Caterpillar, Target Among 10 Companies To Announce Annual Dividend Increases In June

This is the latest in my series of articles where I provide predictions of annual dividend increases for a variety of long-term dividend growth companies. In the middle of May, I provided predictions for 12 dividend growth companies that have historically announced annual payout increases in the second half of May. In this article I’ll look at another 10 dividend growth companies that I expect will announce their annual dividend increases in June.

Before I get to that, dividend growth investors should know that cell tower REIT American Tower Corporation (AMT) announced a 0.6% dividend increase to an annualized $6.28. The company usually announces increases each quarter but skipped its boost last quarter. The payout bump, which extends the company’s dividend growth streak to 13 years, gives American Tower a forward yield of 3.45%.

Here are the results from my predictions from the second half of May (as always, the original predictions are available here), followed by my predictions for the dividend increases that I’m expecting to be announced in June:

(All yields are based on stock prices at the market close on Friday, May 26th.)

Results for Dividend Increase Announcements from the Second Half of May

Ashland Inc. (ASH) – 13 years

Prediction: 9.0 – 11.9% increase to $1.46 – $1.50.

Actual: 14.9% increase to $1.54.

Forward yield: 1.77%.

Despite slowing growth, the specialty chemical company announced a good increase this year.

Donaldson Company, Inc. (DCI) – 34 years

Prediction: 6.5 – 10.9% increase to $0.98 – $1.02.

Actual: 8.7% increase to $1.00.

Forward yield: 1.55%.

The filtration company’s double-digit earnings growth leaves enough room for a good dividend increase and continued share buybacks.

Flowers Foods, Inc. (FLO) – 21 years

Prediction: 0 – 4.5% increase to $0.88 – $0.92.

Actual: 4.5% increase to $0.92.

Forward yield: 3.57%.

The bakery company announced another year of 4-cent annual dividend growth – its 7th straight.

Lennox International Inc. (LII) – 14 years

Prediction: 10.4 – 12.3% increase to $4.68 – $4.76.

Actual: 3.8% increase to $4.40.

Forward yield: 1.57%.

The HVAC company fell far short of my expectations with its latest boost.

Lowe’s Companies, Inc. (LOW) – 59 years

Prediction: 23.8 – 28.6% increase to $5.20 – $5.40.

Actual: 4.8% increase to $4.40.

Forward yield: 2.13%.

This year’s dividend increase from Lowe’s is a big disappointment, as the company has traditionally boosted its payout by more than 20% annually. But with increasing interest rates and a potential recession in the housing market, Lowe’s is playing it safe while still growing its dividend.

LyondellBasell Industries N.V. (LYB) – 11 years

Prediction: 4.2 – 5.9% increase to $4.96 – $5.04.

Actual: 5.0% increase to $5.00.

Forward yield: 5.73%.

As demand for its products slows, the chemical company’s dividend growth rate is falling. This year’s increase is below the 5-year average of 5.8% and last year’s 5.3% boost.

Medtronic plc (MDT) – 44 years

Prediction: 4.4 – 7.4% increase to $2.84 – $2.92.

Actual: 1.5% increase to $2.76.

Forward yield: 3.39%.

Foreign exchange effects caused EPS to fall this year for the medical devices company, resulting in a minimal increase.

Monro, Inc. (MNRO) – 9 years

Prediction: 3.6 – 7.1% increase to $1.16 – $1.20.

Actual: 0% increase to $1.12.

Forward yield: 2.59%.

It looks like the auto repair and tire company will defer its next dividend boost to later in the year.

Northrop Grumman Corporation (NOC) – 19 years

Prediction: 7.5 – 9.8% increase to $7.44 – $7.60.

Actual: 8.1% increase to $7.48.

Forward yield: 1.71%.

Dividend growth at the defense contractor slowed from last year’s 10% increase.

Insperity, Inc. (NSP) – 13 years

Prediction: 13.5 – 17.3% increase to $2.36 – $2.44.

Actual: 9.6% increase to $2.28.

Forward yield: 2.06%.

This is the first year of sub-10% dividend growth for the human resources company in a while.

TowneBank (TOWN) – 12 years

Prediction: 10.9 – 15.2% increase to $1.02 – $1.06.

Actual: 8.7% increase to $1.00.

Forward yield: 4.18%.

Despite a 13% drop in EPS, the regional bank still rewarded investors with a good dividend boost.

Union Pacific Corporation (UNP) – 16 years

Prediction: 3.8 – 6.2% increase to $5.40 – $5.52.

Actual: 0% increase to $5.20.

Forward yield: 2.69%.

The railroad is deferring its next dividend increase to later in the year.

Predictions for Dividend Increases for June

There are 10 long-term dividend growth companies I expect to announce their annual increases in June. Here are my predictions for two featured companies:

Caterpillar Inc. (CAT) – 29 years of dividend growth

Heavy machinery company Caterpillar is continuing to fire on all cylinders. The company posted a 28% growth in its adjusted EPS last year and followed up on that with 70% year-over-year growth in the first quarter of 2023. This growth is being driven by double-digit sales growth across all of Caterpillar’s business segments – Construction Industries, Resource Industries, and Energy & Transportation – and is primarily due to the company’s ability to pass on the effects of inflation.

Caterpillar has a good dividend growth history, balancing longevity with decent-sized increases. The current annual payout of $4.80 has doubled since the end of 2013 and last year the company increased the dividend by 8%, outpacing inflation.

What will this year bring for income investors? The only potential headwind to continued dividend growth from Caterpillar is the relatively high debt-to-equity ratio, but the debt burden is easily managed with the company’s free cash flow. In fact, the company uses most of its free cash flow for share buybacks, having repurchased more than 12% of all outstanding shares since 2018. With the earnings growth, the only question is how much of the free cash flow will be used for share buybacks and how much for dividend growth. I expect Caterpillar to continue to boost its payout in the high single digits, with a chance of a 10% increase.

Prediction: 7.5 – 10.0% increase to $5.16 – $5.28.

Predicted Forward Yield: 2.44 – 2.49%.

Target Corporation (TGT) – 55 years

After rewarding investors with a 20% dividend increase last year, Target is likely to disappoint this year. The company recently reported first quarter earnings announced that adjusted EPS had fallen more than 6% year-over-year due in large part to economic pressures on consumers. The company also announced that it expects theft and shoplifting to reduce profitability by more than $500 million in 2023.

This follows the 2022 annual earnings report, where the company announced that comparable sales and traffic growth had fallen from 12% in 2021 to less than 3% in 2022. This resulted in a 55% drop in adjusted EPS for the full year. With the drop in EPS, Target’s payout ratio jumped from 32% to more than 70%, which will limit the dividend growth this year.

Historically, Target has grown its dividend in the high single digit percentages. The headwinds of increased theft and a slowdown in the economy will make this scenario the best that can be expected. Investors will see a 56th year of dividend growth, but it’ll be in the range of mid-single digit percentages as the company hunkers down.

Prediction: 4.6 – 7.4% increase to $4.52 – $4.64.

Predicted Forward Yield: 3.25 – 3.34%.

Here are my predictions for the 8 other companies which should announce annual increases in the second half of the month:

Company	# Yrs	Industry	Prediction (%)	New Annual Rate
Casey’s General Stores (CASY)	23	Consumer Cyclical – Specialty Retail	7.9% – 11.8%	$1.64 – $1.70
Casey’s General Stores is a fast-growing convenience store chain operating nearly 2,500 stores across the United States. The company grew EPS by nearly 9% in fiscal 2022 and EPS is up a further 39% in the first 3 quarters of fiscal 2023. Casey’s consistently grows its dividend in the high single digits. I expect another boost in the same range with a chance of a double-digit increase. Predicted Forward Yield: 0.71 – 0.74%.
Great Southern Bancorp, Inc. (GSBC)	9	Financial – Regional Banks	10.0% – 12.5%	$1.76 – $1.80
The regional bank is making its way through the nationwide banking crisis in good stead, with earnings up 10% in 2022 and another 28% year-over-year in the first quarter of 2023. In addition to growing its dividend, Great Southern has also reduced its outstanding shares by nearly 14% since 2018. With the continuing earnings growth, the company has plenty of room to continue to do both. I expect a dividend boost in the 10% range, consistent with its 5-year average and last year’s 11% increase. Predicted Forward Yield: 3.49 – 3.57%.
The Kroger Company (KR)	16	Consumer Defensive – Grocery Stores	11.5% – 15.3%	$1.16 – $1.20
Supermarket chain Kroger continues to generate massive free cash flow, through both growing sales and reducing costs. The company posted adjusted EPS growth of 15% in fiscal 2022, powered by $1B in cost savings. Kroger will be hard pressed to match last year’s 24% dividend increase, especially as it is guiding adjusted EPS growth to 7% in fiscal 2023. More than that, I expect the company to pull back on using free cash for dividend growth and share repurchases as it prepares to merge with Idaho-based supermarket chain Albertson’s Companies. This year’s payout boost will likely be around the 5-year growth average of 12%. Predicted Forward Yield: 2.45 – 2.54%.
Matson, Inc. (MATX)	9	Industrials – Marine Shipping	3.20%	$1.28
Matson is a shipping company focused on transportation across the Pacific. The company is seeing container loads fall and income dropping, with first quarter EPS down nearly 90% year-over-year. Although Matson has a 5-year dividend growth average close to 10%, it’ll be another year of 4-cent annual dividend growth for investors. Predicted Forward Yield: 1.78%.
National Fuel Gas Company (NFG)	52	Energy – Oil & Gas Integrated	2.1% – 4.2%	$1.94 – $1.98
The natural gas utility has a history of very modest dividend growth: from 2012 – 2021, the National Fuel Gas’ annual dividend increase was 4 cents, and was surpassed only by last year’s 8-cent increase. Even with 37% adjusted EPS growth in 2022, investors will see another year of 4 or 8-cent dividend growth, especially since the company is expecting a 10% drop in adjusted EPS in 2023. Predicted Forward Yield: 3.79 – 3.87%.
Oil-Dri Corporation of America (ODC)	19	Materials – Specialty Chemicals	3.6% – 7.1%	$1.16 – $1.20
Oil-Dri produces absorbent products from its mines distributed across the U. S. Since 2008, the company has boosted its annual dividend by 4 cents, giving it a 4.7% compounded growth rate over the last decade. Adjusted EPS fell 7% in 2022, but Oil-Dri is doing very well in 2023, with EPS in the first half of the year exceeding all of 2022. The company has bought back nearly 5% of its shares since 2018, so I think investors will see another year of 4-cent dividend growth, with the chance of a slightly bigger boost. Predicted Forward Yield: 3.03 – 3.14%
UnitedHealth Group Incorporated (UNH)	13	Healthcare – Healthcare Plans	13.9% – 15.2%	$7.52 – $7.60
The healthcare insurer continues to grow its subscriber base, resulting in consistent double-digit EPS growth. 2022 EPS is up 17% year-over-year and the company is guiding to 11% EPS growth in 2023, as United Healthcare won Medicaid contracts in Indiana and Texas. Investors should be rewarded with a boost in the mid-teens, right around last year’s 14% increase. Predicted Forward Yield: 1.56 – 1.58%.
John Wiley & Sons (WLY)	23	Communication Services – Publishing	0.7% – 1.4%	$1.40 – $1.41
It’s shaping up to be a rough year for the publisher of academic journals. The academic market is facing severe headwinds and currency effects are hitting the company hard; Wiley reduced its full year guidance when it reported 3rd quarter results, and is guiding to a drop of 17% in adjusted EPS. Last year’s annual dividend increase was a single penny and it looks like investors can expect something similar this year. Predicted Forward Yield: 3.87 – 3.90%.

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Summary

Dividend increases were disappointing in the latter half of May. Union Pacific, expected to announce its next annual increase, deferred its announcement while Lowe’s – which historically announces 20%+ increases – increased its dividend by a disappointing but still respectable 5%. Medical device company Medtronic announced a minimal 1.5% increase. And auto repair company Monro also decided to defer its dividend boost.

On the positive side, specialty chemical company Ashland announced a 15% boost while there were several high single-digit percentage increases from filtration company Donaldson, defense contractor Northrop Grumman, staffing company Insperity, and regional bank TowneBank. The other increases were all at or below 5%.

With the Memorial Day holiday and the summer slowdown in the United States, the number of dividend increase announcements will slow down. But investors should be able to look forward to double-digit percentage boosts from regional bank Great Southern Bancorp, supermarket chain Kroger, and healthcare insurer UnitedHealth in June. Widely held construction equipment manufacturer Caterpillar should announce a boost in the high single digits, while retailer Target – which is dealing with headwinds right now – will likely slow its dividend growth to the mid-single digit percentages.