Large Caps With High Dividend Per Share Growth

Published Wed, 30 Sep 2015 18:15 CET by DividendYields.org

There are several sectors that pay good dividends as reflected on their dividend yields. Energy, utilities and telecoms are on the lead, with a 15.3% average dividend yield for the oil drilling (energy) sector. Utilities average a dividend yield of 4.8% and telecoms have an average of 4.8% (as of February 2015). Considering that the S&P 500 yields 1.99% on average, these yields are attractive and could entice you to invest in the companies trading in these sectors. However, selecting a dividend-growth company requires looking further than the dividend yield. It should include factors like the sector stability and the dividend payout ratio. This is what dividend investing is about.
The article discusses three large-cap companies trading in the industrials, financials and energy sectors. These stocks not only have high dividend yields, but they also have the highest growth in annual Dividend Per Share (DPS) for a period of 3-years and 5-years. This verifies that DPS growth is more important that the dividend yield per se. Also, although all three stocks have underperformed versus the NYSE over the past year, investor confidence remains at a sustainable level because they are dividend-growth companies.

Cummins, Invesco and Williams Companies versus NYSE Index 1 Year Stock Performance Graph
Cummins (NYSE: CMI) is a Columbus-based company engaging in the design, manufacture, distribution and service of diesel and natural gas engines and related products. The global power leader distributes its products through 600 original equipment manufacturers (OEMs) and independent distributors in the U.S and 7,200 dealers worldwide. In terms of DPS growth, Cummins’ 3-year growth is 28.5% and 5-year growth is 31.6%. During the same period, S&P 500 has an average growth of 14.5% and 13.2%, respectively, so the company has significantly outperformed the index as well. In Q2 2015, Cummins increased its dividend by 25% compared to Q1 ($0.975 from $0.78), thus raising its quarter dividend by 680% since the beginning of 2008 ($0.975 from $0.125). In addition, the company’s current payout ratio of 41% is due to an EPS of $9.52, whereas its average 5-year payout ratio 23.86%. Analysts forecast an average EPS of $11.85 through 2018 and an average annual earnings growth of 10.97% through 2019. Cummins is clearly among the companies that deliver shareholder value through dividends and share repurchase.

Invesco (NYSE: IVZ) is another company worth looking at for its dividend consistency and growth. The Atlanta-based independent global investment management company has a DPS growth of 26.9% in 3 years and 19.1% in 5 years, outperforming S&P 500 during the same period. Also, the company’s 5-year average payout ratio is 42%, in line with its current payout ratio of 45%. Although, in Q2 2015, Invesco faced the challenges of uncertainty in the global markets, mainly due to the situations in Greece and in China, it has also seen a turnaround in the European retail market, which led to more than $1 billion of net inflows. Analysts forecast an average EPS of $2.93 through 2017 (current EPS is $2.41) and an average annual earnings growth of 11.65% for the next five years. Given the company’s focus on organic growth, with a plan to achieve 3% to 5% in 2015, Invesco is a safe investment for dividend investors.

Name Price ($) Market Cap ($ b) P/E D/E DPS Growth 3 years DPS Growth 5 years Beta Payout Ratio
Cummings 106.84 19.36 11.47 0.20 28.5% 31.6% 1.63 41%
Invesco 30.92 13.25 12.81 0.19 26.9% 19.1% 1.63 45%
Williams 36.56 27.41 13.60 2.68 36.2% 34.8% 0.77 94%

Williams Companies (NYSE: WMB) is an energy infrastructure company, located in Tulsa, OK, that owns and operates midstream gathering and processing assets, and interstate natural gas pipelines across the U.S. Williams’ 3-year DPS growth is 36.2% and 5-year growth is 34.8%, suggesting that the company not only delivers dividends, but it also increases them. In addition, its 5-year payout ratio 94.44% is in line with the current payout ratio of 94%, indicating a stable company that focuses on driving cash flow growth. Williams plans to deliver an annualized dividend of $2.85 in 2016, increased by 11.3%, while it seeks a 10% to 15% annual dividend growth through 2020. Clearly, the company has the potential to anticipate the commodity price headwinds and deliver value to its shareholders.


Stock name Dividend Yield
Invesco 6.23
Williams 5.39
Cummins 2.65

Articles featuring Invesco (IVZ):

2 S&P 500 High-Dividend Stocks, 6%-8% Yields, Insiders Buying, 4 Tax-Deferred High-Yield Trades - No K-1s

In yesterday's article, we discussed some trades for current Dogs of the Dow. We've broadened our search to the S&P 500, and also found two high-dividend stocks among the dividend yield leaders of that larger index. Profiles: CenturyLink (CTL) is a legacy telecom which has been transitioning into data services in order to battle landline attrition. CTL provides various communications services to residential, business, wholesale, and governmental customers in the US and... Read more

Azimut: The Projected 9% Yield And 40% Upside On This Asset Manager Is Still Up For Grabs

Azimut Holding (OTCPK: AZIHF) (OTCPK: AZIHY) is a relatively small independent asset manager with AUM of about 55 Billion EUR. The company is active mainly in Italy but has made great strides in recent years to expand internationally and achieve a significant presence in some foreign markets. Although investors did not seem to notice, the growth story has been mostly successful. Mainly through an active strategy consisting of M&A (bolt-on acquisitions) and JVs, Azimut has achieved a... Read more

Nicholas Ward's Dividend Growth Portfolio: May Update

Another month in the books, another step closer to financial freedom. I love putting together these monthly portfolio updates because this is when I tally up my monthly dividends and put them into my long-term spreadsheet. As many of you know, it's my dividend income stream that I'm planning on relying on for financial freedom in retirement. This is why I focus so much of my time and energy here at Seeking Alpha writing about dividend growth stocks. It's also why, during tough times like we... Read more

Introducing The Dividend 30

The Margin of Safety Dividend 30 is designed to find roughly 30 domestic companies that offer both dividend safety and future growth. We also maintain an International Dividend Dozen focus stock list. Our goal is to find about 30 companies, maybe a few more, that can support their current dividends and provide growth of dividends in the future. Growth is the operative word. Companies must increase revenues and profitability to grow their profits. Investors often "chase yield." Too many... Read more

Dividend Champion And Contender Highlights: Week Of May 26

Introduction The Dividend Champions list is a monthly compilation of companies which have consistently increased their annual dividend payouts, and the latest edition may be found here. However, since this list is only produced once per month, the data in it can quickly get out of date. Furthermore, with close to 900 companies on the list, the sheer amount of data can quickly become overwhelming. In this weekly series, I highlight recent and upcoming dividend related activity for companies... Read more