Dividend growth investing is a strategy where investors buy stock in companies which consistently raise distributions. This leads to higher dividend payouts over time, and also leads to capital gains, as the market adjusts stock prices to reflect the higher income generated by the stock.
Dividend growth does not just miraculously appear out of a thin air however. In order to get dividend hikes every year, the company has to generate earnings growth over time.
For example, back in 2001, Chevron (NYSE:CVX) earned $1.85 per share, paid a dividend of $1.325 per share and traded at $44.81 per share. Ten years later, in 2011 the company is earning $13.44 per share, the dividend is $3.09 per share. The stock is trading around very comfortable $100 per share. The company is expected to distribute at least $3.24 per share in 2012. Investors who purchased the stock a decade ago are sitting at handsome capital gains, and are earning 7.20% yield on cost.
In order to generate high returns from dividends and capital gains, investors need to focus on companies which will be able to earn higher amounts in the future.
Corporations that have designated roadmaps to generate higher earnings per share, increase investors odds of receiving higher distributions and enjoying capital gains in the process are a great place to start earning money for your portfolio.
Below, you could find a list of four companies which have outlined their corporate strategies of achieving high earnings per share for the next several years:
Beverage company Coca-Cola (NYSE:KO) engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. This dividend king has raised distributions for 50 years in a row.
Coca-Cola’s 2020 Vision Strategy strives for a high single digit annual EPS growth throughout this decade, driven through 5%-6% annual increases in revenues as the company expects 3%-4% yearly increase in sales volumes. The company is focusing more of its attention to still beverages like waters and juices, which stand the chance of delivering strong growth over time.
In addition, growth could come from emerging markets such as China and India, where the average number of servings per capita is much lower than that of the US. The company is pursuing differing strategies to capture the imaginations (and dollars) of consumers in emerging, developing and developed markets.
While the company might be focusing on growth through innovation and productivity initiatives in the developed markets, it might generate growth in emerging markets by heavy investing and maximizing volumes.
In addition, the company is playing on strong long-term demographic trends of continued rise in the global population, increased urbanization as well as the expected rise of the middle class worldwide. Yield: 2.70% (analysis)
Clorox (NYSE:CLX) manufactures and markets consumer and institutional products worldwide. The company operates in four segments: Cleaning, Lifestyle, Household, and International. This dividend champion has consistently raised distributions for 34 years in a row.
In 2007 the company introduced its Centennial Strategy where the company is focused on achieving double-digit annual growth in economic profit. A key driver of the strategy is to accelerate sales by growing existing brands, including expanding into adjacent categories, entering new sales channels and increasing penetration within existing countries.
The company also anticipates using its strong cash flow to pursue growth opportunities and increase shareholder returns.
Basically the company will try to deliver further growth through an ongoing focus on consumer megatrends.
In addition to that the company will be targeting a 2% sales growth through product innovation. The company projects sales growth of 3-5 percent, excluding acquisitions and expansion into new geographies through 2013.
Last but not least Clorox will target margin expansion and maximizing cash flow through implementation a continued robust cost-saving program and maintaining price increases the company has taken. Yield: 3.40% (analysis)