Income investors typically focus on stocks with high dividend yields. However, investors with a longer time horizon should also consider dividend growth stocks, as these may provide more income over the long run.
This is especially true when it comes to quality dividend growth stocks. These 3 dividend growth stocks have raised their dividends for over 25 years, and should be able to continue raising their dividends for many years.
Sherwin-Williams Company (SHW)
Sherwin-Williams, founded in 1866, is North America’s largest manufacturer of paints and coatings.
The company distributes its products through wholesalers as well as retail stores (including a chain of more than 4,900 company-operated stores and facilities) to 120 countries under the Sherwin-Williams name.
The company also manufactures Dutch Boy, Pratt & Lambert, Minwax, Thompson’s Waterseal, Krylon, Valspar (acquired in 2017), and other brands.
On October 22nd, 2024, Sherwin-Williams released financial results for the third quarter of fiscal 2024. Sales increased 0.7% from the same quarter in the previous year. Gross margin expanded from 47.7% to 49.1% thanks to price hikes. Adjusted earnings-per-share grew 5%, from $3.20 to $3.37.
Sherwin-Williams reiterated its guidance for 2024. It expects sales to be up a low-single digit percentage, and earnings-per-share of $11.10-$11.40. The company is highly profitable which fuels its dividend increases.
Sherwin-Williams is not necessarily in a high-growth industry, but its entrenched position offers the company its fair share of competitive advantages, allowing the business to grow consistently. Moreover, acquisitions are a way for Sherwin-Williams to enhance its presence, with the Valspar transaction being a good example.
SHW has increased its dividend for 46 consecutive years.
Cintas Corporation (CTAS)
Cintas Corporation is the U.S. industry leader in uniform design, manufacturing & rental. The company also offers first aid supplies, safety services, and other business-related services.
Cintas reported second quarter earnings on December 19th, 2024, and results were largely in line with expectations. Organic revenue was 7.1% in the quarter, which excludes forex translation and the impacts of acquisitions.
Revenue was up 7.6% year-on-year to $2.56 billion, meeting expectations. Earnings came to $1.09 per share, which was seven cents ahead of estimates.
Gross margin was $1.28 billion, up from $1.14 billion a year ago. As a percentage of revenue, gross margin was 49.8%, up 180 basis points from a year ago.
Operating income was 18.4% higher, and was up 210 basis points as a percentage of revenue at 23.1%. On a dollar basis, earnings came to $449 million, up from $375 million a year ago, up 20%. On a per-share basis, earnings were $1.09, up from 90 cents.
Cintas has compounded its earnings-per-share at a rate of about 16% annually since 2012. Over full economic cycles, we believe the company can deliver continued earnings growth in the range of 9% per year.
Its two primary growth levers are higher organic revenue and higher margins. Cintas has proven it can grow revenue consistently over the years. It is also adept at removing cost redundancies, which drives operating margin higher over time.
CTAS has increased its dividend for 42 years.
Brown & Brown Inc. (BRO)
Brown & Brown Inc. is a leading insurance brokerage firm that provides risk management solutions to both individuals and businesses, with a focus on property & casualty insurance. Brown & Brown has a notably high level of insider ownership.
Brown & Brown posted third quarter earnings on October 28th, 2024, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to 91 cents, which was three cents ahead of expectations. Revenue was up over 10% year-over-year to $1.18 billion, and beat estimates by $10 million.
Commissions and fees revenue rose 10.1%, while organic revenue rose 9.5%. Income before taxes was $317 million, soaring 31% year-over-year. As a percentage of revenue, it rose from 22.7% to 26.7%. Net income was $234 million, up $58 million year-over-year. On a per-share basis, net income was up from 81 cents a year ago to 91 cents. Brown & Brown boosted its dividend by 15.4% to a new payout of 60 cents per share annually.
Brown & Brown has a remarkable growth track record that includes a decade-long compound annual earnings growth rate of more than 14%. The company’s book value per common share has grown at a similar rate, expanding at ~11% per year over the last ten years. Brown & Brown’s growth strategy is both simple and sustainable.
Over the years, the company has actively acquired smaller insurance brokerage firms and integrated them into its larger operating base. We believe that this strategy has plenty of room left to run and forecast that the firm can continue to grow at 9% per year for the foreseeable future.
BRO has increased its dividend for 31 years.
Disclosure: No positions in any stocks mentioned
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.