Invest in high quality dividend paying companies that can manage their cash flow and payout ratio and be rewarded with constant dividend increases. A dividend increase is something every dividend growth investor can get excited about. Who wouldn’t love earning a little more from an investment without having to add additional capital? Well, August, so far has seen some great dividend increases from a variety of companies. Let’s run down the list and see if any of these dividend raisers are in your portfolio.
First up, is a company that has a very long history of raising dividends, Illinois Tool Works Inc. (ITW). ITW is one of those “behind the scenes” type of company that produces everything from screws, fasteners, janitorial supplies, welding equipment, adhesives, sealants and various types of lubrication and much, much more that is used in commercial and industrial applications daily. This month ITW announced a dividend increase of 15% to $0.485 per share. Currently yielding 1.90% with a moderate payout ratio of 42.3%, ITW has been raising its dividend every year for over fifty years! In fact, the ten year annualized dividend growth rate for ITW is an impressive 13.03%. The current PE for ITW is a little rich at 21.71 but forward PE looks much better at 16.9.
Another dividend raiser this month is a company I just mentioned in a recent post discussing timber REITs. Weyerhaeuser Co. (WY) just announced a quarterly dividend increase of 32% to $0.29 per share. A major player in the lumber and wood production space, WY is currently yielding a decent 2.80% with a PE of 33.90 and a relatively high payout ratio of 85.3%. The forward PE for this one looks better at 20.8. One bright spot for WY is the very attractive yield it will have with the increased dividend payment. The new yield will be about 3.60%.
Our next dividend raiser comes from the tech space, KLA-Tencor Corporation (KLAC). KLAC manufactures and markets semiconductor equipment and wafer and chip manufacturing products. Currently yielding 2.60% with a moderate payout ratio of 49.8%, KLAC has an impressive five year annualized dividend growth rate of 23.16%. Time will tell if KLAC can maintain that hyper dividend growth longer term. The company increased its quarterly dividend 11% to $0.50 per share. The current PE of KLAC is 21.42 which is well below its peers which stand at 51.50. Even at these elevated prices KLAC may offer a decent buying opportunity for someone looking for an accelerated dividend growth stock.
From the makers of Duncan Hines, Vlasic, Aunt Jemima, Mrs. Butterworth’s, Birds Eye and many more is dividend raiser Pinnacle Foods Inc. (PF). Currently yielding 2.50% with a moderate payout ratio of 54.3%, PF increased its quarterly dividend 12% to $0.235 per share. Share prices seem to have jumped ahead of earnings as PF has a current PE of 35.51 making this stock expensive relative to the S&P and industry peers. Forward PE starts looking a lot better at 16.7 which might suggest a pause before pulling the trigger on this one.
Finally, in the aerospace industry we have CAE Inc. (CAE) increasing its quarterly dividend 17% to $0.06 per share. Currently yielding a relatively low 1.70% with an equally low payout ratio of 38.4% might suggest future dividend raises are inevitable. The current PE of CAE is 18.36 which is closely in line to its peers and the market in general but might also suggest fully priced shares at current levels. The forward PE is slightly lower.
Getting a dividend raise is always a welcome gesture. The above companies each raised their respective dividends in the double digits. Not a bad feat considering the shakiness of the market as of late. Are any of the companies mentioned in your portfolio? Let me know.
Disclosure: Long ITW