Darden Restaurants, Inc. (DRI), The Clorox Company (CLX), Chevron Corporation (CVX): 4 Great Dividend Increases

I already own Chevron

Chevron Corporation (NYSE:CVX) was recently trading at $119 and yields 3.4%. The company has been raising its dividend every year for 19 years, and sports a five-year DGR of 9%. The last increase in the dividend was in May, when the company raised it by 11%.

Chevron Corporation (NYSE:CVX)’s management must be feeling confident about the company’s future; they are planning to build a new 50-story, 1.7 million square foot skyscraper in downtown Houston to house the company’s expanding workforce. Groundbreaking will begin in 2014, with occupancy expected for 2016. This building joins the two other Chevron Corporation (NYSE:CVX) buildings in downtown Houston, both formerly owned by Enron.

Chevron Corporation (NYSE:CVX)’s low payout ratio (27%) and low PE (9.0) argue for purchase now, but its extremely low projected earnings growth rate (EGR) of 0.8% is quite a damper. Nevertheless, I did choose Chevron Corporation (NYSE:CVX) for my PDP in April and stand by my decision.

Why have I never looked at Safeway?

Safeway Inc. (NYSE:SWY) was recently trading at $24 and yields 3.4%, with a five-year DGR of 19.3%. On top of a low payout rate of 24% and a low PE of 9.7, I’d say Safeway looks like a pretty compelling dividend buy.

Safeway Inc. (NYSE:SWY) announced it would raise its dividend in May, for a 14.3% increase. The company was just reiterated as a Buy by TheStreet.com, where the author cited strong earnings-per-share and net-income growth over the same quarter last year.

Safeway’s EPS increased by 63% due to a favorable tax situation, which dropped the company’s tax expense from 30% to 2.1%. (We can debate the ethical and patriotic meaning of this tax situation in another forum.) Without the tax break, the earnings would have increased by 17%, still an impressive figure.

Safeway has a PE of 9.9 and a PEG of 1.5, both indicating that the company is not overvalued. It’s paying out only 30% of free cash flow in dividends, so it’s not in any danger of being unable to continue.

If I didn’t have a complete portfolio already, and if I weren’t determined to stick to a 10-year-or-more criterion for my portfolio, Safeway would be an extremely strong contender for inclusion.

Conclusion

I put both The Clorox Company (NYSE:CLX) and Darden Restaurants, Inc. (NYSE:DRI) on my “Watch” list. I suggest you do the same.

Karin Hernandez has a position in Chevron. The Motley Fool recommends Chevron. The Motley Fool owns shares of Darden Restaurants.

The article 4 Great Dividend Increases originally appeared on Fool.com and is written by Karin Hernandez.

Karin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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