Companies that boost dividends consistently over time are rare. When they do so over a quarter or half century each year without fail, they are classified as dividend aristocrats or dividend kings respectively. These groups of stocks are rare breeds. They have such wide moats around them that irrespective of market conditions, booms or busts, they find a way to increase payouts to their shareholders.
Spotting stocks that are boosting dividends is the first step in identifying companies that could be part of these rare groups. Here are two stocks that just increased their dividends:
Darden Restaurants (DRI) owns several national restaurant chains, including Olive Garden, The Capital Grille, and LongHorn Steakhouse.
While lockdowns clearly interrupted the revenue streams of restaurants, people have started returning to restaurants in droves. Darden Restaurants feels confident the trend will continue, leading to a brighter future, higher revenues and profits. In fact, the company already sees some of these results. Revenues in FY 2020 were $7.8 billion while those in FY 2022 came in at $9.6 billion.
The company feels so confident that it increased its dividend payout by 10%. 2022 Q4 investors will receive $1.21 per share.
Is Darden A Buy?
Darden Restaurants projects a terrific 2023 with even more locations, revenues, and profits. The stock market hasn’t responded to those forecasts yet. At least not in a positive way. Year-to-date, the share price is down 32%, from a high close to $160 per share.
So is now a good time to buy Darden?
When we crunched the numbers, we arrived at a fair market value of $145.06 per share, suggesting upside of 20% could be on the cards for DRI. Year over year revenues are up 33% and, while that is expected to slow, the forecasts for top line figures are for $10 billion in sales this year and $11.5 billion by FY 2025.
Dividend per share forecasts are anticipated to be $4.84 per share this year and rising to $5.85 per share by FY 2025.
Practically everyone has used McCormick’s products. The company sells spices, season packets, and condiments. Some of its top sellers include Old Bay Seasoning, French’s Yellow Mustard, and Frank’s Red Hot.
McCormick relies on revenue streams from restaurants and consumers. Individuals can find McCormick products in the grocery store, while restaurants and similar businesses typically place bulk orders. Now that those restaurants are starting to see more business, they need more of the spices and condiments that make their foods delicious. And that has translated to rising revenues, which are up from $5.3 billion in 2019 to $5.6 billion in 2020 and $6.3 billion in 2021.
Rising sales in a tough economic climate is exactly what you want to see as an investor and it has encouraged McCormick to increase its dividend payout by about 9% to $0.37. McCormick is already a Dividend Aristocrat — a company that has increased its base dividend payout every year for at least 25 years – and this increase further cements the bullish thesis that McCormick is a stock to hold for the long-term.
Time To Buy McCormick?
McCormick sells to consumers and businesses, so it doesn’t need to rely on restaurants to succeed. If restaurants aren’t buying as much as they used to, though, McCormick needs to pivot and increase consumer sales.
McCormick’s stock has lost value over the last year. Its year-to-date price is down by nearly 7.5%. And that has created an opportunity. By our estimates, fair market value sits at around $87.27 per share, suggesting almost double digit percentage upside opportunity for a proven dividend stock with a 29 year growth streak that is on its way to becoming a dividend king.