward yield of 3.55%.
– Finally, State Street Corporation (STT) announced its 14th year of dividend growth with a 9.5% increase to an annual $2.76. State Street now sports a forward yield of 3.88%.
Here are the results from my predictions from July (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 28th.)
Results for Announcements of Dividend Increases from July
Community Bank System, Inc. (CBU) – 32 years
Prediction: 1.1 – 3.4% increase to $1.78 – $1.82
Actual: 2.3% increase to $1.80
Forward yield: 3.42%
It’s the 4th straight year of 4-cent annual dividend growth for the regional bank.
The Clorox Company (CLX) – 47 years of dividend growth
Prediction: 0 – 1.7% increase to $4.72 – $4.80
Actual: 1.7% increase to $4.80
Forward yield: 3.12%
Dividend growth has slowed dramatically at the consumer products company, with another year of sub-2% dividend growth.
Cintas Corporation (CTAS) – 40 years
Prediction: 14.8 – 16.5% increase to $5.28 – $5.36
Actual: 17.4% increase to $5.40
Forward yield: 1.07%
I expected an increase in the mid-teens from Cintas but underestimated the business services company.
Community Trust Bancorp, Inc. (CTBI) – 44 years
Prediction: 4.5 – 6.8% increase to $1.84 – $1.88
Actual: 4.5% increase to $1.84
Forward yield: 4.75%
The Kentucky-based regional bank’s dividend growth rate slowed from 10% last year.
Duke Energy Corporation (DUK) – 20 years
Prediction: 2.0 – 3.0% increase to $4.10 – $4.14
Actual: 2.0% increase to $4.10
Forward yield: 4.35%
The utility fell short of its expected adjusted EPS growth of 5 – 7%, resulting in another small dividend boost.
Greene County Bancorp, Inc. (GCBC) – 11 years
Prediction: 7.1 – 14.3% increase to $0.30 – $0.32
Actual: 14.3% increase to $0.32
Forward yield: 0.93%
The New York State-based bank broke its streak of 2-cent annual dividend growth with a nice boost this year.
The Hershey Company (HSY) – 15 years
Prediction: 12.0 – 15.0% increase to $4.641 – $4.766
Actual: 15.0% increase to $4.766
Forward yield: 2.02%
This is the second straight year of 15% dividend growth from the candy company.
Landstar System, Inc. (LSTR) – 11 years
Prediction: 13.3 – 16.7% increase to $1.36 – $1.40
Actual: 10.0% increase to $1.32
Forward yield: 0.65%
Dividend growth slowed at the logistics and transportation company from last year’s 20% boost.
McKesson Corporation (MCK) – 17 years
Prediction: 6.5 – 9.3% increase to $2.30 – $2.36
Actual: 14.8% increase to $2.48
Forward yield: 0.62%
McKesson continued its pattern of double-digit boosts with a 2nd year of 15% growth.
Mondelez International, Inc. (MDLZ) – 11 years
Prediction: 5.2 – 7.8% increase to $1.62 – $1.66
Actual: 10.4% increase to $1.70
Forward yield: 2.27%
Despite falling EPS, the snack company rewarded investors with another year of double-digit dividend growth.
MGE Energy, Inc. (MGEE) – 48 years
Prediction: 4.3 – 5.5% increase to $1.70 – $1.72
Actual: Deferred to August
Utility MGE Energy should announce its latest dividend increase in mid-August.
Marsh & McLennan Companies, Inc. (MMC) – 15 years
Prediction: 10.2 – 11.9% increase to $2.60 – $2.64
Actual: 20.3% increase to $2.84
Forward yield: 1.50%
The business consulting firm rewarded investors with another good increase.
Altria Group, Inc. (MO) – 14 years
Prediction: 3.7 – 5.9% increase to $3.90 – $3.98
Actual: Deferred to August
As was pointed out to me by one of the commenters of last month’s article, Altria will announce its next dividend increase on August 24th.
PPG Industries, Inc. (PPG) – 53 years
Prediction: 6.5 – 8.1% increase to $2.64 – $2.68
Actual: 4.8% increase to $2.60
Forward yield: 1.79%
The paint and coatings company fell short of my expectations and its historical growth rate of 7% with a 2nd year of 5% dividend growth.
Republic Services, Inc. (RSG) – 21 years
Prediction: 7.1 – 8.1% increase to $2.12 – $2.14
Actual: 8.1% increase to $2.14
Forward yield: 1.41%
The waste company’s latest increase is right in line with its decade-long growth rate of 7.7%.
The J. M. Smucker Company (SJM) – 27 years
Prediction: 2.9 – 3.9% increase to $4.20 – $4.24
Actual: 3.9% increase to $4.24
Forward yield: 2.81%
The food company continues to focus on restructuring its business lines, and preserving cash by reducing dividend growth.
The Scotts Miracle-Gro Company (SMG) – 13 years
Prediction: 0 – 1.5% increase to $2.64 – $2.68
Actual: Deferred to August
The lawn and garden care company should announce its next dividend when it reports earnings on August 2nd.
Stanley Black & Decker, Inc. (SWK) – 57 years
Prediction: 0 – 1.3% increase to $3.20 – $3.24
Actual: 1.3% increase to $3.24
Forward yield: 3.27%
The tool company kept its dividend growth streak going with a minimal increase.
Skyworks Solutions, Inc. (SWKS) – 9 years
Prediction: 6.5 – 8.1% increase to $2.64 – $2.68
Actual: Deferred to August
The semiconductor company is scheduled to announce earnings on August 7th. Investors can expect the company to announce its next dividend increase then.
Walgreens Boots Alliance (WBA) – 48 years
Prediction: 1.0 – 3.1% increase to $1.94 – $1.98
Actual: 0% increase to $1.92
Forward yield: 6.44%
Walgreens Boots Alliance continues to struggle, skipping its dividend increase this year.
Predictions for Dividend Increases for August
There are 16 long-term dividend growth companies I expect to announce their annual increases in August. First, here are my predictions for three featured companies:
Intuit Inc. (INTU) – 12 years of dividend growth
Is Intuit a financial company that uses technology or a technology company that focuses on financial software? It doesn’t particularly matter – since the company switched most of its software to subscription services, revenues and earnings have been growing quickly. With services including TurboTax, Credit Karma, Mailchimp, and QuickBooks, Intuit owns software brands used by many business in the United States. The company saw EPS growth of nearly 22% last year, and is guiding to 12% revenue growth and 20% EPS growth for 2023. Intuit expects the bulk of that growth to come from businesses and self-employed individuals, and raised the segment revenue growth guidance to 24%.
Historically, Intuit has compounded dividends around 15% a year. With the earnings growth last year and expected growth this year, the company can easily match last year’s 14.7% dividend increase. But I think that the company will surprise to the upside. Intuit doesn’t have a history of buying back shares and it has a very modest payout ratio of 26%. Moreover, the company’s debt levels are modest leaving plenty of cash flow for a larger than expected payout boost this year. I believe that investors can expect an increase in the high teens and possibly as large as 20%.
Prediction: 15.4 – 19.9% increase to $3.60 – $3.74
Predicted Forward Yield: 0.70 – 0.73%
Illinois Tool Works Inc. (ITW) – 60 years
Illinois Tool Works is an industrial manufacturer with good diversification across its seven business segments: Automotive, Construction, Food Equipment, Polymers & Fluids, Specialty Products, Test & Measurement and Electronics, and Welding. The company isn’t overly dependent on one or two of the segments as each contributes between 11% and 19% of total company revenues. In 2022, five of these segments grew by more than 10%, led by Food Equipment with revenues up by 23%. The only major laggard was Specialty Products, which only grew revenues by less than 1%. Collectively, the company had organic revenue growth of 12%, which drove 15% EPS growth.
This should allow the company to meet or exceed its 5-year compounded dividend growth rate of 11.5%. However, Illinois Tool is expecting a dramatic slowdown in 2023 as the economy slows. The company provided guidance of organic growth below 5% and roughly zero EPS growth for 2023. So will Illinois Tool’s next dividend increase be based on last year’s actual growth or this year’s expected growth? I expect that the company will pull back on its payout increase this year and use excess free cash flow to continue its stock buyback program, adding to the 9% of shares it has bought back since 2018. Investors can expect an increase like last year’s 7.4% or slightly larger.
Prediction: 7.6 – 9.9% increase to $5.64 – $5.76
Predicted Forward Yield: 2.17 – 2.22%
Verizon Communications Inc. (VZ) – 19 years
Verizon runs a very cash-intensive business. The need to deploy wireless and high-speed internet to individuals and businesses around the country, and to keep upgrading these technologies, means that Verizon needs to be constantly using its free cash flow to invest in new capabilities. This, in turn, reduces the amount of free cash flow for dividend growth, and Verizon’s dividend growth rate reflects this. Despite a 5% increase last year, Verizon has compounded its dividend by less than 3% over the last decade.
The company continues to struggle with growth and earnings, as reflected in its outsized dividend yield. Verizon’s adjusted EPS fell 6% and free cash flow fell 6% in 2022. But there are small glimmers of a potential reversal in 2023, as free cash flow grew by 1.7% despite the fact that adjusted EPS are expected to drop another 9% for the full year. Capital spending – that continued investment that’s so important to keep Verizon competitive – is expected to decrease by double-digit percentages, which will make more cash potentially available for dividends.
So what does this mean for Verizon’s dividend boost this year? To summarize, Verizon has to use much of its free cash flow for investments and has a history of small dividend increases. But the expected capital investments this year leaves an opening for an increase similar to last year’s – a 5% boost, roughly double the long-term growth rate.
Prediction: 4.6 – 6.1% increase to $2.73 – $2.77
Predicted Forward Yield: 8.02 – 8.14%
Here are my predictions for the 12 other companies which should announce annual increases in August:
| Company | # Yrs | Industry | Prediction (%) | New Annual Rate |
| American Financial Group, Inc. (AFG) | 17 | Insurance – Property & Casualty | 9.5% – 11.1% | $2.76 – $2.80 |
| The Cincinnati-based insurer announced a special dividend of $2 a share in May, following up $10 per share in special dividends in 2022. Nevertheless, with another 9% EPS growth expected in 2023, investors can look forward to a boost of around 10%. Predicted Forward Yield: 2.26% – 2.29% | ||||
| BancFirst Corporation (BANF) | 30 | Banks – Regional | 10.0% – 12.5% | $1.76 – $1.80 |
| The Fed’s interest increases allowed the regional bank to grow interest income, resulting in 14% EPS growth in 2022 followed by another 60% increase in the first quarter of 2023. BancFirst is poised to announce another 10%+ dividend increase after last year’s 11% increase. Predicted Forward Yield: 1.76% – 1.80% | ||||
| Badger Meter, Inc. (BMI) | 31 | Scientific & Technical Instruments | 11.1% – 13.3% | $1.00 – $1.02 |
| The water filtration company routinely boosts its dividend by double digits, having compounded its payout by 10% over the last decade. The debt-free company is growing organically and through acquisitions, and increased EPS by 9% in 2022, enough for another good increase this year. Predicted Forward Yield: 0.62% – 0.63% | ||||
| Broadridge Financial Solutions, Inc. (BR) | 16 | Information Technology Services | 12.4% – 14.5% | $3.26 – $3.32 |
| The financial technology company should reward investors with a good increase again this year. Adjusted EPS were up 14% in fiscal 2022 and the company is guiding to another 7 – 11% adjusted EPS growth in fiscal 2023. The only wrench in the machinery is that in the first three quarters of the fiscal year Broadridge posted flat adjusted EPS year-over-year. Still, I think we’ll see an increase along the lines of last year’s 13% boost. Predicted Forward Yield: 1.94% – 1.98% | ||||
| Cboe Global Markets, Inc. (CBOE) | 13 | Financial Data & Stock Exchanges | 8.0% – 10.0% | $2.16 – $2.20 |
| The creator of equity options and futures continues to make investments in future growth, resulting in higher current expenses and lower earnings. Despite a 13% dividend growth rate over the last decade, the lower EPS forced CBOE to lower last year’s dividend growth to only 4%. The company posted year-over-year EPS growth of 60% in the first quarter of fiscal year 2023, showing that earnings are returning to normal but I think it will be another year before dividend growth returns to the low teens. Predicted Forward Yield: 1.54% – 1.57% | ||||
| Carlisle Companies Incorporated (CSL) | 47 | Building Products & Equipment | 17.3% – 20.0% | $3.52 – $3.60 |
| 2022 was a year of spiking revenues and earnings for the diversified manufacturer, with the former up 37% and the latter more than doubling year-over-year. Normally, this would mean that investors should expect another dividend increase like last year’s 39% boost, but it looks like the spike was temporary. 2023’s first quarter adjusted EPS are down 40% year-over-year. Even if this plays out over the entire year, it still positions Carlisle for a good double-digit dividend increase this year. Predicted Forward Yield: 1.27% – 1.30% | ||||
| Dover Corporation (DOV) | 68 | Specialty Industrial Machinery | 5.0% – 7.9% | $2.12 – $2.18 |
| Earnings growth had slowed at the industrial manufacturer over the last several years, reflected in the company’s 5-year dividend growth rate of below 2%. However, this year earnings jumped, which means investors can expect the three year streak of 2-cent annual dividend growth to be broken. Adjusted EPS were up 11% in 2022 which should power good mid-single digit dividend growth at Dover. Predicted Forward Yield: 1.46% – 1.50% | ||||
| Federal Realty Investment Trust (FRT) | 56 | REIT – Retail | 1.9% – 2.8% | $4.40 – $4.44 |
| This retail REIT is focused on properties in coastal cities. Things have been tough on Federal Realty with dividend growth falling over the last several years. However, business seems to be improving as funds from operations (FFO) were up more than 13% in 2022 and another 6% year-over-year in the first quarter of 2023. Federal Realty’s guidance for full year FFO growth ranges from between 1% and 4%. Investors can expect to see dividend growth accelerate from last year’s 1% boost but only into the low single digits. Predicted Forward Yield: 4.36% – 4.40% | ||||
| International Flavors & Fragrances Inc. (IFF) | 21 | Specialty Chemicals | 0.6% – 2.5% | $3.26 – $3.32 |
| IFF’s sales may be growing but earnings started to slow in 2022 and the pattern is continuing into 2023. 2022 adjusted EPS were down 4% compared with 2021; first quarter EPS were down nearly 50% year-over-year. The earnings drop was reflected in last year’s 2.5% dividend boost, well below the average growth rate of 9% over the last decade. With the accelerating drop in 2023, another 2.5% increase is the best that investors can expect. Predicted Forward Yield: 3.82% – 3.89% | ||||
| Nordson Corporation (NDSN) | 60 | Specialty Industrial Machinery | 15.4% – 18.5% | $3.00 – $3.08 |
| Nordson develops, designs and manufactures fluid dispensing equipment used in various industries. The company continues to knock it out of the park, boosting sales by 10% and adjusted EPS by 22% in 2022. The company is guiding to slightly lower earnings in 2023, but the company’s current payout ratio of 27% leaves plenty of room for an increase in the mid-to-high teens. Predicted Forward Yield: 1.20% – 1.23% | ||||
| Westlake Corporation (WLK) | 19 | Specialty Chemicals | 6.4% – 10.6% | $1.52 – $1.58 |
| Like so many companies, the specialty chemical company saw a good 2022 but is starting to see lower earnings at the beginning of 2023. The slowdown in the U. S. housing market is hitting Westlake’s Housing and Infrastructure Products business segment, resulting in a 17% drop in revenues and a nearly 50% drop in EPS year-over-year. While the 11% jump in EPS in 2022 bodes well for a 20th year of dividend growth from Westlake, it’ll be far less than last year’s 20% boost. Predicted Forward Yield: 1.11% – 1.15% | ||||
| Essential Utilities, Inc. (WTRG) | 32 | Utilities – Regulated Water | 6.3% – 8.0% | $1.22 – $1.24 |
| Essential Utilities consistently and slowly acquires smaller water and natural gas utilities serving local municipalities, which has allowed to consistently grow over time. In addition to three water systems it acquired in 2022, the company has purchase agreements to another nine systems pending completion. Essential Utilities provided guidance of EPS growth in the 5 – 7% range through 2025 and is projecting 5 – 6% EPS growth next year, which will support another increase in the 7% range, consistent with its long-term dividend growth rate. Predicted Forward Yield: 2.90% – 2.94% | ||||
Summary
After a mixed bag in June, with a few double-digit boost and a few companies skipping their annual increases, July brought investors several 10%+ increases. The largest was a 20% increase from insurance broker and risk assessor Marsh & McLennan. Other companies that gave out good rewards to investors were food companies Hershey’s and Mondelez, business services company Cintas, logistics company Landstar, and regional bank Green County Bancorp, all of which announced double-digit increases.
In contrast, utility Duke Energy and consumer products company Clorox announced minimal increases to keep their dividend growth streaks going. And Walgreens Boots Alliance skipped its annual increase entirely, giving the company until the end of next year to keep its year-over-year dividend growth streak going.
The double-digit boosts should continue into August from a wide variety of companies. Diversified manufacturers Carlisle Companies and Nordson, financial software company Intuit, regional bank BancFirst, and financial technology company Broadridge should all announce dividend increases of at least 10%. And while I don’t expect a 10% increase from Dover Corporation, its increase from August will extend the company’s dividend growth streak to 67 years – one of the longest among all publicly traded companies.
