The Dynamic Dividend

These Companies Will Raise Their Dividends in December

Each month I compile a list of companies likely to give their shareholders a raise, based on their historical dividend activity, current financial condition, and near-term prospects. Since I started writing these forecasts, 95% of the featured companies have come through with dividend hikes during the predicted month.

December is historically the biggest month for dividend hikes, with many companies either giving shareholders a year-end boost or announcing a raise that will take effect shortly after the calendar turns. As such, this month’s list contains 11 companies, making it the largest crop since I started writing these forecasts. Collectively, these companies have been increasing shareholder returns for more than 250 consecutive years.

Ecolab (ECL) has improved its dividend output every year dating back to 1986, and announced a dividend hike each of the last nineteen Decembers. With a forward payout ratio of just 23% and enough cash to cover its current payout for more than a year, the company is poised to extend both streaks once again this month.

AT&T (T) is currently the highest-yielding Dow Jones Industrial Average component, and the telecom giant is likely to widen its lead over the other 29 blue chips with yet another payout hike this month. AT&T has improved its dividend output annually since 1985, and lately has fallen into a pattern of using December to set the table for yet another year of dividend growth, raising its payout during the final month of each of the last eight years.

Nucor (NUE) may not be able to match its aggressive activity of the last six years (383% growth for its quarterly dividend, plus nearly $5 per share distributed via special payouts), but the steel company is positioned to extend its lengthy dividend growth streak once again. Nucor, which has improved its dividend output every year since 1974, traditionally announces an increase to its payout in early December.

C.H. Robinson Worldwide (CHRW) came public in 1997 and declared its first dividend that December. The logistics company has raised its payout every year since, improving its quarterly rate nearly twentyfold in the process. With a sub-40% forward payout ratio and enough cash to cover its current payout for more than two years, there’s no reason to believe the company won’t up its payout for a 14th consecutive year.

Franklin Resources (BEN) has improved its dividend output every year dating back to 1982, and each of its last ten dividend hikes have come in December. Last year the investment management firm, which has raised its payout by an annual average of 14% over the last two decades, announced a 13.6% increase to its payout.

The Valspar Corporation (VAL) has raised its dividend every year since 1982, and it would be a major disappointment if the company didn’t extend its streak to a 30th consecutive year this month. The milestone is all but a lock, as the coating and paint company sports a forward payout ratio of just 21% and enough cash on its balance sheet (nearly $2.00 per share) to cover its current payout for the next ten quarters. Valspar typically announces its annual dividend hike within the first ten days of December.

ABM Industries (ABM), which has already secured 2011 as its 44th consecutive year of dividend growth, usually positions itself to extend its massive streak the following year by announcing an increase to its dividend ahead of its January payout. The provider of facility services typically picks a day in mid-December to announce both its fourth quarter results and latest dividend hike.

Enbridge (ENB) has increased its dividend by an annual average of 10% since initiating the payout way back in 1953, and is currently working on a 16 year dividend growth streak. Expect the energy transportation company to extend its run once again in early December, when it typically announces its annual dividend hike.

Graco (GGG) increased its dividend at the end of 1999 and, like clockwork, has done so every four quarters since. Traditionally, the company announces its annual dividend hike during the first week of December, and it would be pretty shocking if they decided to hold the payout flat this year. The maker of fluid systems and components has enough cash to cover its current payout for more than five years, and analysts currently expect the company to earn more than three times its dividend rate in 2012.

Erie Indemnity (ERIE) has raised its dividend every year for more than two decades — historically announcing its annual dividend hike during the first half of December — and there’s no reason to believe the streak will end any time soon. With a gigantic cash hoard (more than $40 per share!), the insurance holding company can certainly afford the luxury of its relatively high payout ratio, which it keeps in the 60-65% range.

J&J Snack Foods (JJSF) initiated its dividend in December 2004 and has raised its payout every year since. While its dividend growth streak (currently just six years long) may not stack up to some of the other runs on this list, J&J is in such fantastic shape financially that they have no reason to stop giving their shareholders annual raises. The company has enough cash on hand to cover its current payout for more than a dozen years and is expected to earn more than six times their current dividend rate in 2012. J&J has always announced their annual dividend hike in either November or December, and this year they didn’t announce it in November.