With its expected announcement in March, Colgate-Palmolive will begin its 7th decade of dividend growth.
Justin Sullivan
With its expected announcement in March, Colgate-Palmolive will begin its 7th decade of dividend growth.
Justin Sullivan
This is the latest in my series of articles where I provide predictions of annual dividend increases for long-term dividend growth companies. In the middle of February, I provided predictions for 10 dividend growth companies that have historically announced annual payout increases in the second half of February. In this article, I’ll look at another 10 dividend growth companies that I expect will announce their annual dividend increases in March.
Before I get to that, I want to note two other companies with a history of dividend growth that also announced annual dividend increases in the second half of February:
- Chubb (CB) announced plans to recommend a 5.8% dividend increase to the corporate board, for its 31st year of dividend growth. The new annualized dividend of $3.64 will give the insurer a forward yield of 1.45%.
- Ireland-based Eaton (ETN) announced a 9.3% dividend increase to an annualized $3.76. The industrial’s annual dividend boost – its 15th year of growth – gives the company a forward yield of 1.28%.
Here are the results from my predictions from the second half of February (the original predictions are available here), followed by my predictions for the dividend increases that I’m expecting to be announced in March:
(All yields are based on stock prices at the market close on Friday, March 1st.)
Analog Devices, Inc. (ADI) – 22 years of dividend growth
Prediction: 4.7 – 5.8% increase to $3.60 - $3.64
Actual: 7.0% increase to $3.68
Forward yield: 1.88%
With EPS growth slowing, the semiconductor company's latest dividend increase was roughly half of last year’s 13% boost.
Best Buy Co., Inc. (BBY) – 21 years
Prediction: 2.2 – 4.3% increase to $3.76 - $3.84
Actual: 2.2% increase to $3.76
Forward yield: 4.83%
With sales and earnings down, the electronics retailer announced a minimal dividend increase.
Essex Property Trust, Inc. (ESS) – 30 years
Prediction: 4.8 – 5.6% increase to $9.68 - $9.76
Actual: 6.1% increase to $9.80
Forward yield: 4.18%
Dividend growth from the apartment REIT accelerated from last year’s 5% boost.
The Home Depot, Inc. (HD) – 15 years
Prediction: 7.7 – 10.0% increase to $9.00 - $9.20
Actual: 7.7% increase to $9.00
Forward yield: 2.34%
As the economy slows, it's driving EPS growth down and continuing to cause dividend growth to decelerate at the home improvement retailer.
Leggett & Platt, Incorporated (LEG) – 51 years
Prediction: 0 – 2.2% increase to $1.84 - $1.88
Actual: 0% increase to $1.84
Forward yield: 8.92%
With earnings continuing to fall at the bedding and automobile seat manufacturer, Leggett & Platt is delaying its latest increase. While a few years ago, the company would announce its annual increase in the first quarter, recently it has moved the increase to the second quarter. I’ll revisit Leggett & Platt in my May report.
McGrath RentCorp (MGRC) – 33 years
Prediction: 6.5 – 8.6% increase to $1.98 - $2.02
Actual: 2.2% increase to $1.90
Forward yield: 1.52%
I had expected that double-digit EPS growth would allow the B2B rental company to return to its usual 8% dividend growth rate. Unfortunately for investors, this is the second year of 2% dividend growth.
Old Republic International Corporation (ORI) – 43 years
Prediction: 2.0 – 4.1% increase to $1.00 - $1.02
Actual: 8.2% increase to $1.06
Forward yield: 3.63%
In addition to accelerating its dividend growth, the insurer also added $1.1 billion to its share repurchase program.
Silgan Holdings Inc. (SLGN) – 20 years
Prediction: 8.3 – 11.1% increase to $0.78 - $0.80
Actual: 5.6% increase to $0.76
Forward yield: 1.74%
Despite a low payout ratio below 25%, Silgan’s latest increase is half of the company’s 5-year dividend growth rate.
SpartanNash Company (SPTN) – 12 years
Prediction: 2.3 – 4.7% increase to $0.88 - $0.90
Actual: Deferred to early March
The food distributor hadn’t announced its latest quarterly dividend as of the publication of this article.
Sempra (SRE) – 20 years
Prediction: 2.9 – 4.2% increase to $2.45 - $2.48
Actual: 4.2% increase to $2.48
Forward yield: 3.55%
This is the second year of 4% dividend growth for the Southern California energy infrastructure company.
Walmart Inc. (WMT) – 51 years
Prediction: 1.8 – 2.6% increase to $2.32 - $2.34
Actual: 9.2% increase to $2.49
Forward yield: 1.41%
Walmart broke its streak of 4-cent annual dividend growth this year with a very nice increase, adding to its appeal after announcing a 3-for-1 stock split. Post-split, the company’s annual dividend is 83 cents.
There are 10 long-term dividend growth companies I expect to announce their annual increases in March. First, here are my predictions for two featured companies:
Colgate-Palmolive Company (CL) – 60 years of dividend growth
While the personal products company gets points for the longevity of its dividend growth record, it certainly isn’t setting records for its growth rate. With 10 straight years of 4 – 8 cent annual dividend increases, Colgate-Palmolive has a compounded growth rate of 3.7% over the last decade. This low growth rate is a result of a fall in earnings since 2020.
Earnings growth resumed for Colgate-Palmolive in 2023, with net sales growth of 8.5% and adjusted EPS growth of 8.8%, driven primarily by fast growth in Latin America, although the company saw growth across all geographical regions.
So will this higher growth rate lead to faster dividend growth? Possibly, as the company is guiding 2024 EPS growth to the mid-to-high single digit percentages. While this might indicate that the company’s next increase will be in the 7 – 8% range, Colgate-Palmolive uses its free cash flow to buy back outstanding stock, having repurchased about 4% of outstanding shares since 2019. Hence, investors are likely to see a slightly higher dividend growth rate this year, but not an 8% increase.
Prediction: 4.2 – 6.3% increase to $2.00 - $2.04
Predicted Forward Yield: 2.31 – 2.36%
Dollar General Corporation (DG) – 9 years
Discount retailer Dollar General is preparing to finish up its first decade of dividend growth. After last year’s 7% increase, the company sports a compounded growth rate of slightly more than 9% over the last 5 years, which is pretty decent for a retailer. On top of the dividend growth, Dollar General has repurchased more than 15% of its outstanding shares since 2019.
The company has been able to build this dividend growth and share repurchase record by quickly expanding its already large store base. For example, the company planned for 1500 store remodels and 800 new store openings (including 15 stores in Mexico) over the course of 2023. And the company just opened its 20,000th store a few weeks ago.
It looks like the rapid growth, at least for earnings and dividends, will be put on hold this year. The company is expecting a drop of around 30% in EPS. Part of this drop is caused by the lack of a 53rd week in the fiscal year, as compared to 2022, and part is due to higher interest rates. The company also reported a “significant headwind” from inventory shrink in the first 9 months of 2023, which is another way of saying that shoplifting is hitting profit margins. Dollar General also reduced its plans to continue repurchasing shares in 2023. The company’s reduced EPS will stifle dividend growth, but not eliminate it. Investors won’t see a dividend increase at the 9% compounded growth rate, but could see a boost near last year’s 7% increase.
Prediction: 3.4 – 6.8% increase to $2.44 - $2.52
Predicted Forward Yield: 1.63 – 1.69%
Here are my predictions for 8 other long-term dividend growth companies which should announce annual increases in March:
| Company | # Yrs | Industry | Prediction (%) | New Annual Rate |
| CareTrust REIT, Inc. (CTRE) | 9 | REIT - Healthcare Facilities | 1.8% - 3.6% | $1.14 - $1.16 |
| CareTrust REIT focuses on healthcare-related properties, specifically skilled nursing and assisted living facilities. Dividend growth has slowed at the company as Funds From Operations (a measure of profitability that takes into the tax benefits of real estate ownership) per share have fallen. Investors should see another minimal increase this year, as FFO per share fell 5% in 2023. Look for another increase like last year’s 2% boost. Predicted Forward Yield: 5.00 – 5.09% | ||||
| General Dynamics Corporation (GD) | 32 | Aerospace & Defense | 3.0% - 4.5% | $5.44 - $5.52 |
| The defense and IT contractor’s EPS were flat year-over-year from 2022 to 2023, as revenue growth was more than offset by operating expenses. General Dynamics has a large backlog in its defense segments, including maintenance and modernization for two U. S. Navy Arleigh Burke-class guided-missile destroyers, and a contract with the Indian Health Service to modernize its electronic health record. While the defense business is steady, GD’s ability to grow its earnings is limited – at least without any acquisitions. Investors can expect a smaller dividend boost compared to last year’s 5% increase. Predicted Forward Yield: 2.00 - 2.03% | ||||
| Globe Life Inc. (GL) | 19 | Financial - Life Insurance | 6.7% - 11.1% | $0.96 - $1.00 |
| Insurance company Globe Life has four major business segments: Life Insurance, Supplemental Health Insurance, Annuities, and Investments. The company is a free cash flow machine, and focuses on buying back shares in addition to growing its dividend. Over the last 5 years, Globe Life has bought back more than 11% of its shares while compounding its dividend at 7% annually. With net income growth of 11% in 2023 and projected to be another 10% in 2024, investors can look forward to another good increase. Predicted Forward Yield: 0.76 - 0.79% | ||||
| Horace Mann Educators Corporation (HMN) | 14 | Financial - Property & Casualty Insurance | 1.5% - 4.5% | $1.34 - $1.38 |
| This financial company focuses on the educator market, serving primary school teachers and college professors. The company has grown its dividend by 4 cents in each of the last 4 years. While Horace Mann is guiding to EPS growth of more than 80% this year as its Property & Casualty segment returns to profitability, 2023’s 9% drop in EPS means investors will see a 4th straight year of 4-cent dividend growth. Predicted Forward Yield: 3.76 - 3.87% | ||||
| Hurco Companies (HURC) | 11 | Industrials - Specialty Machinery | 0% - 6.3% | $0.64 - $0.68 |
| Small-cap Hurco manufactures machine tools to the metal cutting and metal forming industry. The company has a manufacturing presence in China and Taiwan, and sells its tooling worldwide. The company is seeing a decline in sales and orders, with 9% and 13% reductions in 2023 as compared to 2022. The company has grown its annual dividend by 4 cents in each of the last 9 years, and with EPS down 46% to 66 cents in 2023, that’s the best that investors can expect this year. There’s a decent chance that Hurco will delay its dividend increase until later in the year to preserve cash. Predicted Forward Yield: 2.47 - 2.63% | ||||
| Kadant Inc. (KAI) | 11 | Industrials - Specialty Machinery | 10.3% - 13.8% | $1.28 - $1.32 |
| Industrial machinery company Kadant saw record revenues and earnings in 2023. The company has low debt and a low payout ratio of 11.6%. Although the company is guiding to flat adjusted EPS in 2024, last year’s growth provides plenty of cash flow to announce a dividend boost like last year’s 11.5% increase. Predicted Forward Yield: 0.39 - 0.40% | ||||
| Linde plc (LIN) | 30 | Materials - Specialty Chemicals | 8.2% - 9.8% | $5.52 - $5.60 |
| The industrial gases and engineering company posted 16% adjusted EPS growth in 2023 and is projecting another 10% adjusted EPS growth in 2024. In addition to building a 5-year compounded dividend growth rate of 9%, Linde has also used its free cash flow to buy back 8% of its outstanding shares over the last five years. With continued growth expected, investors can look forward to a dividend increase in line with its 5-year growth rate. Predicted Forward Yield: 1.23 - 1.25% | ||||
| Steel Dynamics, Inc. (STLD) | 13 | Materials - Steel | 15.3% - 20.0% | $1.96 - $2.04 |
| Steel Dynamics surprised investors (and me) last year with a 25% dividend boost. What will this year bring? The company has built an impressive dividend growth rate, compounding its payout by 18% over the last 5 years, but 2023 brought a double-digit sales decline and a 30% earnings decline. Despite this, Steel Dynamics has a low payout ratio below 12%. With plenty of free cash flow despite the drop in earnings, investors can look forward to another boost in the mid-teens. Predicted Forward Yield: 1.47 - 1.53% | ||||
After a busy first half of February, the pace of dividend increase announcements slowed in the second half of the month. This pace will continue into March, as most of the first quarter increases have already been announced.
The biggest pleasant surprise from the latter half of February was Walmart’s 9% dividend increase. The announcement broke a decade of annual 4-cent dividend growth and was a follow-up to a 3-for-1 stock split that was announced in late January. Another happy surprise was an 8% increase from insurer Old Republic, a change from its long time policy of 3 – 4% increases.
Coming up in March, most dividend increases will be modest, but investors can expect a 10%+ increase from industrial machinery company Kadant and up to a 20% increase from metals company Steel Dynamics. And the well-known consumer products company Colgate-Palmolive will begin its 7th decade of dividend growth.