AAPL - Union Pacific Among 12 Companies To Announce Dividend Increases In First Half Of May
2023-05-01 00:59:03 ET
Summary
- Investors will see annual dividend increases from 12 more companies, including Union Pacific and Northrop Grumman.
- The latter half of April brought annual increases from four dividend kings: Johnson & Johnson, Parker-Hannifin, W. W. Grainger, and Sysco.
- Investors were rewarded with 10%+ boosts from Costco, Discover Financial, and Lithia & Driveway Motors.
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 March, I provided predictions for 15 dividend growth companies that have historically announced annual payout increases in the second half of April. In this article I'll look at another 12 dividend growth companies that I expect will announce their annual dividend increases in the first half of May.
Before I get to that, there were two other dividend growth companies that announced their annual increases in the latter half of April:
- Parker-Hannifin Corporation ( PH ) announced their 68th year of dividend growth with an 11% increase to an annualized $5.92. The industrial machinery company has a forward yield of 1.82%.
- Defense contractor Raytheon Technologies ( RTX ) announced a new annual dividend rate of $2.36, a 7.3% increase from the prior level, resulting in a new forward yield of 2.36%. The company's dividend history of 30 years extends back to before the merger of Raytheon and United Technologies.
Here are the results from my predictions from the second half of April (as always, the original predictions are available here ), followed by my predictions for the dividend increases that I'm expecting to be announced in the first half of May:
(All yields are based on stock prices at the market close on Friday, April 28th.)
Results for Dividend Increase Announcements from Second Half of April
Apple Inc. ( AAPL ) - 10 years of dividend growth
Prediction: 6.5 - 8.7% increase to $0.98 - $1.00
Actual: Deferred to May
While in recent years Apple has announced its annual increase in late April, this year the announcement will be deferred to early May.
Ameriprise Financial, Inc. ( AMP ) - 18 years
Prediction: 8.0 - 9.2% increase to $5.40 - $5.46
Actual: 8.0% increase to $5.40
Forward yield: 1.77%
The asset manager's latest increase is consistent with its 5-year average growth rate.
AptarGroup, Inc. ( ATR ) - 29 years
Prediction: 0 - 2.6% increase to $1.52 - $1.56
Actual: 0% increase to $1.52
Forward yield: 1.28%
The drug delivery company is deferring its annual dividend boost, presumably to later in the year.
American Water Works Company, Inc. ( AWK ) - 16 years
Prediction: 6.9 - 9.2% increase to $2.80 - $2.86
Actual: 8.0% increase to $2.83
Forward yield: 1.91%
American Water Works met its dividend growth target of 7 - 9%.
Costco Wholesale Corporation ( COST ) - 19 years
Prediction: 12.2 - 14.4% increase to $4.04 - $4.12
Actual: 13.3% increase to $4.08
Forward yield: 0.81%
Costco continues to compound its dividend growth in the 12 - 13% range.
Discover Financial Services ( DFS ) - 13 years
Prediction: 10.8 - 15.0% increase to $2.66 - $2.76
Actual: 16.7% increase to $2.80
Forward yield: 2.71%
Discover Financial continues to reward investors with dividend growth in the teens.
FactSet Research Systems Inc. ( FDS ) - 24 years
Prediction: 9.6 - 12.4% increase to $3.90 - $4.00
Actual: Deferred to May
The financial data and analytics firm should announce its annual boost in the first week of May.
First Financial Bankshares, Inc. ( FFIN ) - 13 years
Prediction: 5.9 - 8.8% increase to $0.72 - $0.76
Actual: 5.9% increase to $0.72
Forward yield: 2.46%
Dividend growth at the Texas-based bank slowed dramatically from last year's 13% boost.
W. W. Grainger, Inc. ( GWW ) - 52 years
Prediction: 6.4 - 7.8% increase to $7.32 - $7.42
Actual: 8.1% increase to $7.44
Forward yield: 1.07%
The industrial products distributor's dividend growth accelerated from its usual 6% increases.
International Business Machines Corporation ( IBM ) - 28 years
Prediction: 0.6 - 1.2% increase to $6.64 - $6.68
Actual: 0.6% increase to $6.64
Forward yield: 5.25%
It's another year of minimal dividend growth for IBM.
Johnson & Johnson ( JNJ ) - 62 years
Prediction: 5.3 - 6.6% increase to $4.76 - $4.82
Actual: 5.3% increase to $4.76
Forward yield: 2.91%
The health care giant's dividend boost this year is consistent with its long-term dividend growth rate of 6%.
Lithia & Driveway Motors, Inc. ( LAD ) - 13 years
Prediction: 9.5 - 15.5% increase to $1.84 - $1.94
Actual: 19.0% increase to $2.00
Forward yield: 0.91%
The automotive retailer's latest dividend increase is above its historic rate of 16%.
Lakeland Bancorp, Inc. ( LBAI ) - 12 years
Prediction: 5.2 - 6.9% increase to $0.61 - $0.62
Actual: 0% increase to $0.58
Forward yield: 4.04%
Despite a low payout ratio, Lakeland Bancorp is still digesting its merger with 1st Constitution Bancorp.
MetLife, Inc. ( MET ) - 12 years
Prediction: 3.0 - 5.0% increase to $2.06 - $2.10
Actual: 4.0% increase to $2.08
Forward yield: 3.39%
It's a 6th year of an 8-cent annual increase for the insurer.
Portland General Electric Company ( POR ) - 17 years
Prediction: 3.9 - 5.0% increase to $1.88 - $1.90
Actual: 5.0% increase to $1.90
Forward yield: 3.75%
This is Portland General's 6th year of 9 cent annual dividend growth
The Southern Company ( SO ) - 22 years
Prediction: 2.9 - 4.4% increase to $2.80 - $2.84
Actual: 2.9% increase to $2.80
Forward yield: 3.81%
The Atlanta-based utility extends its dividend growth streak to 22 years with a small increase.
Sonoco Products Company (SON) - 41 years
Prediction: 7.1 - 10.2% increase to $2.10 - $2.16
Actual: 4.1% increase to $2.04
Forward yield: 3.37%
The packaging and container company held back on its dividend growth this year as it digests the acquisition of Ball Metalpack.
Sysco Corporation ( SYY ) - 54 years
Prediction: 6.1 - 9.2% increase to $2.08 - $2.14
Actual: 2.0% increase to $2.00
Forward yield: 2.61%
Despite good earnings growth, the international food services company's latest increase was well below its usual growth rate.
The Travelers Companies, Inc. ( TRV ) - 21 years
Prediction: 4.3 - 6.5% increase to $3.88 - $3.96
Actual: 7.5% increase to $4.00
Forward yield: 2.21%
The insurer's dividend growth accelerated from last year's 5% boost. Travelers also announced a $5 billion share buyback program.
UGI Corporation ( UGI ) - 35 years
Prediction: 2.8 - 5.6% increase to $1.48 - $1.52
Actual: Deferred to early May
Investors will find out the natural gas utility's latest increase in the first half of May.
Predictions for Dividend Increases for the First Half of May
There are 12 long-term dividend growth companies I expect to announce their annual increases in the first half of May. First, here are my predictions for three featured companies:
Cardinal Health, Inc. ( CAH ) - 27 years of dividend growth
Cardinal Health is a pharmaceutical distributor, manufacturer and distributor of medical and laboratory products, and a provider of management and IT services for health care facilities.
While building a nearly three decade history of dividend growth, the company has spent a great deal of free cash flow on repurchasing shares, buying back nearly 17% of its outstanding shares since 2018. Despite the reduction in share count and an 18% increase in revenues, adjusted EPS fell in 2022 by 9%. This was mostly due to inflation and supply chain effects, both of which hit the Medical business segment hardest.
Looking forward to 2023, halfway through the fiscal year the company is guiding to adjusted EPS growth of 5.5%. Will this encourage the company to increase its dividend growth from last year's 1% increase? Possibly, but the company is still dealing with the same headwinds. Look for another 1% increase, with a small chance of a slightly larger boost.
Prediction: 1.0 - 2.0% increase to $2.0026 - $2.0225
Predicted Forward Yield: 2.44 - 2.46%
Northrop Grumman Corporation ( NOC ) - 19 years
As one of the big three defense contractors, you would expect that the Russian - Ukrainian war and tensions with China over Taiwan would drive higher sales for Northrop Grumman. And, to an extent, that is happening. Sales were up 4% in 2022 and the company is guiding to another 6% sales growth in 2023. Earnings, however, are not following suit. EPS fell 28% in 2022 and the company is guiding to a further drop of 12%. So what's going on here? Much of this drop in EPS is due to the company having higher than expected cash accounting pension costs, and while these can usually be removed by reporting adjusted EPS, the impacts were pretty large in 2022 and are expected to hit earnings in 2023.
The company remains committed to returning free cash flow to investors. Northrop has bought back nearly 12% of its shares and compounded its dividend by nearly 12% since 2018. At 30%, the company's payout ratio leaves room for another nice dividend increase. Northrop's dividend growth decelerated last year to 10% and, with the pension cost adjustments, I think investors can see dividend growth continue to slow into the high single digit percentages.
Prediction: 7.5 - 9.8% increase to $7.44 - $7.60
Predicted Forward Yield: 1.61 - 1.65%
Union Pacific Corporation ( UNP ) - 16 years
The well-known railroad has a very nice dividend growth record, compounding its payout by more than 15% annually over the last decade. Union Pacific has publicly stated its policy of paying a dividend of roughly 45% of earnings. So how was EPS growth in 2022? Well, it slowed dramatically to 4% as higher than expected operating costs offset higher revenue. The increased costs are coming from higher labor costs and the company's difficulty in hiring qualified people to open positions. A quick glance on Union Pacific's jobs page shows the company routinely offering hiring bonuses up to $25K for train crew positions.
Going forward, the company will likely continue to struggle with EPS growth as low unemployment drive higher wage costs. Right now, however, the 4% EPS growth limits this year's dividend increase, just as last year's 13% EPS growth powered a 10% increase. Investors can expect this year's payout increase to be in the mid-single digit percentage.
Prediction: 3.8 - 6.2% increase to $5.40 - $5.52
Predicted Forward Yield: 2.76 - 2.82%
Here are my predictions for the 9 other companies which should announce annual increases in the second half of the month:
| Company |
| # Yrs |
| Industry |
| Prediction (%) |
| New Annual Rate |
| Alerus Financial Corporation ( ALRS ) |
| 24 |
| Banks - Regional |
| 5.6 - 8.3% |
| $0.76 - $0.78 |
| Alerus provides banking and financial services to portions of North Dakota and Minnesota. The company's earnings fell by nearly 30% in 2022, as the company paid out higher levels of interest on deposits without a corresponding increase in income. After last year's 12.5% dividend boost, investors can expect an increase closer to the 5-year growth rate below 8%. Predicted Forward Yield: 5.28 - 5.42% |
| CNO Financial Group ( CNO ) |
| 10 |
| Insurance - Life |
| 3.6 - 7.1% |
| $0.58 - $0.60 |
| Insurer CNO Financial's operating EPS fell more than 16% in 2022, resulting in flat EPS year-over-year. Dividend growth at the company has moderated over recent years, with the 5-year growth rate of 9.5% well below the 10-year growth rate of nearly 25%. Dividend growth slowed last year and it will continue this year, with an increase in the mid-single digits. Predicted Forward Yield: 2.58 - 2.67% |
| Chesapeake Utilities Corporation ( CPK ) |
| 19 |
| Utilities - Regulated Gas |
| 7.5 - 11.2% |
| $2.30 - $2.38 |
| With several businesses serving Florida, the utility is benefitting from the state's population growth. 2022 EPS were up more than 6% and the company provided EPS guidance of 7 - 8% through 2025. Expect Chesapeake Utilities to reward investors with a boost around 10%, consistent with the 5-year growth rate. Predicted Forward Yield: 1.86 - 1.93% |
| Expeditors International of Washington ( EXPD ) |
| 28 |
| Integrated Freight & Logistics |
| 7.5 - 10.4% |
| $1.44 - $1.48 |
| Demand for logistics and shipping support softened as 2022 came to a close. Full year EPS were flat and the company is expecting more headwinds in the early part of 2023. Investors won't see another 15% increase like last year, but can look forward to a boost around the 10-year growth average of 9%. Predicted Forward Yield: 1.26 - 1.30% |
| Leggett & Platt, Inc ( LEG ) |
| 51 |
| Consumer Cyclical - Furnishings |
| 0 - 2.3% |
| $1.76 - $1.80 |
| Volume and earnings were down at the furniture manufacturer and the company expects things to get worse in 2023. After falling 23% in 2022, Leggett & Platt provided guidance for another 30% drop. The company's next dividend increase may be deferred to later in the year or will certainly be minimal. Predicted Forward Yield: 5.45 - 5.57% |
| MSA Safety Inc ( MSA ) |
| 51 |
| Industrials - Security & Protection Services |
| 4.3 - 6.5% |
| $1.92 - $1.96 |
| Safety products manufacturer MSA Safety began its 2nd half century of dividend growth with a 4.5% dividend increase last year. The company posted adjusted EPS growth of 21% in 2022. It's been 4 years since the company announced anything larger than an 8-cent annual payout boost. While MSA Safety could reward investors with a larger increase, I think the company will stick with a small-ish increase. Predicted Forward Yield: 1.48 - 1.51% |
| Pool Corporation ( POOL ) |
| 12 |
| Industrials - Industrial Distribution |
| 10.0 - 12.0% |
| $4.40 - $4.48 |
| The wholesale distributor of pools and related products is seeing reduced business as the economic slowdown hits discretionary purchases. Despite a decent debt load, the company has different levers to pull before holding off on its dividend growth. In addition to a low payout ratio of 25%, the company could slow down its stock repurchases (over the last 5 years, Pool Corp has bought back 3.6% of its outstanding shares). While it won't be near the 20% average growth rate, investors can look forward to another nice dividend boost from the company. Predicted Forward Yield: 1.25 - 1.28% |
| RLI Corp. ( RLI ) |
| 47 |
| Insurance - Property & Casualty |
| 3.80% |
| $1.08 |
| This debt-free insurer just paid out a special dividend of $7.00 a share in November 2022. So, despite EPS growth of 35% in 2022 and year-over-year EPS growth of 24% in the first quarter of 2023, RLI will boost its annual dividend by 4 cents as it historically does. Predicted Forward Yield: 0.78% |
| Tetra Tech, Inc. ( TTEK ) |
| 8 |
| Industrials - Engineering & Construction |
| 13.0 - 17.4% |
| $1.04 - $1.08 |
| While its dividend growth history is relatively short, engineering consulting company Tetra Tech has established a very good growth record. Tetra Tech has compounded its dividend by 18% over the last 5 years. Investors can look forward to another good year - the company built on 21% adjusted EPS growth in 2022 with 13% growth in the first quarter of 2023. While dividend growth is starting to slow, Tetra Tech will reward investors with another double digit boost. Predicted Forward Yield: 0.75 - 0.78% |
Summary
The announcements of dividend increases came fast and furious in the latter half of April. Another 19 companies extended their dividend growth streaks, including two companies with dividend growth spanning more than 6 decades: Johnson & Johnson and Parker-Hannifin, which extended their annual streaks to 61 and 68 years, respectively. Grainger and Sysco also announced annual payout boosts, with Grainger extending its streak to 52 years and Sysco to 54 years.
Notable announcements included double-digit boosts from Costco (13%), Discover (17%), and Lithia & Driveway Motors (19%).
Two companies that were expected to announce increases did not: both AptarGroup and Lakeland Bancorp normally announce increases in April, but held their payouts steady.
Coming up in May, investors can expect double-digit increases from Tetra Tech and Pool Corporation, as well as smaller increases from several well-known companies including medical distributor Cardinal Health, defense company Northrop Grumman, and railroader Union Pacific.
For further details see:
Union Pacific Among 12 Companies To Announce Dividend Increases In First Half Of May