Searching For Dividend-Growth Tells

5/23/2016


Nothing resonates with me quite like news that one of my stocks plans to hike its dividend. The bigger the bump, the better.

Over the last 12 months, dividend-paying stocks in the S&P 1500 Index averaged dividend growth of 4.7%. Growth has slowed in each of the last five rolling 12-month periods, and it may be a while until we see growth return to the five-year average of 6.7%.

However, plenty of companies still grow their payouts aggressively. Some characteristics common among dividend growers:

• In rolling 12-month periods over the last five years, S&P 1500 dividend-payers averaged dividend growth of 6.7%. Stocks in four of the 10 market sectors — consumer discretionary, consumer staples, industrials, and technology — averaged growth of more than 7%, with tech setting the pace at 9.0% and consumer discretionary close behind at 8.9%.

• Stocks that have grown their dividend in the past are likely to keep the payout rising. Stocks that grew their dividends at a rate of more than 10% over the last 12 months averaged growth of 10.6% in the following year.

• Strong earnings, cash provided by operations (CPO), and free cash flow (FCF) give companies the flexibility to keep the payout rising. Our research found that after 12-month periods when companies grew earnings, CPO, or FCF at least 10%, they averaged dividend growth of 9.6%, 8.5%, and 10.5%, respectively, in the following year.

For this column, I focused on the 770 stocks in the index with five years of dividend-growth history.

We at the Forecasts prefer not to rely on luck, but rather to stack the odds heavily in our favor. With that in mind, check out the table below, which presents stocks with a history of dividend, earnings, and cash-flow growth. Consider those stocks good bets to deliver double-digit dividend growth in the year ahead.

GOOD CHOICES FOR DIVIDEND GROWTH
Most of the A-rated companies below exceed 10% growth in all four of the key statistics, though those that hail from one of the four high-dividend-growth sectors can qualify with strong growth in just three metrics. Stocks from our recommended lists are in bold.
-------- Growth, Last 12 Months --------
Company (Price; Ticker)
Div.
($)
Yield
(%)
Per-
Share
Earnings
(%)
Oper.
Cash
Flow
(%)
Free
Cash
Flow
(%)
Per-
Share
Dividends
(%)
Sector
AbbVie ($60; ABBV)
2.28
3.8
39
79
51
20
Health care
Amgen
($151; AMGN)
4.00
2.7
20
11
13
29
Health care
C.H. Robinson
($73; CHRW)
1.72
2.4
15
20
20
11
Industrials
CDW ($42; CDW)
0.43
1.0
17
44
47
59
Technology
Cisco Systems
($27; CSCO)
1.04
3.9
15
14
12
11
Technology
CVS Health
($102; CVS)
1.70
1.7
11
11
14
26
Cons. staples
Disney ($99; DIS)
1.42
1.4
24
10
15
19
Cons. discretion.
Ford Motor ($13; F)
0.60
4.6
99
21
15
62
Cons. discretion.
General Motors
($31; GM)
1.52
4.9
57
35
61
22
Cons. discretion.
Honeywell
($113; HON)
2.38
2.1
12
11
11
15
Industrials
Kroger ($34; KR)
0.42
1.2
17
16
17
16
Cons. staples
Lam Research
($74; LRCX)
1.20
1.6
22
65
57
100
Technology
Lear ($114; LEA)
1.20
1.1
22
78
55
24
Cons. discretion.
Owens Corning
($50; OC)
0.72
1.4
58
69
40
6
Industrials
Robert Half Int'l
($39; RHI)
0.88
2.2
16
18
17
11
Industrials
Skyworks Sol.
($64; SWKS)
1.04
1.6
39
2
11
90
Technology
Target ($68; TGT)
2.24
3.3
9
32
16
14
Cons. discretion.
Time Warner
($71; TWX)
1.61
2.3
36
24
17
12
Cons. discretion.

Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com