The Dynamic Dividend

These Companies Will Raise Their Dividends in January

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, 96% of the featured companies have come through with dividend hikes during the predicted month.

Below are my seven picks for January, historically a big month for dividend hikes.

Polaris Industries (PII) has given its shareholders a raise to start every year since 1996, and 2012 should be no different. Even after last year’s 12.5% dividend hike — its largest since 2005 — the off-road vehicle company still maintains a forward payout ratio of just 24% and has enough cash on its balance sheet ($4.86 per share) to cover its payout for more than five years.

Consolidated Edison (ED) increased its dividend at the beginning of 1975 and, like clockwork, has given its shareholders a raise every four quarters since. Consolidated features a relatively low forward payout ratio (65%) for its industry, but don’t expect an outsized dividend hike from this stingy utility holding company. Consolidated has raised its dividend rate by a total of just 10% since 2000, and shareholders haven’t seen a raise of more than 3% since 1994. Last year the company upped its payout by just 0.84%.

Family Dollar Stores (FDO) raised its dividend by 16% last January, marking the 35th consecutive year the operator of discount stores has given its shareholders a raise. And unlike most companies with similar records, Family Dollar has never had to rely on weak dividend hikes to extend its streak, raising its payout by at least 8% every year for more than two decades. With a sub-15% forward payout ratio and nearly three years of dividend coverage in cash, look for Family Dollar to give its shareholders yet another big raise during the second half of January, when it traditionally announces its annual dividend hike.

SJW Corp. (SJW) has improved its dividend output every year since 1968, and announced each of its last ten dividend hikes during the month of January. The holding company has a manageable forward payout ratio (65%) considering most of its business is done through utility subsidiaries, so expect yet another payout increase this month — just not a large one. SJW gave its shareholders a 1.5% raise last year and its biggest dividend hike in the last 20 years was a modest 7% increase.

Praxair (PX) initiated its payout in 1992 and has raised its dividend output every year since. It would be quite a shock if the industrial gas company didn’t extend its streak to a 20th year given its low forward payout ratio (34%) and propensity for aggressive dividend growth (16 of the company’s 18 dividend hikes have provided double-digit increases). Praxair traditionally announces its annual dividend hike alongside its fourth quarter results, which it’s scheduled to report on January 25.

Rollins (ROL) has increased its dividend every year since 2003, raising it by at least 12% every time. And with a forward payout ratio of just 32%, the pest and termite control company is more than capable of giving its shareholders a double-digit raise for a tenth consecutive year. Rollins has announced each of its previous nine dividend hikes during the second half of January.

California Water Service (CWT) has improved its dividend output every year since 1968, which is tied (with the aformentioned SJW and five others) for the 22nd-longest streak among publicly-traded companies. But don’t be fooled into thinking this is just another stodgy old utility holding company keeping its long streak alive with miniscule payout bumps. California Water has a remarkably low forward payout ratio (55%) for its industry, and last year’s 3.4% dividend hike — while modest by most standards — was the company’s largest in 20 years. So there’s a bit of momentum here, and room to accommodate aggressive growth.