UNH - Hershey And Cintas Could Reward Investors With 10%+ Dividend Boosts In July
2023-07-03 02:41:50 ET
Summary
- 10 long-term dividend growth companies announced their annual increases in June. Most were as expected, with 10%+ increases from Casey’s General Stores, Kroger’s, and UnitedHealth.
- Dividend growth investors can look forward to another 20 companies announcing their annual dividend boosts in July, including widely held companies like Altria, Clorox, and Walgreens Boots Alliance.
- Double-digit boosts are expected from candy company Hershey’s, logistics company Landstar, business services company Cintas, and insurance broker Marsh & McLennan.
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 May, I provided predictions for 10 dividend growth companies that have historically announced annual payout increases in June. In this article I'll look at another 20 dividend growth companies that I expect will announce their annual dividend increases in July.
Here are the results from my predictions from June (as always, the original predictions are available here ), followed by my predictions for the dividend increases that I'm expecting to be announced in July:
(All yields are based on stock prices at the market close on Friday, June 30th.)
Results for Dividend Increase Announcements from June
Casey's General Stores, Inc. ( CASY ) - 25 years of dividend growth
Prediction: 7.9 - 11.8% increase to $1.64 - $1.70
Actual: 13.2% increase to $1.72
Forward yield: 0.71%
The convenience store chain's dividend growth accelerated from last year's 9% increase.
Caterpillar Inc. ( CAT ) - 31 years of dividend growth
Prediction: 7.5 - 10.0% increase to $5.16 - $5.28
Actual: 8.3% increase to $5.20
Forward yield: 2.11%
Caterpillar begins its 4th decade of dividend growth with a good boost.
Great Southern Bancorp, Inc. ( GSBC ) - 10 years
Prediction: 10.0 - 12.5% increase to $1.76 - $1.80
Actual: 0% increase to $1.60
Forward yield: 3.15%
This is the biggest disappointment for me this month. It looks like the regional bank is deferring its annual boost until later in the year.
The Kroger Co. ( KR ) - 17 years
Prediction: 11.5 - 15.3% increase to $1.16 - $1.20
Actual: 11.5% increase to $1.16
Forward yield: 2.47%
The operator of the supermarket chain continues its record of 10%+ dividend increases.
Matson, Inc. ( MATX ) - 10 years
Prediction: 3.2% increase to $1.28
Actual: 3.2% increase to $1.28
Forward yield: 1.65%
Cross-Pacific trade is slowing, hitting dividend growth at the transportation company.
National Fuel Gas Company ( NFG ) - 54 years
Prediction: 2.1 - 4.2% increase to $1.94 - $1.98
Actual: 4.2% increase to $1.98
Forward yield: 3.86%
The natural gas utility's latest increase is roughly twice as large as its historical growth rate.
Oil-Dri Corporation of America ( ODC ) - 21 years
Prediction: 3.6 - 7.1% increase to $1.16 - $1.20
Actual: 3.6% increase to $1.16
Forward yield: 1.97%
It was another year of 4-cent dividend growth for the absorbent products manufacturer.
Target Corporation ( TGT ) - 57 years
Prediction: 4.6 - 7.4% increase to $4.52 - $4.64
Actual: 1.9% increase to $4.40
Forward yield: 3.34%
With high levels of theft and falling sales, the retail giant's latest increase was far below its historical growth levels.
UnitedHealth Group Incorporated ( UNH ) - 15 years
Prediction: 13.9 - 15.2% increase to $7.52 - $7.60
Actual: 13.9% increase to $7.52
Forward yield: 1.56%
It's the second straight year of 14% dividend growth for the healthcare insurer.
John Wiley & Sons, Inc. ( WLY ) - 30 years
Prediction: 0.7 - 1.4% increase to $1.40 - $1.41
Actual: 0.7% increase to $1.40
Forward yield: 4.11%
The publisher continues to experience slow earnings growth. This is the company's 2nd straight year of annual dividend growth of a single penny.
Predictions for Dividend Increases for July
There are 20 long-term dividend growth companies I expect to announce their annual increases in July. First, here are my predictions for three featured companies:
The Clorox Company ( CLX ) - 46 years of dividend growth
The consumer products company has been struggling with earnings growth since 2020, when EPS peaked at $7.46. Last year's EPS of $3.73 was a 50% drop from that peak. The company is continuing to struggle, but is taking steps to reverse the decline by identifying savings across its businesses, and narrowing its focus to improve profitability. Specifically, Clorox Company is adjusting the strategy of its Vitamins, Minerals and Supplements (VMS) business line by focusing on core brands. This resulted in the company taking an impairment charge of nearly half a billion dollars, as Clorox acknowledges the reduction in the value of the VMS business.
Clorox provided guidance for fiscal 2023 (which ends June 30, 2023, but which the company hasn't reported yet). With the impairment charge, EPS are expected to fall another 85% to between 45 and 60 cents for the full year. Excluding the impairment charge and the cost of other strategic investments, adjusted EPS are expected to be up by 6 - 10% to between $4.35 and $4.50. This is an improvement over the guidance provided at the beginning of the fiscal year. But with a current dividend of $4.72, Clorox's payout ratio is above 100% - unsustainable in the long term. With a group of stable brands, Clorox has some flexibility to keep its dividend streak going as the company gets through this difficult period with a minimal increase, but it may skip the increase this year.
Prediction: 0 - 1.7% increase to $4.72 - $4.80
Predicted Forward Yield: 2.97 - 3.02%
Altria Group, Inc. ( MO ) - 14 years
Faced with a business environment that is hostile to continued tobacco use, Altria is working to modify its core business to rely less on cigarettes. Captured in the corporate motto "Moving Beyond Smoking", Altria is quickly moving to expand outside cigarettes. The company recently announced its decision to fully acquire vaping company NJOY and has a non-exclusive, irrevocable global license to some of JUUL's intellectual property.
Altria has a long dividend history. The 14 year history I reference above dates back to Altria's spin off of Philip Morris International, Altria's international tobacco business. Including the dividends that Phillip Morris continues to pay out, Altria's dividend growth history extends back more than half a century, with a 10-year growth average of 8%.
Altria's dividend growth is slowing, however, and the company's goals going forward are more modest than its history indicates. Altria recently announced goals of annual adjusted EPS and dividend growth in the mid-single digits through 2028. This growth rate is consistent with last year's EPS growth of 5% and this year's expected EPS growth between 3 and 6%. Given the EPS growth and the company's objectives, investors can look forward to another payout boost like last year's 4.4% increase.
Prediction: 3.7 - 5.9% increase to $3.90 - $3.98
Predicted Forward Yield: 8.61 - 8.79%
Walgreens Boots Alliance ( WBA ) - 48 years
Formed out of a merger between U.S. retailer Walgreens and European health and beauty retailer Alliance Boots in 2014, the company has slowly refocused itself on consumer health care. The company is taking larger steps, particularly within the United States, to move towards providing direct health care services to individuals and families. With recent acquisitions of CareCentrix and Shields, Walgreens Boots Alliance has expanded into at home care and integrated pharmaceutical services, and it also operates more than 200 VillageMD clinics and nearly 120 Walgreens Health Corners.
The company had a rough time during the COVID pandemic when earnings dropped to 20 cents a share. Dividend growth suffered as well, with last year's boost of 0.5% clearly meant to keep the company's growth streak going. Earnings have since recovered, with fiscal 2022 adjusted EPS up 3.4% to $5.04. Unfortunately for investors, I think it'll be another year of slow dividend growth. Walgreens is guiding to a drop of 10% in adjusted EPS; this doesn't even include the multibillion dollar settlement the company paid out for opioid claims. While it looks like the company's prospects are improving, this year's dividend boost will be below the five-year average of 4% but bigger than last year's increase.
Prediction: 1.0 - 3.1% increase to $1.94 - $1.98
Predicted Forward Yield: 6.81 - 6.95%
Here are my predictions for the 17 other companies which should announce annual increases in July:
| Company |
| # Yrs |
| Industry |
| Prediction (%) |
| New Annual Rate |
| Community Bank System, Inc. ( CBU ) |
| 31 |
| Financial - Regional Banks |
| 1.1% - 3.4% |
| $1.78 - $1.82 |
| The northeastern U.S.-based regional banking company has boosted its annual dividend by 4 cents in each of the last three years. With adjusted EPS growth of 2.6% in 2022, investors can look for another year of 4 cent annual dividend growth. Predicted Forward Yield: 3.80 - 3.88% |
| Cintas Corporation ( CTAS ) |
| 39 |
| Industrials - Specialty Business Services |
| 14.8% - 16.5% |
| $5.28 - $5.36 |
| Cintas provides uniforms, cleaning products and compliance services to businesses across the U. S. and the world. The company has an outstanding dividend growth record, compounding its payout by more than 20% annually over the last decade. Investors can expect another good year, but not at the same level as last year's 22% boost, as adjusted EPS growth came in at 10% in 2022, with the expectation of another 13% increase in 2023. Look for a payout increase in the high teens from the business services company. Predicted Forward Yield: 1.06 - 1.08% |
| Community Trust Bancorp, Inc. ( CTBI ) |
| 43 |
| Financial - Regional Banks |
| 4.5% - 6.8% |
| $1.84 - $1.88 |
| After a 10% dividend increase last year, this Kentucky-based regional bank will be hard-pressed for another year of a double-digit boost. Last year's EPS were down 7% and the first quarter's EPS are down another 2.7%. Investors can expect a dividend increase around the company's 5% long-term dividend growth rate. Predicted Forward Yield: 5.17 - 5.29% |
| Duke Energy Corporation ( DUK ) |
| 19 |
| Utilities - Regulated Electric |
| 2.0% - 3.0% |
| $4.10 - $4.14 |
| The utility reaffirmed its long-term adjusted EPS growth objective of 5 - 7% and provided 2023 adjusted EPS guidance of 7% growth at the midpoint, but this probably won't translate into that level of dividend growth. First, the company's adjusted EPS in 2022 fell by 6%. Second, the company's first quarter adjusted EPS fell by 7% year-over-year. Finally, Duke Energy's long term dividend growth rate is below 3%. Look for a dividend boost consistent with that long term growth rate. Predicted Forward Yield: 4.57 - 4.61% |
| Greene County Bancorp, Inc. ( GCBC ) |
| 10 |
| Financial - Regional Banks |
| 7.1% - 14.3% |
| $0.30 - $0.32 |
| Based in the Hudson Valley of New York State, Greene County Bancorp has grown quickly, with revenues up 63% since 2018. Over that same time, the bank holding company has compounded its dividend by more than 7%; over each of the last 4 years, the bank has boosted its annual dividend by 2 cents. With the earnings growth, investors can expect another year of 2 cent growth, with a chance of a double digit boost. Predicted Forward Yield: 1.01 - 1.07% |
| The Hershey Company ( HSY ) |
| 14 |
| Consumer Defensive - Confectioners |
| 12.0% - 15.0% |
| $4.641 - $4.766 |
| Hershey's sweetness doesn't just come from the products it sells, but also from its dividend payout. Last year's 15% boost was half as large as the company's long-term dividend growth rate. With 20% adjusted EPS growth in 2022 and another 11% growth expected this year, investors should see another year of payout growth in the low to mid-teens. Predicted Forward Yield: 1.86 - 1.91% |
| Landstar System, Inc. ( LSTR ) |
| 10 |
| Industrials - Integrated Freight & Logistics |
| 13.3% - 16.7% |
| $1.36 - $1.40 |
| The logistics and transportation company has built an amazing dividend growth record over the last decade, with a compounded growth rate of 21%. Last year's dividend boost of 20% was consistent with that growth rate and was powered by a doubling of Landstar's EPS from 2021 to 2022. Investors can expect the dividend growth to continue at a good rate but to slow from the 20%+ boosts that the company has been providing to date. EPS growth in 2022 was 18% but first quarter EPS in 2023 was down 35%, due mainly to the slowing economy. Look for Landstar's dividend growth to slow into the mid-teens. Predicted Forward Yield: 0.71 - 0.73% |
| McKesson Corporation ( MCK ) |
| 16 |
| Healthcare - Medical Distribution |
| 6.5% - 9.3% |
| $2.30 - $2.36 |
| The healthcare services provider for businesses is one of those rare companies that has built a good dividend growth record while still investing a lot of free cash flow to buy back a ton of outstanding shares. While buying back more than 30% of all outstanding shares since 2018, McKesson has compounded its payout by 10% annually, topping it off with a 15% boost last year. With EPS growth slowing to below 10% last year and McKesson guiding to growth in the low single digits for fiscal 2024, the company' dividend growth will slow to the high single digits. Predicted Forward Yield: 0.54 - 0.55% |
| Mondelez International, Inc. ( MDLZ ) |
| 10 |
| Consumer Defensive - Confectioners |
| 5.2% - 7.8% |
| $1.62 - $1.66 |
| Snack and candy company Mondelez is probably best known for its Oreo cookie brand, but also owns well-known brands Ritz, Triscuit and Wheat Thins crackers and Cadbury chocolates. And while dividend growth has accelerated recently, this year will probably be the exception. EPS fell 35% in fiscal 2022, which will drive the company's next boost to something closer to the 10-year growth average of 6%. Predicted Forward Yield: 2.22 - 2.28% |
| MGE Energy, Inc. ( MGEE ) |
| 48 |
| Utilities - Regulated Electric |
| 4.3% - 5.5% |
| $1.70 - $1.72 |
| MGE Energy, whose principal business is Madison Gas & Electric serving the Wisconsin city and its suburbs, has consistently grown its dividend in the mid-single digit percentages. Despite a drop in EPS in the first quarter of 2023, the 5% EPS growth in 2022 will support another dividend increase consistent with its long-term growth rate. Predicted Forward Yield: 2.15 - 2.17% |
| Marsh & McLennan Companies, Inc. ( MMC ) |
| 14 |
| Financial - Insurance Brokers |
| 10.2% - 11.9% |
| $2.60 - $2.64 |
| Powered by 15% growth in operating income in its Consulting business line, the insurance broker and risk assessor grew adjusted EPS by 11% in 2022. The additional free cash flow will allow Marsh & McLennan to boost its dividend by around 11% for the second straight year. Predicted Forward Yield: 1.38 - 1.40% |
| PPG Industries, Inc. ( PPG ) |
| 52 |
| Basic Materials - Specialty Chemicals |
| 6.5% - 8.1% |
| $2.64 - $2.68 |
| Paint company PPG hit some bumps in the road last year, as adjusted EPS fell by 11% due to rising costs of their raw materials. The company is expecting things to pick back up again in 2023 and, if the first quarter results are any indication, PPG will exceed its goals. Year-over-year adjusted EPS are up 33% in the first quarter which puts the company on track to meet its full year outlook for adjusted EPS growth of 17%. I expect PPG to return to its historical dividend growth rate of 7% - 8% after last year's 5% boost. Predicted Forward Yield: 1.78 - 1.81% |
| Republic Services, Inc. ( RSG ) |
| 20 |
| Industrials - Waste Management |
| 7.1% - 8.1% |
| $2.12 - $2.14 |
| Between last year's acquisition of US Ecology and this year's purchase of GFL Environmental's Colorado and New Mexico operations, the recycling and waste services company is continuing to grow. Although the company is using debt for the acquisitions, investors can continue to expect dividend growth in the 7% range. Predicted Forward Yield: 1.38 - 1.40% |
| The J. M. Smucker Company ( SJM ) |
| 26 |
| Consumer Defensive - Packaged Foods |
| 2.9% - 3.9% |
| $4.20 - $4.24 |
| Last year's 3% boost from the food company was below Smucker's decade-long average of 7% and reflected the fact that Smucker's was in the process of restructuring its business. The restructuring is continuing with Smucker's adjusted EPS flat in fiscal 2023. And while the company is expecting EPS growth of 5% in fiscal 2024, this year's dividend increase will be similar to last year's. Predicted Forward Yield: 2.84 - 2.87% |
| The Scotts Miracle-Gro Company ( SMG ) |
| 13 |
| Basic Materials - Agricultural Inputs |
| 0% - 1.5% |
| $2.64 - $2.68 |
| Scotts skipped its dividend boost last year, meaning that the lawn and garden care company has until the end of 2023 to boost its payout to keep the dividend growth record going. With adjusted EPS down more than 50% last year and expectations of another drop of about 5% this year, I think there's an even chance that Scotts skips the increase in 2023 and ends its streak or announces a minimal boost. Predicted Forward Yield: 4.21 - 4.28% |
| Stanley Black & Decker, Inc. ( SWK ) |
| 56 |
| Industrials - Tools & Accessories |
| 0% - 1.3% |
| $3.20 - $3.24 |
| Tool company Stanley Black & Decker is not expecting a good year, as it focuses on cutting its inventory in the face of reduced demand. The company is guiding to full year adjusted EPS of no more than $2.00. If the company hits this maximum, it would put the payout ratio at an unsustainable 160%. The company will be reluctant to halt its dividend growth streak, but it will probably defer the increase this year. Predicted Forward Yield: 3.41 - 3.46% |
| Skyworks Solutions, Inc. (SWKS) |
| 9 |
| Technology - Semiconductors |
| 6.5% - 8.1% |
| $2.64 - $2.68 |
| After growing EPS by 7% in 2022, the semiconductor company is seeing a 13% drop in revenues and a 20% drop in adjusted EPS in the first half of fiscal 2023. Investors can expect dividend growth to continue to slow from the 5-year average of 14% and last year's boost of 10%. Expect Skyworks to announce an increase in the high single digits. Predicted Forward Yield: 2.39 - 2.42% |
Summary
It was a mixed bag in June for dividend growth investors. While companies like Casey's General Stores, Kroger's and UnitedHealth announced double-digit boosts, several companies announced a small or no increase. Some of these were expected, like John Wiley's 1-cent annual boost - announced to keep its dividend growth streak going until better times return. Others came out of nowhere - Great Southern Bancorp held its dividend level despite good earnings growth.
July brings increases from another 20 long-term dividend growth companies including snack and candy makers Hershey's and Mondelez, tobacco company Altria, household products company Clorox, and healthcare retailer Walgreens. The latter two should announce small increases as both deal with business restructuring, with the chance that Clorox may skip their annual increase altogether. But I am expecting 10%+ increases from Hershey's, along with business services company Cintas, logistics company Landstar, and insurance broker Marsh & McClellan. Many of the other companies should announce boosts in the mid-single digits, including several regional banks, utility Duke Energy, and semiconductor company Skyworks.
For further details see:
Hershey And Cintas Could Reward Investors With 10%+ Dividend Boosts In July