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Dividend Companies Showering Shareholders With More Cash

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February 21, 2018 – Comments (0) | RELATED TICKERS: KO , PEP , CLX

As part of my monitoring process, I review the list of dividend increases every week. I usually focus on companies that have managed to boost dividends to shareholders for at least a decade. It looks like this year may be classified as the year of higher dividend growth.

This is because of the new tax law, which went into effect this year. As a result of the lowering of corporate tax rates, companies are increasing the amounts of their regular dividends to shareholders, and are initiating new share buyback programs. Some companies are accelerating their dividend increases schedules, and therefore showering their shareholders with more cash. As shareholders in many prominent blue chips, we can hardly complain of course.

Over the past week, the following companies raised their dividends to shareholders:

The Coca-Cola Company (KO) is a beverage company that manufactures and distributes various nonalcoholic beverages worldwide. Coca-Cola raised its quarterly dividend by 5.40% to 39 cents/share. This marked the 56th consecutive annual dividend increase for this dividend king. Coca-Cola has managed to hike its dividends at an annual rate of 7.90%/year over the past decade. Unfortunately, the company has been unable to grow earnings per share over the past decade. Coca-Cola earned $1.28/share in 2007. Last year, in FY 2017, Coca-Cola only earned $1.10/share. The company does expect to earn $2.06 - $2.10/share in 2018. However, the forward expectations for near term earnings have been at around $2/share for several years in a row now. As a result, I view the stock as overvalued at 21.80 times forward earnings. While Coke yields a nice 3.50% today, I view the forward dividend payout ratio at 75% to be a tad too high. Consistent with my analysis from last year, I view Coca-Cola as a hold. I would not be buying shares today, if I were just starting out

 

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