Tobacco company Altria’s ownership of JUUL intellectual property is helping the company slowly grow its earnings and dividend. The company should announce its annual dividend increase in July, extending its streak to 55 years.
This is the latest in my series of articles where I provide predictions of annual dividend increases for long-term dividend growth companies. At the end of May, I provided predictions for 9 dividend growth companies that have historically announced annual payout increases in June. In this article I’ll look at another 18 dividend growth companies that I expect will announce their annual dividend increases in July.
Here are the results from my predictions from June (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 28th.)
Results for Dividend Increase Announcements from June
Casey’s General Stores, Inc. (CASY) – 26 years of dividend growth
Prediction: 8.1 – 10.5% increase to $1.86 – $1.90
Actual: 16.3% increase to $2.00
Forward yield: 0.52%
Dividend growth continues to accelerate at the Midwest-based convenience store chain.
Caterpillar Inc. (CAT) – 32 years
Prediction: 10.0 – 13.1% increase to $5.72 – $5.88
Actual: 8.5% increase to $5.64
Forward yield: 1.69%
It’s another year of 8 – 9% dividend growth for investors in the heavy equipment manufacturer.
The Kroger Company (KR) – 18 years
Prediction: 6.9 – 10.3% increase to $1.24 – $1.28
Actual: 10.3% increase to $1.28
Forward yield: 2.56%
Despite falling earnings, the supermarket chain keeps its streak of double-digit dividend growth going.
Matson, Inc. (MATX) – 11 years
Prediction: 0 – 3.1% increase to $1.28 – $1.32
Actual: 6.3% increase to $1.36
Forward yield: 1.04%
The shipping and logistics company announced a larger-than-expected increase.
National Fuel Gas Company (NFG) – 54 years
Prediction: 2.0 – 4.0% increase to $2.02 – $2.06
Actual: 4.0% increase to $2.06
Forward yield: 3.80%
The natural gas utility continues to reward investors with low-single digit percentage dividend increases.
Oil-Dri Corporation of America (ODC) – 22 years
Prediction: 10.3 – 13.4% increase to $1.28 – $1.32
Actual: 6.9% increase to $1.24
Forward yield: 1.93%
While this year’s dividend boost was higher than last year’s 4% increase, the company fell short of my expectations.
Target Corporation (TGT) – 57 years
Prediction: 1.8 – 2.7% increase to $4.48 – $4.52
Actual: 1.8% increase to $4.48
Forward yield: 3.03%
Dividend growth slowed sharply at the mega-retailer, as consumers continue to feel squeezed.
UnitedHealth Group Incorporated (UNH) – 15 years
Prediction: 10.1 – 11.7% increase to $8.28 – $8.40
Actual: 11.7% increase to $8.40
Forward yield: 1.65%
As expected, dividend growth continued to slow at the healthcare insurer but investors will still receive a nice bump from UnitedHealth.
John Wiley & Sons, Inc. (WLY) – 25 years
Prediction: 0 – 0.7% increase to $1.40 – $1.41
Actual: 0.7% increase to $1.41
Forward yield: 3.46%
The academic publisher kept its dividend growth streak going – but only barely.
Predictions for Dividend Increases in July
There are 17 long-term dividend growth companies I expect to announce their annual increases in July. First, here is my prediction for two featured companies:
The Clorox Company (CLX) – 47 years of dividend growth
The last few years have been rough for some long-term dividend growth companies. V. F. Corporation and 3M both ended their run as dividend kings, cutting their dividends after 50 and 66 years, respectively. Unfortunately, there’s a decent chance that Clorox may join them as the company has been dealing with a lot of headwinds over the last several years. Earnings have fallen from $7.35 in 2020 to $1.20 in 2023, dropping 68% from 2022 to 2023 alone. The company is dealing with increased administrative and selling costs, along with higher commodity costs. The company also took large charges earlier this year due to closing its Argentinian business and for costs related to its pension plan in 2023.
Going forward, the company is expecting sales to continue to drop by low single digit percentage points. EPS growth expectations have fallen and the company is now expecting a EPS rebound to between $1.66 and $1.81. While this represents growth between 40 and 50% over 2023, even the high end would still leave the company with a payout ratio of over 260%. Using adjusted EPS as a marker (which ignores the one-time charges noted above), the payout ratio is a more reasonable but still high 80%. Given the difficulties the company is facing, the best income investors can expect this year is another 2% increase like last year’s. I think there’s a significant chance Clorox defers its dividend increase until business improves, as the company can continue to show annual dividend growth even if it skips its increase this year. If it does, it’ll have until the end of 2025 to grow its payout to keep the dividend growth streak alive.
Prediction: 0 – 1.7% increase to $4.80 – $4.88
Predicted Forward Yield: 3.52 – 3.58%
Altria Group, Inc. (MO) – 54 years
With more than a half century of dividend growth under its belt, tobacco company Altria has been a go-to company for income investors. Brands like Marlboro cigarettes made the company a free cash flow giant for decades. Despite legal difficulties in the past, the company continues to diversify its core business to expand beyond cigarettes. Altria completed its acquisition of the NJOY vaping brand in June 2023 and earlier that year acquired a global license to certain JUUL-brand intellectual property.
The moves that Altria’s leadership have made are maintaining adjusted EPS and free cash flow in the low-to-mid single digit percentages. The company posted adjusted EPS growth of 2.3% in 2023 and is expecting another 2 – 4.5% growth in 2024. The company recently reaffirmed its goals for adjusted EPS growth in the mid-single digit percentages through 2028, from a base of $4.84 per share in 2022. The company also continues to buy back its shares and recently authorized a second one billion dollar buyback program after repurchasing 5% of its outstanding shares since 2019.
Altria has a 5-year compounded growth rate of 4.6%, which it should be able to maintain as long as it meets its EPS growth goals. Although the company didn’t quite meet that bar last year, investors can still expect a dividend increase around last year’s 4.3% boost.
Prediction: 3.1 – 4.6% increase to $4.04 – $4.10
Predicted Forward Yield: 8.87 – 9.00%
Here are my predictions for 15 other long-term dividend growth 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% – 3.3% | $1.82 – $1.86 |
The regional financial services company saw increasing revenues more than offset by growing employee costs, with adjusted EPS down 6% in 2023, followed by another 11% drop in the first quarter of 2024. Community Bank’s 4% dividend growth rate has been falling as the company has grown its annual dividend by just 4 cents over each of the last 4 years. Investors can expect another year of 4-cent annual growth. Predicted Forward Yield: 3.86 – 3.94% | ||||
Cintas Corporation (CTAS) | 39 | Industrials – Specialty Business Services | 13.3% – 16.3% | $6.12 – $6.28 |
Business services company Cintas continues to hit it out of the park with earnings growth, which has allowed the company to build an envious dividend growth record. Over the last decade, the company has compounded its payout by more than 20% annually. Double-digit EPS growth is continuing: 2023 EPS were up 11.5% and Cintas has continually raised its guidance for 2024 earnings growth and is now projecting 15% EPS growth this year. This level of earnings growth won’t support another 20% dividend boost, but investors can expect an increase in the mid-teen percentages, similar to last year’s 17% boost. Predicted Forward Yield: 0.87 – 0.90% | ||||
Community Trust Bancorp, Inc. (CTBI) | 43 | Financial – Regional Banks | 3.3% – 5.4% | $1.90 – $1.94 |
With small increases in loan charge-offs and nonperforming loans, the Kentucky-based regional bank saw EPS fall by 5% in 2023 and another 4% in the first quarter of 2024. Investors won’t see dividend growth ramp up, but with a payout ratio below 50% Community Trust can continue to boost its payout in the historical range of 4 – 5%. Predicted Forward Yield: 4.35 – 4.44% | ||||
Duke Energy Corporation (DUK) | 20 | Utilities – Regulated Electric | 2.0% – 2.9% | $4.18 – $4.22 |
The North Carolina-based utility is seeing benefits from the population movement into the southeastern United States. The company ended 2023 with 5.5% adjusted EPS growth and is expecting another 5 – 9% growth in 2024. Going further, Duke reaffirmed its long term growth rate of 5 – 7% through 2028. However, the company has a decent debt load and is slowly growing the number of outstanding shares, which has resulted in 4 years of 8-cent annual dividend growth. So while the company could grow its dividend faster, I expect Duke Energy to continue its pattern. Predicted Forward Yield: 4.17 – 4.21% | ||||
Greene County Bancorp, Inc. (GCBC) | 10 | Financial – Regional Banks | 6.3% – 12.5% | $0.34 – $0.36 |
The economic slowdown is hitting Greene County Bancorp. After posting years of earnings growth and splitting its stock 2-for-1 in March 2023, the upstate NY regional bank is saw EPS fall by 25% in the first three months of fiscal 2024, which ends on June 30, 2024. Investors will see payout growth slow from last year’s 14% increase, but can still expect a nice boost as Greene County begins its second decade of dividend growth. Predicted Forward Yield: 1.01 – 1.07% | ||||
Landstar System, Inc. (LSTR) | 10 | Industrials – Integrated Freight & Logistics | 6.1% – 9.1% | $1.40 – $1.44 |
Logistics and transportation company Landstar is another company that’s suffering from the economic slowdown. After posting a 30% drop in revenue and 37% drop in EPS in 2023, business continued to be soft in the first quarter of 2024, driving EPS down a further 39%. The company has minimal debt and a low payout ratio below 20% which will allow an 11th straight year of dividend growth, but investors can expect growth to continue to slow, with payout increases in the high single digit percentages. Predicted Forward Yield: 0.76 – 0.78% | ||||
McKesson Corporation (MCK) | 16 | Healthcare – Medical Distribution | 12.1% – 15.3% | $2.78 – $2.86 |
Healthcare company McKesson provides pharmacy services and distribution and wholesale medical supplies to a variety of healthcare providers. The company continues to post good results and generate good cash flow, which it uses to grow its payout and repurchase its shares. Since 2019, the company has compounded its dividend by nearly 10% annually and repurchased nearly 20% of its outstanding shares. With adjusted EPS growth of 6% in fiscal 2024 (which just concluded) and an expectation of 14 – 17% growth in fiscal 2025, investors can expect another dividend boost in the low to mid-teen percentages, similar to last year’s 15% increase. Predicted Forward Yield: 0.48 – 0.49% | ||||
Mondelez International, Inc. (MDLZ) | 10 | Consumer Defensive – Confectioners | 8.2% – 10.6% | $1.84 – $1.88 |
The owner of many snack brands including the popular (to me, at least) Oreo and Chips Ahoy brands has compounded its payout by nearly 12% since beginning to grow its dividend a decade ago. The company continues to post good earnings growth, with adjusted EPS up 19% in 2023. While the company is expecting flat free cash flow in 2024, the company’s payout ratio of 50% leaves room for another dividend increase in the 10% range. Predicted Forward Yield: 2.81 – 2.87% | ||||
Marsh & McLennan Companies, Inc. (MMC) | 15 | Financial – Insurance Brokers | 15.5% – 19.7% | $3.28 – $3.40 |
Consulting company Marsh & McLennan has compounded dividends at 11% over the last decade and routinely boosts its payout by double digits. The company blew away expectations with last year’s increase, rewarding investors with a 20% jump to an annualized $2.84. With Marsh & McLennan posting 17% earnings growth in 2023, the company is poised to keep rewarding investors. I expect the company’s next increase to be close to last year’s boost. Predicted Forward Yield: 1.56 – 1.61% | ||||
PPG Industries, Inc. (PPG) | 52 | Basic Materials – Specialty Chemicals | 6.2% – 9.2% | $2.76 – $2.84 |
Earnings growth has picked up at the paint and coatings company, as PPG has implemented a cost savings program while passing on higher selling prices to its customers. Adjusted EPS grew 27% in 2023 and are expected to grow another 10% in 2024. So while dividend growth slowed to 5% last year, investors can expect it to pick up closer to the company’s average growth rate of 6 – 8%. Predicted Forward Yield: 2.19 – 2.26% | ||||
Republic Services, Inc. (RSG) | 20 | Industrials – Waste Management | 6.5% – 8.4% | $2.28 – $2.32 |
After posting slow dividend growth over the last 5 years, environmental services company Republic Services boosted its dividend by 8% last year. Investors can expect continued good dividend growth going forward – adjusted EPS grew 14% in 2023 and are expected to grow another 6% this year. I expect another boost similar to last year’s increase. Predicted Forward Yield: 1.17 – 1.19% | ||||
The J. M. Smucker Company (SJM) | 26 | Consumer Defensive – Packaged Foods | 4.7% – 5.7% | $4.44 – $4.48 |
J. M. Smucker began its 2nd quarter century of dividend growth last year with a 4% increase, slightly below the long-term dividend growth rate of 5 – 6%. The company returned to earnings growth in fiscal 2024 (which ended April 30th), posting 11% growth to nearly $10 a share. Unfortunately, Smucker is expecting impacts from inflation next year, with sales up 10% but earnings flat. Given the mixed message, I expect dividend growth at the food company to only return to its historical average. Predicted Forward Yield: 4.07 – 4.11% | ||||
Stanley, Black & Decker, Inc. (SWK) | 56 | Industrials – Tools & Accessories | 1.2% – 2.5% | $3.28 – $3.32 |
2023 was a rebuilding year for the tool manufacturer, with the company investing in cost-cutting measures in response to global inflation. With adjusted EPS down 70% from 2022, it’s not surprising that last year’s dividend increase was a minimal 1% boost. The company seems to be making its way past the storms, though, and is expecting adjusted EPS to rebound to between $3.50 and $4.50 – almost a complete return to 2022’s adjusted EPS of $4.62. Despite the optimistic projections, I think the company will play it safe and that investors will see a second year of slow dividend growth. Predicted Forward Yield: 4.11 – 4.16% | ||||
Skyworks Solutions, Inc. (SWKS) | 9 | Technology – Semiconductors | 5.9% – 8.8% | $2.88 – $2.96 |
Earnings have fallen since 2021 for the semiconductor company, with EPS down 24% and sales down 13% in 2023. Sales and earnings are continuing to fall in the first half of 2024, meaning that investors can expect dividend growth to continue to decelerate from last year’s 10% increase to the high single digit percentages. Predicted Forward Yield: 2.70 – 2.78% |
Summary
There were some very nice increases in June, among them double-digit boosts from Casey’s General Stores, grocer Kroger, and UnitedHealth. We also saw a good 8.5% increase from heavy equipment manufacturer Caterpillar. Conversely, we saw two small increases from Target and John Wiley & Sons – mostly to just keep their dividend growth streaks alive.
After a slow June, things will pick up in July with 17 companies announcing increases. Several regional banks should announce their annual increases, including Greene County Bancorp, Community Bank System, and Community Trust Bancorp. Double-digit increases are expected from business services company Cintas, healthcare company McKesson, and consulting company Marsh & McLennan. We should also see a nice increase from snack company Mondelez and a mid-single digit increases from food company J. M. Smucker and tobacco company Altria. Stanley, Black & Decker should announce a small increase, while The Clorox Company may skip its annual increase this year.
To all my American followers, I wish each of you a Happy Independence Day holiday!
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