Pharmaceutical company AbbVie should announce its next annual dividend increase in October. The company has increased its dividend each year since its spin-off from Abbott Labs.
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 August, I provided predictions for 13 dividend growth companies that have historically announced annual payout increases in September. In this article I’ll look at another 15 dividend growth companies that I expect will announce their annual dividend increases in October.
Before I get to that, I want to note four other companies with a history of dividend growth that also announced annual dividend increases in September:
– Texas Instruments (TXN) announced its 21st annual dividend increase with a 4.8% boost to an annualized $5.20. The stock now yields 3.27%.
– Starbucks (SBUX) extended its dividend growth streak to 14 years with a 7.5% increase, giving the stock a forward yield of 2.50%.
– Telecommunications REIT American Tower (AMT) yields 3.94% after announcing a 3.2% increase. This is the 14th year of dividend growth for the company.
– KLA Corporation (KLAC) announced its 15th year of dividend growth with an 11.5% boost to give the electronics company a forward yield of 1.26%.
Here are the results from my predictions from September (with the original predictions are available here), followed by my predictions for the dividend increases that I’m expecting to be announced in October:
(All yields are based on stock prices at the market close on Friday, September 29th.)
Results for Dividend Increase Announcements from September
Accenture plc (ACN) – 13 years of dividend growth
Prediction: 14.3 – 16.1% increase to $5.12 – $5.20
Actual: 15.2% increase to $5.16
Forward yield: 1.68%
It’s another year of 15% dividend growth for the business consulting firm.
BancFirst Corporation (BANF) – 31 years
Prediction: 10.0 – 12.5% increase to $1.76 – $1.80
Actual: 7.5% increase to $1.72
Forward yield: 1.98%
Despite double-digit EPS growth, the regional bank’s latest increase was less than its 5-year growth average of 13%.
Black Hills Corporation (BKH) – 53 years
Prediction: 4.0 – 5.6% increase to $2.60 – $2.64
Actual: Deferred to October
The natural gas and electric utility should announce its next annual dividend increase in late October.
Brady Corporation (BRC) – 39 years
Prediction: 2.2 – 4.3% increase to $0.94 – $0.96
Actual: 2.2% increase to $0.94
Forward yield: 1.71%
The identification products company held true to its long-term dividend growth rate, preferring to use excess free cash flow to repurchase outstanding shares.
Fifth Third Bancorp (FITB) – 14 years
Prediction: 6.1 – 10.6% increase to $1.40 – $1.46
Actual: 6.1% increase to $1.40
Forward yield: 5.53%
The overhang on regional banks from the Fed’s rapid increase in interest rates is holding dividend growth back at Fifth Third. This year’s increase is about half of Fifth Third’s 10-year compounded growth rate.
The First of Long Island Corporation (FLIC) – 27 years
Prediction: 2.4 – 7.1% increase to $0.86 – $0.90
Actual: 0% increase to $0.84
Forward yield: 7.30%
Unlike Fifth Third above, this regional bank is deferring its annual dividend increase as it deals with headwinds in the banking industry.
Honeywell International Inc. (HON) – 14 years
Prediction: 4.9 – 6.8% increase to $4.32 – $4.40
Actual: 4.9% increase to $4.32
Forward yield: 2.34%
It’s another year of 5% dividend growth for Honeywell.
Lockheed Martin Corporation (LMT) – 21 years
Prediction: 5.0 – 6.7% increase to $12.60 – $12.80
Actual: Deferred to October
The defense contractor should announce its next increase in early October.
McDonald’s Corporation (MCD) – 48 years
Prediction: 9.9 – 11.2% increase to $6.68 – $6.76
Actual: Deferred to October
McDonald’s usually announces its annual dividend increase in the last week of September but, as of the publication of this article, there was no press release. We should hear about the next dividend increase in early October.
New Jersey Resources Corporation (NJR) – 29 years
Prediction: 6.4 – 8.3% increase to $1.66 – $1.69
Actual: 7.7% increase to $1.68
Forward yield: 4.13%
The natural gas utility continued its pattern of 7 – 8% dividend growth.
OGE Energy Corporation (OGE) – 19 years
Prediction: 1.0 – 2.0% increase to $1.6729 – $1.6895
Actual: 1.0% increase to $1.6729
Forward yield: 5.02%
With a payout ratio north of 80%, the Oklahoma-based utility announced a 2nd year of 1% dividend growth.
Philip Morris International Inc. (PM) – 16 years
Prediction: 3.9 – 5.9% increase to $5.28 – $5.38
Actual: 2.4% increase to $5.20
Forward yield: 5.62%
Despite 10% EPS growth, the international tobacco company held back on its dividend growth.
U.S. Bancorp (USB) – 13 years
Prediction: 4.2 – 6.3% increase to $2.00 – $2.04
Actual: 0% increase to $1.92
Forward yield: 5.81%
Another regional bank straining from interest rate increases, U.S. Bancorp decided to defer its next dividend increase.
Verizon Communications Inc. (VZ) – 20 years
Prediction: 4.6 – 6.1% increase to $2.73 – $2.77
Actual: 1.9% increase to $2.66
Forward yield: 8.21%
Verizon’s latest increase is consistent with its long-term dividend growth rate of 2.5%.
Predictions for Dividend Increases for October
There are 15 long-term dividend growth companies I expect to announce their annual increases in October. First, here are my predictions for three featured companies:
AbbVie Inc. (ABBV) – 11 years of dividend growth
The result of a spinoff from Abbott Labs in 2013, AbbVie has grown its dividend ever since. And if they held onto the stock, Abbott shareholders would have enjoyed 30% compounded dividend growth since the spinoff. The company has a stable of well-known drugs including treatments for plaque psoriasis and Crohn’s disease in the form of Humira, Skyrizi and Rinvoq. Other well-known drugs manufactured by AbbVie include Imbruvica, used to treat certain blood cancers, and Vraylar, which is use for certain mental illnesses.
The company’s multiple drugs for Crohn’s disease – covered under the Immunology business segment – allow AbbVie to offset Humira coming off of patent, with sales growth for Skyrizi and Rinvoq more than offsetting Humira’s decline. Sales in the Immunology business segment grew 14% in 2022, offsetting a 9% drop in the oncology business segment. The company-wide sales growth powered 2022 adjusted EPS growth to 16%.
However, AbbVie is warning that 2023’s full-year adjusted EPS will be down 17%. The company is also dealing with a heavy debt-to-equity burden of more than 400%. So while dividend growth was fast right after the spinoff from Abbott Labs, investors should expect another year of mid-single digit growth, like last year’s 5% boost.
Prediction: 4.7 – 6.1% increase to $6.20 – $6.28
Predicted Forward Yield: 4.16 – 4.21%
American Electric Power Company, Inc. (AEP) – 14 years
While based in Ohio, AEP’s reach extends across 11 states. The company has customers across the Midwest, and in Kentucky, Oklahoma, and Texas. Like many utilities, AEP isn’t a fast dividend grower – the company’s dividend growth rate is solidly in the 5 – 6% range, with last year’s 6.4% increase being one of the larger ones in recent history.
That increase was powered by 7% EPS growth in 2022. But it’ll be difficult for AEP to repeat the increase. While the company aims for 6 – 7% long-term growth, the 2023 guidance is in the 4% range. Residential business is down as inflation is hurting consumers, more than offsetting an increase in commercial business. And AEP is selling off non-core businesses, including transmission businesses Pioneer and Prairie Wind, to invest in its core regulated utility businesses.
With slower EPS growth, AEP won’t match last year’s dividend boost but investors can still look forward to a mid-single digit increase.
Prediction: 3.6 – 5.4% increase to $3.44 – $3.50
Predicted Forward Yield: 4.57 – 4.65%
Rockwell Automation, Inc. (ROK) – 14 years
Rockwell Automation works with companies in a wide variety of industries to help them automate their industrial processes. The company breaks out its businesses into three segments: Intelligent Devices – hardware, Software & Control – software, and Lifecycle Services – long-term support. Rockwell has posted a compounded dividend growth rate just shy of 10% over the last decade, but recent growth has been decelerating.
Rockwell continues to see revenue growth across all three segments, with total sales up 11% in 2022. But GAAP earnings fell last year, as the company marked down the value of its investment in digital technology company PTC. Even adjusted for this, earnings growth was essentially zero as Rockwell’s investment spending increased.
The good news is that this stalling is likely to be temporary. Rockwell increased its 2023 earnings guidance earlier this year and now expects adjusted EPS to grow 25% on 15% sales growth in 2023. While this bodes well for future dividend growth, investors will not see the benefits from future projections this year. But with a payout ratio of 50%, even on depressed earnings, Rockwell is likely to reward investors by repeating last year’s 5% dividend increase.
Prediction: 4.2 – 5.1% increase to $4.92 – $4.96
Predicted Forward Yield: 1.72 – 1.74%
Here are my predictions for the 12 other companies which should announce annual increases in October:
| Company | # Yrs | Industry | Prediction (%) | New Annual Rate |
| A. O. Smith Corporation (AOS) | 30 | Industrials – Specialized Industrial Machinery | 10.0 – 13.3% | $1.32 – $1.36 |
| In spite of potential slowdowns in China and the U.S., the manufacturer of boilers and hot water heaters is seeing strong demand from both markets. That, along with lower costs for steel inputs compared with last year, has A. O. Smith increasing full year adjusted EPS growth guidance to between 10% and 15%. This should allow the company to return to double-digit growth after last year’s 7% increase. Predicted Forward Yield: 2.00 – 2.06% | ||||
| Amphenol Corporation (APH) | 12 | Technology – Electronic Components | 4.8 – 9.5% | $0.88 – $0.92 |
| The designer and manufacturer of electrical cables, sensors, and antenna has built an envious dividend growth record, compounding its payout by nearly 26% over the last decade. But last year’s boost of 5% was much lower than the growth rate would have predicted. And while 2022’s EPS growth rate of more than 20% would cause investors to expect Amphenol to return to its usual dividend growth rate, 2023 is a different story as the economic slowdown takes its toll. EPS growth has disappeared in the first half of 2023 – meaning that investors will probably see another year of below-average dividend growth. Predicted Forward Yield: 1.05 – 1.10% | ||||
| Brown & Brown, Inc. (BRO) | 29 | Financial – Insurance Brokers | 8.7 – 13.0% | $0.50 – $0.52 |
| Run well, insurance businesses are cash flow machines and investors are benefitting from Brown & Brown’s group of businesses. The company has consistently grown its dividend in the high single digit percentages and rewarded investors with a 12% boost last year. With 6% full-year EPS growth in 2022 and another 19% in the first half of 2023, the company is poised for another year of 10% dividend growth. Predicted Forward Yield: 0.72 – 0.74% | ||||
| The Gorman-Rupp Company (GRC) | 17 | Industrials – Specialized Industrial Machinery | 2.9 – 5.7% | $0.72 – $0.74 |
| The designer and manufacturer of pumps and pump systems saw rough waters last year, as it digested the acquisition of niche pump manufacturer Fill-Rite. Gorman-Rupp took on new debt to finance the purchase and the interest expense helped drive adjusted EPS down by 22% in 2022. Earnings are rebounding so far in 2023, but the company is likely to hold off on accelerating its dividend growth until some of that new debt is paid down. Look for a boost in the mid-single digits, below the long-term dividend growth record of 8%. Predicted Forward Yield: 2.19 – 2.25% | ||||
| Lincoln Electric Holdings, Inc. (LECO) | 28 | Industrials – Tools & Accessories | 13.3 – 17.2% | $2.90 – $3.00 |
| Lincoln Electric specializes in arc welding systems for a variety of industries. In addition to growing its dividend for more than a quarter century, the company also uses its free cash flow for share repurchases – Lincoln Electric has bought back nearly 10% of its outstanding shares since 2018. EPS growth was fantastic in 2022 – the 75% EPS growth powered by the ability of the company to pass along inflating costs to its customers. While much slower, the growth is continuing into 2023 with year-over-year EPS up 6%. Powered by last year’s massive earnings jump, investors can look forward to another year of payout growth in the mid-teens, consistent with Lincoln Electric’s long term dividend growth rate. Predicted Forward Yield: 1.60 – 1.65% | ||||
| Middlesex Water Company (MSEX) | 50 | Utilities – Regulated Water | 7.2 – 8.8% | $1.34 – $1.36 |
| The New Jersey-based utility has been accelerating its dividend growth in recent years, peaking with an 8% boost last year. And while EPS are flat year-over-year in the first half of 2023, the 15% EPS growth for the full year of 2022 will encourage Middlesex Water to keep the fast dividend growth going. Investors can expect another high single digit boost in late October. Predicted Forward Yield: 2.02 – 2.05% | ||||
| Northwest Natural Holding Company (NWN) | 67 | Utilities – Regulated Gas | 0.5 – 1.0% | $1.95 – $1.96 |
| Although net income was up 10% in 2022, it was more than offset by an increase in the outstanding shares. There’s not much to say here – the natural gas utility has recorded 8 years of annual dividend growth of 1 penny. With a payout ratio north of 75% and zero EPS growth, the company will continue to do the minimum amount to keep the dividend growth streak going into its 68th year. Predicted Forward Yield: 5.11 – 5.14% | ||||
| Prosperity Bancshares, Inc. (PB) | 25 | Financial – Regional Banks | 3.6 – 5.5% | $2.28 – $2.32 |
| Texas-based Prosperity Bancshares benefitted from the favorable energy exploration policies during the Trump presidency. Dividend growth has leveled off over the last three years, with annual increases of 12 cents per share. Still, this translates into 6% annual dividend growth since 2020. Earnings growth continues to encounter headwinds – EPS grew only 2.3% in 2022 and, so far in 2023 is down more than 15%. Still, even with the drop in EPS, Prosperity sports a payout ratio of less than 50% – giving it enough room for a small increase this year. Predicted Forward Yield: 4.18 – 4.25% | ||||
| RPM International Inc. (RPM) | 49 | Materials – Specialty Chemicals | 4.8 – 7.1% | $1.76 – $1.80 |
| The specialty chemical company manufactures many products used in construction and is benefiting from companies moving manufacturing plants back to the United States. RPM recently reported 17% adjusted EPS growth on 8% sales growth, and expects a good fiscal 2024. While the EPS growth could support a double-digit boost, I think it’s more likely that the company will stick with a mid-single digit increase – similar to the last 3 years. Predicted Forward Yield: 1.86 – 1.90% | ||||
| Stepan Company (SCL) | 55 | Materials – Specialty Chemicals | 2.7 – 5.5% | $1.50 – $1.54 |
| Lower demand for Stepan’s specialty chemicals are impacting earnings. With sales down 17% in the first half of 2023 and expenses up, operating income fell a minimum of 45% across all business segments. Unless business improves dramatically, the company is looking at its payout ratio jumping from 21% to more than 70%. I expect Stepan to pull back on its dividend growth until sales and income improve. Predicted Forward Yield: 2.00 – 2.05% | ||||
| Standex International Corporation (SXI) | 13 | Industrials – Specialized Industrial Machinery | 8.9 – 14.3% | $1.22 – $1.28 |
| The diversified manufacturer is benefitting from investments in renewable energy, electric vehicles, and the commercialization of space. The company has taken advantage of the consistent free cash flow by buying back 4% of its outstanding shares and compounding its payout by 10% over the last 5 years. With a 70% growth in EPS in 2022, and another 115% increase in the first 3 quarters of 2023, investors can expect dividend growth to accelerate from last year’s 8% boost. Predicted Forward Yield: 0.84 – 0.88% | ||||
| Tompkins Financial Corporation (TMP) | 20 | Financial – Regional Banks | 3.3 – 5.0% | $2.48 – $2.52 |
| This small-cap banking and financial services company is dealing with the same issues afflicting the banking industry – net losses on investments in Treasuries along with headwinds affecting the economy. The company has consistently grown its dividend in the 4 – 5% range and, while Tompkins is looking at an EPS drop of nearly 40% so far in 2023, the company should be able to manage another year of dividend growth as it waits for business prospects to improve. Predicted Forward Yield: 5.06 – 5.14% | ||||
| Waste Connections, Inc. (WCN) | 13 | Industrials – Waste Management | 11.8 – 17.6% | $1.14 – $1.20 |
| The Canadian solid waste services company has an outstanding dividend growth record, with 14% compounded growth over the last decade. 2022 was another good year for Waste Connections, with revenues up 17% and adjusted EPS up 18%. While 2023’s first half growth rate of 5% may mean lower growth in the future, investors can expect at least one more year of double-digit dividend growth. Predicted Forward Yield: 0.85 – 0.89% | ||||
Summary
The dividend increases continued in September, although there were no major surprises. As expected, both Accenture and Microsoft announced double-digit boosts, while most of the other announcements were in the mid-single digit ranges. Coming in with small increases – usually done to keep a dividend growth streak going while business is tough – were Verizon with a 2% increase and OGE, which announced a 1% boost.
Of interest, two companies decided to hold off on boosting their dividend, which is another tactic that companies use to keep the growth streak going while conserving cash. Not surprisingly, both companies are regional banks, as the banking sector is under quite a bit of pressure right now due to the Federal Reserve’s interest rate increases. First of Long Island Corporation and U.S. Bancorp both held their dividend steady. It’s unclear when they will resume their dividend growth, but because they normally announce mid-year increases, both companies have until the end of 2024 to keep their year-over-year dividend growth streaks going.
These two companies are only the latest to pause growth in their dividends. Since August, at least three other companies – Walgreens Boots Alliance (WBA), International Flavors & Fragrances (IFF), and Scotts Miracle-Gro (SMG) – also skipped their normal dividend increase.
October will bring increases from another 15 companies, most notably AbbVie which is expected to announce a mid-single digit boost. Double-digit boosts are expected from A. O. Smith, Waste Connections, and Lincoln Electric. And utility Northwest Natural Holding Company should continue its pattern of sub-1% annual increases to extend its dividend growth streak to 68 years.
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