Every week I screen the list of companies whose board of directors has approved an increase in their dividend. I then further narrow the list by including only companies which have shown commitment to raising distributions for at least five consecutive years. The purpose of this exercise is to note whether any companies in my dividend portfolio are raising distributions and also to identify any hidden dividend gems. Further screening based on quantitative factors such as valuation, earnings growth, dividend sustainability could add value by decreasing the list of potential candidates for further research to a more manageable level.
Last week, there were twelve stocks which announced dividend hikes:
The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company raised its quarterly distributions by 5.40% to 39 cents/share. This dividend aristocrat has raised distributions for 46 years in a row. The company has managed to raise distributions by 8.30% on average over the past decade. Yield: 2.60% (analysis)
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company raised its quarterly distributions by 9.40% to 58 cents/share. This dividend champion has raised distributions for 48 years in a row. The company has managed to raise distributions by 12.40% on average over the past decade. Yield: 3% (analysis)
Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada, and Mexico. The company raised its quarterly dividend by 9.80% to 45 cents/share. This dividend king has raised dividends for 55 consecutive years. The company has managed to raise distributions by 4.20% on average over the past decade. Yield: 3.40% (analysis)
British American Tobacco p.l.c. (BTI) , through its subsidiaries, engages in the manufacture, distribution, and sale of tobacco products. The company’s board of directors approved an increase in its final dividend to 81 pence/share. The total annual dividend would thus be at 114.20 pence/share, which represents a 15% increase over the payment in 2009. British American Tobacco is an international dividend achiever, which has raised distributions for thirteen years in a row. The US ADR annual dividend equivalent at current forex rates comes out to $3.68/share. Yield: 4.60%
McGrath RentCorp (MGRC) operates as a business-to-business rental company in the United States. It operates in four segments: Mobile Modular Management Corporation (Mobile Modular); TRS-RenTelco; Adler Tank Rentals, LLC (Adler Tank); and Enviroplex, Inc. (Enviroplex). The company raised its quarterly distributions by 2.20% to 23 cents/share. This dividend achiever has raised distributions for 19 years in a row. The company has managed to raise distributions by 12.70% on average over the past decade. Yield: 3.30%
Essex Property Trust, Inc. (ESS), a real estate investment trust (REIT), engages in the ownership, operation, management, acquisition, development, and redevelopment of apartment communities primarily in the West Coast of the United States. This real estate investment trust raised quarterly distributions by 0.70% to $1.04/share. The company is a member of the dividend achievers index, and has consistently raised distributions for seventeen consecutive years. The company has managed to raise distributions by 5.90% on average over the past decade. Yield: 3.40%
Old Republic International Corporation (ORI), through its subsidiaries, engages in insurance underwriting business. It operates in three segments: General Insurance, Mortgage Guaranty, and Title Insurance. The company raised its quarterly dividend by 1.40% to 17.50 cents/share. This dividend champion has raised distributions for 30 years in a row. The company has managed to raise distributions by 8.90% on average over the past decade. Yield: 5.60%
RenaissanceRe Holdings Ltd. (RNR), together with its subsidiaries, provides reinsurance and insurance products and services worldwide. The company operates through two segments, Reinsurance and Individual Risk. The company raised its quarterly dividend by 4% to 26 cents/share. This marked the sixteenth consecutive dividend increase for this dividend achiever. The company has managed to raise distributions by 7.20% on average over the past decade. Yield: 4%
EOG Resources, Inc. (EOG), together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas and crude oil primarily in the United States, Canada, the Republic of Trinidad, Tobago, the United Kingdom, and the People's Republic of China. The company raised its quarterly dividend by 3.20% to 16 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. The company has managed to raise distributions by 25.10% on average over the past decade. Yield: 0.60%
Westar Energy, Inc. (WR), an electric utility company, engages in the generation, transmission, and distribution of electricity. The company raised its quarterly dividend by 3.20% to 32 cents/share. This marked the seventh consecutive dividend increase for Westar Energy. Yield: 4.90%
Tim Hortons Inc. (THI) develops, franchises, and operates quick service restaurants primarily in Canada and the United States. The company raised its quarterly dividend by 30.80% to 17 cents/share. This marked the sixth annual consecutive dividend increase for Tim Hortons. Yield: 1.60%
Sempra Energy (SRE), together with its subsidiaries, engages in the development of energy infrastructure, operation of utilities, and provision of energy-related products and services worldwide. It operates through two divisions, Sempra Utilities and Sempra Global. The company raised its distributions by 23.10% to 48 cents/share. This marked the seventh consecutive annual dividend increase for the stock. Yield: 3.60%
Full Disclosure: Long CB and CL
Relevant Articles:
- Sixteen Consistent Dividend Payers Raising Dividens
- Nineteen Consistent Dividend Growth Stocks raising distributions
- Eleven Dividend Machines Delivering Higher Distributions
- Five High Yield Dividend Growth Stocks Raising Distributions
Monday, February 28, 2011
Friday, February 25, 2011
Kimberly-Clark (KMB) Dividend Stock Analysis
Kimberly-Clark Corporation (KMB), together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. The company is a dividend aristocrat which has increased distributions for 38 years in a row.
Over the past decade this dividend stock has delivered an annualized total return of 2% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 3.40% per year since 2000. Analysts expect Kimberly-Clark to earn $4.64 per share in 2010 and $5.01 per share in 2011. This would be a nice increase from the $4.52/share the company earned in 2009. The company’s EPS has been aided by the consistent share buybacks, which has led to a 3.10% average decrease in total shares outstanding per year. This means that over the past decade net income has been mostly flat.
The company has been trying to increase market share through product innovation and increased marketing. The company is under intense inflation pressure, but is closely. It has worked closely in streamlining operations in the sluggish North American market, eliminating positions and closing several facilities. Over the past several years, the company has only been able to pass on to consumers just half of the price increases that it experienced. Commodity prices could be detrimental to total costs at the company, as is the competitive nature of developed markets in which Kimberly-Clark does business. As with other consumer products companies, the growth is likely to come from developing and emerging markets, rather than developed markets. Developed markets could benefit from cost cutting and efficiency profits, which would decrease the total price of doing business. Under the company’s global business plan, announced in 2003, it is looking for annual sales growth in the 3%-5% range, EPS growth in the mid to high single digits and dividend increases in line with earnings growth. For more on the global business plan, check this document.
The company’s high return on equity has been on the rise since hitting a bottom at 25.70% in 2006. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 9.30% per year since 2000, which is substantially more than the growth in EPS. This dividend growth has been possible mostly due to the expansion in the dividend payout ratio. Without growth in earnings, future dividend growth would be limited. A 9% growth in distributions translates into the dividend payment doubling every eight years. If we look at historical data, going as far back as 1980, we see that Kimberly-Clark has actually managed to double its dividend every seven and a half years on average. I expect modest dividend growth of up to 6% per year in the future, which could translate in the dividend payment doubling every twelve years.
Over the past decade the dividend payout ratio has increased from 32.30% to over 53%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Kimberly-Clark is attractively valued at 14.40 times earnings, yields 4.20% and has a sustainable dividend payout. In comparison Procter & Gamble (PG) yields 3% and trades at a P/E of 15.90, while Colgate-Palmolive (CL) yields 2.60% and trades at a P/E of 18.80. The issue with Kimberly-Clark is that it has not been able to increase net income over the past decade. The reason behind the increase in earnings per share is because it consistently repurchased shares. In addition to that, the company was able to deliver dividend growth by paying a higher portion of earnings in the form of dividends. Over the next few years I see Kimberly-Clark raising dividends by 4% - 5% per year. The company is suited for investors seeking current income, but should be able to deliver decent total returns over the next decades. I would continue monitoring Kimberly-Clark and will consider adding to my position in the stock on dips.
Full Disclosure: Long KMB
Relevant Articles:
- Becton, Dickinson and Company (BDX) Dividend Stock Analysis
- McCormick & Company (MKC) Dividend Stock Analysis
- Sysco Corporation (SYY) Dividend Stock Analysis
- Genuine Parts (GPC) Dividend Stock Analysis
Over the past decade this dividend stock has delivered an annualized total return of 2% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 3.40% per year since 2000. Analysts expect Kimberly-Clark to earn $4.64 per share in 2010 and $5.01 per share in 2011. This would be a nice increase from the $4.52/share the company earned in 2009. The company’s EPS has been aided by the consistent share buybacks, which has led to a 3.10% average decrease in total shares outstanding per year. This means that over the past decade net income has been mostly flat.
The company has been trying to increase market share through product innovation and increased marketing. The company is under intense inflation pressure, but is closely. It has worked closely in streamlining operations in the sluggish North American market, eliminating positions and closing several facilities. Over the past several years, the company has only been able to pass on to consumers just half of the price increases that it experienced. Commodity prices could be detrimental to total costs at the company, as is the competitive nature of developed markets in which Kimberly-Clark does business. As with other consumer products companies, the growth is likely to come from developing and emerging markets, rather than developed markets. Developed markets could benefit from cost cutting and efficiency profits, which would decrease the total price of doing business. Under the company’s global business plan, announced in 2003, it is looking for annual sales growth in the 3%-5% range, EPS growth in the mid to high single digits and dividend increases in line with earnings growth. For more on the global business plan, check this document.
The company’s high return on equity has been on the rise since hitting a bottom at 25.70% in 2006. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 9.30% per year since 2000, which is substantially more than the growth in EPS. This dividend growth has been possible mostly due to the expansion in the dividend payout ratio. Without growth in earnings, future dividend growth would be limited. A 9% growth in distributions translates into the dividend payment doubling every eight years. If we look at historical data, going as far back as 1980, we see that Kimberly-Clark has actually managed to double its dividend every seven and a half years on average. I expect modest dividend growth of up to 6% per year in the future, which could translate in the dividend payment doubling every twelve years.
Over the past decade the dividend payout ratio has increased from 32.30% to over 53%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Kimberly-Clark is attractively valued at 14.40 times earnings, yields 4.20% and has a sustainable dividend payout. In comparison Procter & Gamble (PG) yields 3% and trades at a P/E of 15.90, while Colgate-Palmolive (CL) yields 2.60% and trades at a P/E of 18.80. The issue with Kimberly-Clark is that it has not been able to increase net income over the past decade. The reason behind the increase in earnings per share is because it consistently repurchased shares. In addition to that, the company was able to deliver dividend growth by paying a higher portion of earnings in the form of dividends. Over the next few years I see Kimberly-Clark raising dividends by 4% - 5% per year. The company is suited for investors seeking current income, but should be able to deliver decent total returns over the next decades. I would continue monitoring Kimberly-Clark and will consider adding to my position in the stock on dips.
Full Disclosure: Long KMB
Relevant Articles:
- Becton, Dickinson and Company (BDX) Dividend Stock Analysis
- McCormick & Company (MKC) Dividend Stock Analysis
- Sysco Corporation (SYY) Dividend Stock Analysis
- Genuine Parts (GPC) Dividend Stock Analysis
Wednesday, February 23, 2011
Dividend Growth Investing Gets No Respect
Dividend Growth investing is one of the most misunderstood investment strategies out there. Yet various studies have proven that quality dividend growth stocks tend to outperform the broad market indices over time.
The main obstacle to understanding dividend investing in general is that dividend stocks are equities and not a separate asset class. Companies exist for the benefit of shareholders, which mean that they have to generate some return either in the form of dividends or in the form of capital gains. Paying a dividend instills discipline on management to be careful with the cash position and not take excessive risks such as ill-timed acquisitions or investing in projects which might not generate sufficient returns for the company. Investing should be all about the middle ground, and not excessive assumptions about relying exclusively on capital gains or exclusively on dividends. Everything is good in moderation, and investing should not be any different.
Dividend investors realize that focusing just on the dividend income is not preferred. In order to be able to pay the dividend, a company needs to have a sustainable income stream, which preferably could grow over time. This would support a growing dividend over time. A growing stream of earnings also means that unless an unjustifiably high price was paid for the stock, its price should rise over time as well. By reinvesting dividends into purchasing more shares, and by enjoying capital gains in the process, investors will be able to take full advantage of the power of compounding, which will help them in achieving higher net worths over time. The point that dividend stocks are equities and that compounding a smaller initial investment at a certain return could lead to a higher invested amount over time is missed not only by ordinary investors, but even some financial writers.
Another misunderstood fact is that a company that grows distributions over time, could generate sufficient yield on cost to its early investors. If one invests $500,000 today in dividend stocks which yield 3%, they would be generating $15,000 in dividend income. If dividends grow at 6% per year for 12 years, the dividend income would be $30,000 in 2023. This income stream would be the same as the income stream generated by a $1,000,000 investment in 2023, yielding 3%. Dividend growth is not a given of course, although it has been a fact of life for the past several decades, and that is for broader market indices.
Dividend stocks do have risks of course. There are no risk-free assets to invest in to begin with however. Even investing in US treasuries, which are viewed as fairly low risk, could lead to losses if interest rates increase, the dollar loses purchasing power or the US government fails to meet its obligations. Investors could lower their risks by diversifying into at least 30 individual stocks representative of as many market sectors as applicable. A long record of consistent dividend growth is a must, coupled with a business model that boasts strong competitive advantages, stable and growing earnings and strong brand recognition. Overpaying for stocks is a sure way to increase risks of investment losses, just like chasing the highest yielding stocks without checking whether the payout is sustainable is a recipe for disaster.
Even when one looks at the dividends per share in the S&P 500 over the past 30 years, a clear trend of dividend growth is obvious. Dividend growth investors are simply playing on that trend by investing in the companies that actually do grow dividends over time. Not all companies that are purchased by investors would keep growing distributions over time, but if a careful selection method is utilized by investors, coupled with a sound diversification policy, a dividend portfolio should be able to generate high income over time.
As mentioned above, dividend growth is a function of earnings growth. Companies make more money by expanding, raising prices at a higher pace than the increase in costs, cutting costs, acquiring companies or by a combination of any of the above. A gradual decrease in the dollars purchasing power due to inflation actually benefits equities, since this makes nominal prices higher, even if the product or service was acquired at lower nominal amounts. In addition to that, as the number of consumers in the world increases, this could only benefit global companies such as Procter & Gamble (PG), McDonald’s (MCD), Johnson & Johnson (JNJ), Coca Cola (KO) or Colgate-Palmolive (CL).
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company has raised dividends for 48 years in a row and has a ten year dividend growth rate of 13% per annum .Yield: 3.60% (analysis)
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. The company has raised distributions for 54 years in a row and has a ten year dividend growth rate of 10.90% annually. Yield: 3.00% (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company has raised dividends for 49 years in a row and has a ten year dividend growth rate of 10% per year. Yield: 2.70% (analysis)
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised distributions for 47 years in a row and has a ten year dividend growth rate of 12.40% per year. Yield: 2.70% (analysis)
Full Disclosure: Long MCD, CL, KO, PG, JNJ
Relevant Articles:
The main obstacle to understanding dividend investing in general is that dividend stocks are equities and not a separate asset class. Companies exist for the benefit of shareholders, which mean that they have to generate some return either in the form of dividends or in the form of capital gains. Paying a dividend instills discipline on management to be careful with the cash position and not take excessive risks such as ill-timed acquisitions or investing in projects which might not generate sufficient returns for the company. Investing should be all about the middle ground, and not excessive assumptions about relying exclusively on capital gains or exclusively on dividends. Everything is good in moderation, and investing should not be any different.
Dividend investors realize that focusing just on the dividend income is not preferred. In order to be able to pay the dividend, a company needs to have a sustainable income stream, which preferably could grow over time. This would support a growing dividend over time. A growing stream of earnings also means that unless an unjustifiably high price was paid for the stock, its price should rise over time as well. By reinvesting dividends into purchasing more shares, and by enjoying capital gains in the process, investors will be able to take full advantage of the power of compounding, which will help them in achieving higher net worths over time. The point that dividend stocks are equities and that compounding a smaller initial investment at a certain return could lead to a higher invested amount over time is missed not only by ordinary investors, but even some financial writers.
Another misunderstood fact is that a company that grows distributions over time, could generate sufficient yield on cost to its early investors. If one invests $500,000 today in dividend stocks which yield 3%, they would be generating $15,000 in dividend income. If dividends grow at 6% per year for 12 years, the dividend income would be $30,000 in 2023. This income stream would be the same as the income stream generated by a $1,000,000 investment in 2023, yielding 3%. Dividend growth is not a given of course, although it has been a fact of life for the past several decades, and that is for broader market indices.
Dividend stocks do have risks of course. There are no risk-free assets to invest in to begin with however. Even investing in US treasuries, which are viewed as fairly low risk, could lead to losses if interest rates increase, the dollar loses purchasing power or the US government fails to meet its obligations. Investors could lower their risks by diversifying into at least 30 individual stocks representative of as many market sectors as applicable. A long record of consistent dividend growth is a must, coupled with a business model that boasts strong competitive advantages, stable and growing earnings and strong brand recognition. Overpaying for stocks is a sure way to increase risks of investment losses, just like chasing the highest yielding stocks without checking whether the payout is sustainable is a recipe for disaster.
Even when one looks at the dividends per share in the S&P 500 over the past 30 years, a clear trend of dividend growth is obvious. Dividend growth investors are simply playing on that trend by investing in the companies that actually do grow dividends over time. Not all companies that are purchased by investors would keep growing distributions over time, but if a careful selection method is utilized by investors, coupled with a sound diversification policy, a dividend portfolio should be able to generate high income over time.
As mentioned above, dividend growth is a function of earnings growth. Companies make more money by expanding, raising prices at a higher pace than the increase in costs, cutting costs, acquiring companies or by a combination of any of the above. A gradual decrease in the dollars purchasing power due to inflation actually benefits equities, since this makes nominal prices higher, even if the product or service was acquired at lower nominal amounts. In addition to that, as the number of consumers in the world increases, this could only benefit global companies such as Procter & Gamble (PG), McDonald’s (MCD), Johnson & Johnson (JNJ), Coca Cola (KO) or Colgate-Palmolive (CL).
McDonald's Corporation (MCD), together with its subsidiaries, operates as a worldwide foodservice retailer. It franchises and operates McDonald's restaurants that offer various food items, soft drinks, coffee, and other beverages. The company has raised distributions for 34 years in a row and has a ten year dividend growth rate of 26.50% per year .Yield: 3.20% (analysis)
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company has raised dividends for 48 years in a row and has a ten year dividend growth rate of 13% per annum .Yield: 3.60% (analysis)
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. The company has raised distributions for 54 years in a row and has a ten year dividend growth rate of 10.90% annually. Yield: 3.00% (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company has raised dividends for 49 years in a row and has a ten year dividend growth rate of 10% per year. Yield: 2.70% (analysis)
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised distributions for 47 years in a row and has a ten year dividend growth rate of 12.40% per year. Yield: 2.70% (analysis)
Full Disclosure: Long MCD, CL, KO, PG, JNJ
This article was featured on the Carnival of Personal Finance #298 – The Best Money Articles Online
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Monday, February 21, 2011
Sixteen Consistent Dividend Payers Raising Dividends
Dividend investing is one of the many strategies individuals could use in order to generate income in retirement. Most of the quality dividend paying companies which I follow on my blog pursue a policy of stable and growing distributions. These companies are hesitant to cut dividends during recessions or temporary earnings setbacks, which provides retirees with a higher degree of confidence that their income stream would not be jeopardized. The fact that most stocks pay regular quarterly dividend distributions makes it easy for retirees to forecast the level of income they are going to generate in a given period. This stable recurring income stream is essential for budgeting and meeting their recurring expenses in retirement. While stable dividend payments are helpful in generating income, it is companies that also regularly raise distributions that could generate an inflation adjusted stream of income which doesn’t lose purchasing power over time.
In this week’s look of dividend raisers, I have highlighted the companies which not only announced dividend increases, but also have a history of at least five consecutive annual dividend increases:
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. The company announced its plans to raise its quarterly dividend by 9.10% to 48 cents/share. This dividend aristocrat has increased dividends for 39 consecutive years and has a ten year annual dividend growth rate of 8.80%.Yield: 4.10 % (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company announced its plans to raise its quarterly dividend by 6.80% to 47 cents/share. This dividend aristocrat has increased dividends for 49 consecutive years and has a ten year annual dividend growth rate of 10%. Yield: 2.90 % (analysis)
Nestle S.A. (NSRGY) provides nutrition, health, and wellness products worldwide. The company’s Board of Directors has proposed a 15.60% increase in dividends to 1.85 CHF/share ($1.96/share). This international dividend achiever has consistently raised distributions since 1996. Yield: 3.50%
TransCanada Corporation (TRP) operates as an energy infrastructure company in North America. The company operates in two segments, Pipelines and Energy. The Company announced its plans to raise its quarterly dividend by 5 % to 42 cents/share. This international dividend achiever has consistently increased dividends since 2001. Yield: 4.40%
Buckeye Partners, L.P. (BPL) primarily operates refined petroleum products pipeline systems in the United States. The Company announced its plans to raise its quarterly distributions to 98.75 cents/share. This member of the dividend achievers index has increased dividends for 16 consecutive years and has a ten year annual distribution growth rate of 4.80%. Yield: 6.10%
Questar Corporation (STR), a natural gas-focused energy company, through its subsidiaries, engages in the gas and oil exploration and production, midstream field services, energy marketing, interstate gas transportation, and retail gas distribution businesses. The company announced its plans to raise its quarterly dividend by 8.90% to 15.25 cents/share. This dividend aristocrat has increased dividends for 32 consecutive years and has a ten year annual dividend growth rate of 4.70%. Yield 3.40%
The Sherwin-Williams Company (SHW) engages in the development, manufacture, distribution, and sale of paints, coatings, and related products in North and South America, Europe, and Asia. The company announced its plans to raise its quarterly dividend by 1.40 % to 36.50 cents/share. This dividend aristocrat has increased dividends for 33 consecutive years and has a ten year annual dividend growth rate of 10.30%%. Yield: 1.70% (analysis)
Stanley Black & Decker, Inc. (SWK) manufactures tools and engineered security solutions worldwide. The Company announced its plans to raise its quarterly dividend by 20.60 % to 41 cents/share. This dividend champion has increased dividends for 44 consecutive years. Yield: 2.20% (analysis)
Reynolds American Inc. (RAI), through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company announced its plans to raise its quarterly dividend by 8.20 % to 53 cents/share. The company has increased dividends for 6 years in a row. Yield: 6.10%
MOCON, Inc. (MOCO) develops, manufactures, markets, and services measurement, analytical, and monitoring products that are used to detect, measure, and analyze gases and chemical compounds; and provides related consulting services. The company announced its plans to raise its quarterly dividend by 5.30% to 10 cents/share. The company is a member of the dividend challengers list and has increased dividends for 9 consecutive years. Yield 3.20%
NextEra Energy, Inc. (NEE), through its subsidiaries, engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. The company announced its plans to raise its quarterly dividend by 10% to 55 cents/share. The company is a member of the dividend achievers index and has increased dividends for 17 consecutive years. Yield: 4%
Silgan Holdings Inc. (SLGN), through its subsidiaries, engages in the manufacture and sale of metal and plastic consumer goods packaging products primarily in the United States, Canada, and Europe. The company announced its plans to raise its quarterly dividend by 4.80% to 11 cents/share. The company has increased dividends for 8 consecutive years. Yield: 1.10%
T. Rowe Price Group, Inc. (TROW) is a publicly owned asset management holding company. The company announced its plans to raise its quarterly dividend by 14.80% to 31 cents/share. The company is a member of the dividend achievers index and has increased dividends for 24 consecutive years. Yield: 1.70%
Albemarle Corporation (ALB) develops, manufactures, and markets engineered specialty chemicals in the United States and internationally. The company announced its plans to raise its quarterly dividend by 17.90 % to 16.50 cents/share. The company is a member of the dividend achievers index and has increased dividends for 17 consecutive years. Yield: 1.10%
Cheviot Financial Corp. (CHEV) operates as the holding company for Cheviot Savings Bank that provides a range of banking services in Ohio. The company announced its plans to raise its quarterly dividend by 9.10% to 12 cents/share. The company has increased dividends for 8 years in a row. Yield: 5.50%
Compass Minerals International, Inc. (CMP), through its subsidiaries, engages in the production and marketing of inorganic mineral products in North America and the United Kingdom. The company operates in two segments, Salt and Specialty Fertilizer. The Company announced its plans to raise its quarterly dividend by 15.40% to 45 cents/share. The company has raised its quarterly dividend for 8 years in a row. Yield: 1.90%
Full Disclosure: Long ABT,KO, SHW, NSRGY
Relevant Articles:
- Ten Dividend Stocks Beating Inflation
- Fourteen Stocks Raising Dividends Like Clockwork
- Eleven Dividend Machines Delivering Higher Distributions
- Five High Yield Dividend Growth Stocks Raising Distributions
In this week’s look of dividend raisers, I have highlighted the companies which not only announced dividend increases, but also have a history of at least five consecutive annual dividend increases:
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. The company announced its plans to raise its quarterly dividend by 9.10% to 48 cents/share. This dividend aristocrat has increased dividends for 39 consecutive years and has a ten year annual dividend growth rate of 8.80%.Yield: 4.10 % (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company announced its plans to raise its quarterly dividend by 6.80% to 47 cents/share. This dividend aristocrat has increased dividends for 49 consecutive years and has a ten year annual dividend growth rate of 10%. Yield: 2.90 % (analysis)
Nestle S.A. (NSRGY) provides nutrition, health, and wellness products worldwide. The company’s Board of Directors has proposed a 15.60% increase in dividends to 1.85 CHF/share ($1.96/share). This international dividend achiever has consistently raised distributions since 1996. Yield: 3.50%
TransCanada Corporation (TRP) operates as an energy infrastructure company in North America. The company operates in two segments, Pipelines and Energy. The Company announced its plans to raise its quarterly dividend by 5 % to 42 cents/share. This international dividend achiever has consistently increased dividends since 2001. Yield: 4.40%
Buckeye Partners, L.P. (BPL) primarily operates refined petroleum products pipeline systems in the United States. The Company announced its plans to raise its quarterly distributions to 98.75 cents/share. This member of the dividend achievers index has increased dividends for 16 consecutive years and has a ten year annual distribution growth rate of 4.80%. Yield: 6.10%
Questar Corporation (STR), a natural gas-focused energy company, through its subsidiaries, engages in the gas and oil exploration and production, midstream field services, energy marketing, interstate gas transportation, and retail gas distribution businesses. The company announced its plans to raise its quarterly dividend by 8.90% to 15.25 cents/share. This dividend aristocrat has increased dividends for 32 consecutive years and has a ten year annual dividend growth rate of 4.70%. Yield 3.40%
The Sherwin-Williams Company (SHW) engages in the development, manufacture, distribution, and sale of paints, coatings, and related products in North and South America, Europe, and Asia. The company announced its plans to raise its quarterly dividend by 1.40 % to 36.50 cents/share. This dividend aristocrat has increased dividends for 33 consecutive years and has a ten year annual dividend growth rate of 10.30%%. Yield: 1.70% (analysis)
Stanley Black & Decker, Inc. (SWK) manufactures tools and engineered security solutions worldwide. The Company announced its plans to raise its quarterly dividend by 20.60 % to 41 cents/share. This dividend champion has increased dividends for 44 consecutive years. Yield: 2.20% (analysis)
Reynolds American Inc. (RAI), through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company announced its plans to raise its quarterly dividend by 8.20 % to 53 cents/share. The company has increased dividends for 6 years in a row. Yield: 6.10%
MOCON, Inc. (MOCO) develops, manufactures, markets, and services measurement, analytical, and monitoring products that are used to detect, measure, and analyze gases and chemical compounds; and provides related consulting services. The company announced its plans to raise its quarterly dividend by 5.30% to 10 cents/share. The company is a member of the dividend challengers list and has increased dividends for 9 consecutive years. Yield 3.20%
NextEra Energy, Inc. (NEE), through its subsidiaries, engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. The company announced its plans to raise its quarterly dividend by 10% to 55 cents/share. The company is a member of the dividend achievers index and has increased dividends for 17 consecutive years. Yield: 4%
Silgan Holdings Inc. (SLGN), through its subsidiaries, engages in the manufacture and sale of metal and plastic consumer goods packaging products primarily in the United States, Canada, and Europe. The company announced its plans to raise its quarterly dividend by 4.80% to 11 cents/share. The company has increased dividends for 8 consecutive years. Yield: 1.10%
T. Rowe Price Group, Inc. (TROW) is a publicly owned asset management holding company. The company announced its plans to raise its quarterly dividend by 14.80% to 31 cents/share. The company is a member of the dividend achievers index and has increased dividends for 24 consecutive years. Yield: 1.70%
Albemarle Corporation (ALB) develops, manufactures, and markets engineered specialty chemicals in the United States and internationally. The company announced its plans to raise its quarterly dividend by 17.90 % to 16.50 cents/share. The company is a member of the dividend achievers index and has increased dividends for 17 consecutive years. Yield: 1.10%
Cheviot Financial Corp. (CHEV) operates as the holding company for Cheviot Savings Bank that provides a range of banking services in Ohio. The company announced its plans to raise its quarterly dividend by 9.10% to 12 cents/share. The company has increased dividends for 8 years in a row. Yield: 5.50%
Compass Minerals International, Inc. (CMP), through its subsidiaries, engages in the production and marketing of inorganic mineral products in North America and the United Kingdom. The company operates in two segments, Salt and Specialty Fertilizer. The Company announced its plans to raise its quarterly dividend by 15.40% to 45 cents/share. The company has raised its quarterly dividend for 8 years in a row. Yield: 1.90%
Full Disclosure: Long ABT,KO, SHW, NSRGY
Relevant Articles:
- Ten Dividend Stocks Beating Inflation
- Fourteen Stocks Raising Dividends Like Clockwork
- Eleven Dividend Machines Delivering Higher Distributions
- Five High Yield Dividend Growth Stocks Raising Distributions
Friday, February 18, 2011
PepsiCo (PEP) Dividend Stock Analysis
PepsiCo, Inc. manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company operates in four divisions: PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo Europe, and PepsiCo Asia, Middle East and Africa (AMEA). The company is a dividend aristocrat which has increased distributions for 38 years in a row.
Over the past decade this dividend stock has delivered an annualized total return of 4.90% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 10.90% per year since 2000. Analysts expect PepsiCo to earn $4.12 per share in 2010 and $4.61 per share in 2011. This would be a nice increase from the $3.77/share the company earned in 2009.
The company has recognized that carbonated drink sales are not going to grow significantly in the future, which is why it has focused on fast growing non-carbonated soft drinks. The company’s innovation in the area has been successful with the introduction of Aquafina , Gatorade and Propel, Lipton teas and Tropicana. Pepsi has also started to emphasize on health and wellness, and has worked to minimize the amount of trans fats in its snack foods. Future earnings growth could also come from synergies associated with the acquisitions of its bottlers, streamlining of operations and cost cutting. The distribution networks of the bottlers acquired could be used to push some of PepsiCo’s non-beverage products such as snacks and other foods. Earnings growth could also come from strategic acquisitions, as well as product innovations in health and wellness food and beverage section. The company has recently announced its plans to acquire the leading Russian food and beverage company Wimm-Bill-Dann (WBD), in an effort to position itself in the growing emerging market in Russia and to build its nutrition business.
The company has a high return on equity, which has remained above 30%, with the exception of a brief decrease in 2004. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment in US dollars has increased by 13.70% per year since 2000. A 14% growth in distributions translates into the dividend payment doubling every five years. If we look at historical data, going as far back as 1978, we see that PepsiCo has actually managed to double its dividend every six and a half years on average.
Over the past decade the dividend payout ratio has remained above 50% only in 2008. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, PepsiCo is attractively valued at 16.50 times earnings, yields 2.90% and has a sustainable dividend payout. In comparison Coca Cola (KO) yields 2.70% and trades at a P/E of 20. I would continue monitoring PepsiCo and will consider adding to my position in the stock on dips.
Full Disclosure: Long PEP and KO
Relevant Articles:
- Lowe’s Companies (LOW) Dividend Stock Analysis
- Why dividend investing beats US Treasuries today?
- Commerce Bancshares (CBSH) Dividend Stock Analysis
- Genuine Parts (GPC) Dividend Stock Analysis
Over the past decade this dividend stock has delivered an annualized total return of 4.90% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 10.90% per year since 2000. Analysts expect PepsiCo to earn $4.12 per share in 2010 and $4.61 per share in 2011. This would be a nice increase from the $3.77/share the company earned in 2009.
The company has recognized that carbonated drink sales are not going to grow significantly in the future, which is why it has focused on fast growing non-carbonated soft drinks. The company’s innovation in the area has been successful with the introduction of Aquafina , Gatorade and Propel, Lipton teas and Tropicana. Pepsi has also started to emphasize on health and wellness, and has worked to minimize the amount of trans fats in its snack foods. Future earnings growth could also come from synergies associated with the acquisitions of its bottlers, streamlining of operations and cost cutting. The distribution networks of the bottlers acquired could be used to push some of PepsiCo’s non-beverage products such as snacks and other foods. Earnings growth could also come from strategic acquisitions, as well as product innovations in health and wellness food and beverage section. The company has recently announced its plans to acquire the leading Russian food and beverage company Wimm-Bill-Dann (WBD), in an effort to position itself in the growing emerging market in Russia and to build its nutrition business.
The company has a high return on equity, which has remained above 30%, with the exception of a brief decrease in 2004. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment in US dollars has increased by 13.70% per year since 2000. A 14% growth in distributions translates into the dividend payment doubling every five years. If we look at historical data, going as far back as 1978, we see that PepsiCo has actually managed to double its dividend every six and a half years on average.
Over the past decade the dividend payout ratio has remained above 50% only in 2008. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, PepsiCo is attractively valued at 16.50 times earnings, yields 2.90% and has a sustainable dividend payout. In comparison Coca Cola (KO) yields 2.70% and trades at a P/E of 20. I would continue monitoring PepsiCo and will consider adding to my position in the stock on dips.
Full Disclosure: Long PEP and KO
Relevant Articles:
- Lowe’s Companies (LOW) Dividend Stock Analysis
- Why dividend investing beats US Treasuries today?
- Commerce Bancshares (CBSH) Dividend Stock Analysis
- Genuine Parts (GPC) Dividend Stock Analysis
Wednesday, February 16, 2011
How to invest in dividend stocks
Most situations concerning dividend investing discuss how a portfolio should be constructed, how different types of non-correlated assets should be included and how to re-balance from time to time. I realize that I have never really written anything about how to handle influx of new funds in a dividend portfolio and how to maintain asset allocations accordingly.
As an investor in the accumulation stage, I tend to invest a certain amount every month. The amount of money goes first to stocks which have passed the following basic screen:
1) The company has raised dividends for over one decade
2) The P/E ratio is less than 20
3) The dividend payout ratio is less than 50%
4) The dividend yield is above 2.50%
This screen decreases the total universe of investable dividend growth stocks from 300 to a more manageable number.
In the next step I analyze the companies which are on the screen and basically look for qualitative and quantitative factors. In terms of quantitative factors, I look for growth in earnings over the past decade and stable trend in returns on equity. The qualitative factors are highly subjective, as they incorporate my stock market experience to date. I try to understand what the company does, whether it has any competitive advantage and whether it would be able to generate earnings growth in the future. Without earnings growth, no company can afford to grow dividends for more than a few years. If I had already analyzed the company, I just review my previous work and use it to compare the last stocks remaining to each other.
After a list of several stock candidates is generated, I check what my allocation in each one of them is. In a dividend portfolio of 40 stocks, I do not want to see a company that has more than a 4% portfolio weighting. Even if such a company is priced very attractively, I would not invest in it, as long as there are other candidates which could be purchased at bargain prices. Most of the times however I end up owning miniscule positions in stocks which were trading at bargain prices a long time ago, but which have since been overvalued. Family Dollar (FDO) is one such type of stock, where I purchased a small starter position in 2008 when prices were much lower than today. Unfortunately, as the price went above my buy range, I have not added to the position.
After comparing stocks against each other, I typically try to select between eight and ten companies to invest in. For example I added to my position in the following stocks in December:
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. This dividend aristocrat has raised distributions for 54 years in a row and is attractively valued at the moment. Yield: 3% (analysis)
Kimberly-Clark Corporation (KMB) , together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. This dividend aristocrat has raised distributions for 38 years in a row and is attractively valued at the moment. Yield: 4.30% (analysis)
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. This dividend aristocrat has raised distributions for 48 years in a row and is attractively valued at the moment. Yield: 3.60%(analysis)
The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company operates through four segments: Cleaning, Lifestyle, Household, and International. This dividend aristocrat has raised distributions for 33 years in a row and is attractively valued at the moment. Yield: 3.30% (analysis)
ONEOK, Inc. (OKE), a diversified energy company, operates as a natural gas distributor primarily in the United States. The company operates in three segments: ONEOK Partners, Distribution, and Energy Services. This dividend challenger has raised distributions for 8 years in a row and is attractively valued at the moment. Yield: 3.50% (analysis)
Kellogg Company (K), together with its subsidiaries, engages in the manufacture and marketing of ready-to-eat cereal and convenience foods. This dividend stock has raised distributions for 6 years in a row and is attractively valued at the moment. Yield: 3%
Chevron Corporation (CVX) operates as an integrated energy company worldwide. This dividend achiever has raised distributions for 23 years in a row and is attractively valued at the moment. Yield: 2.90% (analysis)
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. This dividend aristocrat has raised distributions for 38 years in a row and is attractively valued at the moment. Yield: 3.90% (analysis)
This is just a snapshot of what I purchased between December 2010 - January 2011. Market conditions change, which is why investors should always be numble and on the lookout for the next opportunity.
Full Disclosure: Long all stocks mentioned above
Relevant Articles:
- Dividend Investors are getting paid for waiting
- The right time to buy dividend stocks
- Living off dividends in retirement
- Why Dividend Growth Stocks Rock?
As an investor in the accumulation stage, I tend to invest a certain amount every month. The amount of money goes first to stocks which have passed the following basic screen:
1) The company has raised dividends for over one decade
2) The P/E ratio is less than 20
3) The dividend payout ratio is less than 50%
4) The dividend yield is above 2.50%
This screen decreases the total universe of investable dividend growth stocks from 300 to a more manageable number.
In the next step I analyze the companies which are on the screen and basically look for qualitative and quantitative factors. In terms of quantitative factors, I look for growth in earnings over the past decade and stable trend in returns on equity. The qualitative factors are highly subjective, as they incorporate my stock market experience to date. I try to understand what the company does, whether it has any competitive advantage and whether it would be able to generate earnings growth in the future. Without earnings growth, no company can afford to grow dividends for more than a few years. If I had already analyzed the company, I just review my previous work and use it to compare the last stocks remaining to each other.
After a list of several stock candidates is generated, I check what my allocation in each one of them is. In a dividend portfolio of 40 stocks, I do not want to see a company that has more than a 4% portfolio weighting. Even if such a company is priced very attractively, I would not invest in it, as long as there are other candidates which could be purchased at bargain prices. Most of the times however I end up owning miniscule positions in stocks which were trading at bargain prices a long time ago, but which have since been overvalued. Family Dollar (FDO) is one such type of stock, where I purchased a small starter position in 2008 when prices were much lower than today. Unfortunately, as the price went above my buy range, I have not added to the position.
After comparing stocks against each other, I typically try to select between eight and ten companies to invest in. For example I added to my position in the following stocks in December:
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. This dividend aristocrat has raised distributions for 54 years in a row and is attractively valued at the moment. Yield: 3% (analysis)
Kimberly-Clark Corporation (KMB) , together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. This dividend aristocrat has raised distributions for 38 years in a row and is attractively valued at the moment. Yield: 4.30% (analysis)
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. This dividend aristocrat has raised distributions for 48 years in a row and is attractively valued at the moment. Yield: 3.60%(analysis)
The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company operates through four segments: Cleaning, Lifestyle, Household, and International. This dividend aristocrat has raised distributions for 33 years in a row and is attractively valued at the moment. Yield: 3.30% (analysis)
ONEOK, Inc. (OKE), a diversified energy company, operates as a natural gas distributor primarily in the United States. The company operates in three segments: ONEOK Partners, Distribution, and Energy Services. This dividend challenger has raised distributions for 8 years in a row and is attractively valued at the moment. Yield: 3.50% (analysis)
Kellogg Company (K), together with its subsidiaries, engages in the manufacture and marketing of ready-to-eat cereal and convenience foods. This dividend stock has raised distributions for 6 years in a row and is attractively valued at the moment. Yield: 3%
Chevron Corporation (CVX) operates as an integrated energy company worldwide. This dividend achiever has raised distributions for 23 years in a row and is attractively valued at the moment. Yield: 2.90% (analysis)
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. This dividend aristocrat has raised distributions for 38 years in a row and is attractively valued at the moment. Yield: 3.90% (analysis)
This is just a snapshot of what I purchased between December 2010 - January 2011. Market conditions change, which is why investors should always be numble and on the lookout for the next opportunity.
Full Disclosure: Long all stocks mentioned above
Relevant Articles:
- Dividend Investors are getting paid for waiting
- The right time to buy dividend stocks
- Living off dividends in retirement
- Why Dividend Growth Stocks Rock?
Monday, February 14, 2011
Nineteen Consistent Dividend Growth Stocks raising distributions
Dividend investing is all the rage these days. One of the reasons is that dividend investors tend to earn the same amount of equity returns, but with lower risk and volatility. However, they should only seek safe dividends, which can grow at least as fast as inflation, so that they are not losing the purchasing power of their money over time. Particularly appealing are companies which have a record of consistent dividend increases. Companies that make a point of raising dividends every year will continue to do so and typically have a long record that’s built in with a remarkable degree or stability and predictability. When these companies announce a dividend increase, they show their confidence that the business model that has produced a long string of consecutive dividend increases is still working.
I have highlighted several companies, which have raised distributions for over five consecutive years, and which also announced dividend increases over the past week:
3M Company (MMM) , together with its subsidiaries, operates as a diversified technology company worldwide. It operates in six segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics; and Electro and Communications. The company raised its quarterly dividend by 4.80% to 55 cents/share. This marked the 53rd consecutive annual dividend increase for this dividend king. This dividend growth stock has managed to increase distributions by 6.10% per year over the past decade. Yield: 2.40% (analysis)
Diebold, Incorporated (DBD) provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. The company raised its quarterly dividend by 3.70% to 28 cents/share. This marked the 58th consecutive annual dividend increase for this dividend king. This dividend growth stock has managed to increase distributions by 5.70% per year over the past decade. Yield: 3.50%
Parker Hannifin Corporation (PH) manufactures fluid power systems, electromechanical controls, and related components. The company raised its quarterly dividend by 10.30% to 32 cents/share. This marked the 55th consecutive annual dividend increase for this dividend champion. This dividend growth stock has managed to increase distributions by 9% per year over the past decade. Yield: 1.40%
Beckman Coulter, Inc. (BEC) provides biomedical testing instrument systems, tests, and supplies for clinical laboratories worldwide. The company raised its quarterly dividend by 5.60% to 19 cents/share. This marked the 18th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 8.40% per year over the past decade. Unfortunately, the company’s dividend history will be cut short because it is being acquired by Danaher (DHR). Yield: 0.90%
Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials in the United States, Canada, Mexico, South America, Europe, and Asia. The company raised its quarterly dividend by 4.40% to 24 cents/share. This marked the 28th consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 6.70% per year over the past decade. Yield: 2.90% (analysis)
Pitney Bowes Inc. (PBI) provides mail processing equipment and integrated mail solutions in the United States and internationally. The company raised its quarterly dividend by 1.40% to 37 cents/share. This marked the 29th consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 2.50% per year over the past decade. Yield: 5.90%
Sigma-Aldrich Corporation (SIAL), together with its subsidiaries, develops, manufactures, purchases, and distributes a range of chemicals, biochemicals, and equipment worldwide. The company raised its quarterly dividend by 12.50% to 18 cents/share. This marked the 35th consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 15.20% per year over the past decade. Yield: 1.20%
Thomson Reuters Corporation (TRI) provides intelligent information for businesses and professionals in the financial, legal, tax and accounting, healthcare, science, and media markets worldwide. The company raised its quarterly dividend by 6.90% to 31 cents/share. This marked the tenth consecutive annual dividend increase for this international dividend achiever. This dividend growth stock has managed to increase distributions by 9.50% per year over the past five years. Yield: 3.10%
Digital Realty Trust, Inc. (DLR), a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company raised its quarterly dividend by 28.30% to 68 cents/share. This marked the seventh consecutive annual dividend increase for this dividend stock. Yield: 4.80%
SCANA Corporation (SCG) and its subsidiaries engage in the generation, transmission, distribution, and sale of electricity to retail and wholesale customers in South Carolina. The company raised its quarterly dividend by 2.10% to 48.50 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 5.30% per year over the past decade. Yield: 4.80%
AGL Resources Inc. (AGL), an energy services holding company, distributes natural gas primarily in Florida, Georgia, Maryland, New Jersey, Tennessee, and Virginia. It operates in four segments: Distribution Operations, Retail Energy Operations, Wholesale Services, and Energy Investments. The company raised its quarterly dividend by 2.30% to 45 cents/share. This marked the ninth consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 5% per year over the past decade. Yield: 4.80%
Auburn National Bancorporation, Inc. (AUBN) operates as a holding company for AuburnBank that offers various banking products and services in east Alabama. The company raised its quarterly dividend by 2.60% to 20 cents/share. This marked the tenth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 6.90% per year over the past decade. Yield: 4%
L-3 Communications Holdings, Inc. (LLL) provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; aircraft modernization and maintenance; and government services in the United States and internationally. The company raised its quarterly dividend by 12.50% to 45 cents/share. This marked the eight consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 26.20% per year over the past five years. Yield: 2.20%
Northeast Utilities (NU), a public utility holding company, engages in the energy delivery business for residential, commercial, and industrial customers in Connecticut, New Hampshire, and western Massachusetts. It operates in three segments: Electric Distribution, Natural Gas Distribution, and Electric Transmission. The company raised its quarterly dividend by 7.30% to 27.50 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 7.30% per year over the past decade. Yield: 3.30%
Owens & Minor, Inc. (OMI), together with its subsidiaries, distributes medical and surgical supplies, as well as provides supply chain management services in the United States. The company raised its quarterly dividend by 13% to 20 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 15.70% per year over the past decade. Yield: 2.60%
Church & Dwight Co. (CHD), Inc., together with its subsidiaries, develops, manufactures, and markets a range of household, personal care, and specialty products under various brand names in the United States and internationally. The company raised its quarterly dividend by 100% to 34 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 12.80% per year over the past decade. Yield: 1.90%
Infinity Property and Casualty Corporation (IPCC) , through its subsidiaries, provides personal automobile insurance with a concentration on nonstandard auto insurance in the United States The company raised its quarterly dividend by 28.60% to 18 cents/share. This marked the ninth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 18.50% per year over the past decade. Yield: 1.20%
Robert Half International Inc. (RHI) provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. The company raised its quarterly dividend by 7.70% to 14 cents/share. This marked the eighth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 13.20% per year over the past five years. Yield: 1.70%
Noble Corporation (NE) provides offshore contract drilling services for the oil and gas industry worldwide. The company raised its quarterly dividend to 13.47 cents/share. This marked the 7th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 43.90% per year over the past five years. Yield: 1.40%
Occidental Petroleum Corporation (OXY), together with its subsidiaries, operates as an oil and gas exploration and production company primarily in the United States. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other. The company raised its quarterly dividend by 21.10% to 46 cents/share. This marked the tenth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 11.40% per year over the past decade. Yield: 1.90%
Full Disclosure: Long MMM
Relevant Articles:
- Dividend Achievers Offer Income Growth and Capital Appreciation
- Dividend Champions - The Best List for Dividend Investors
- Dividend growth stocks are attractive buyout targets
- Ten Dividend Stocks Beating Inflation
I have highlighted several companies, which have raised distributions for over five consecutive years, and which also announced dividend increases over the past week:
3M Company (MMM) , together with its subsidiaries, operates as a diversified technology company worldwide. It operates in six segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics; and Electro and Communications. The company raised its quarterly dividend by 4.80% to 55 cents/share. This marked the 53rd consecutive annual dividend increase for this dividend king. This dividend growth stock has managed to increase distributions by 6.10% per year over the past decade. Yield: 2.40% (analysis)
Diebold, Incorporated (DBD) provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. The company raised its quarterly dividend by 3.70% to 28 cents/share. This marked the 58th consecutive annual dividend increase for this dividend king. This dividend growth stock has managed to increase distributions by 5.70% per year over the past decade. Yield: 3.50%
Parker Hannifin Corporation (PH) manufactures fluid power systems, electromechanical controls, and related components. The company raised its quarterly dividend by 10.30% to 32 cents/share. This marked the 55th consecutive annual dividend increase for this dividend champion. This dividend growth stock has managed to increase distributions by 9% per year over the past decade. Yield: 1.40%
Beckman Coulter, Inc. (BEC) provides biomedical testing instrument systems, tests, and supplies for clinical laboratories worldwide. The company raised its quarterly dividend by 5.60% to 19 cents/share. This marked the 18th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 8.40% per year over the past decade. Unfortunately, the company’s dividend history will be cut short because it is being acquired by Danaher (DHR). Yield: 0.90%
Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials in the United States, Canada, Mexico, South America, Europe, and Asia. The company raised its quarterly dividend by 4.40% to 24 cents/share. This marked the 28th consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 6.70% per year over the past decade. Yield: 2.90% (analysis)
Pitney Bowes Inc. (PBI) provides mail processing equipment and integrated mail solutions in the United States and internationally. The company raised its quarterly dividend by 1.40% to 37 cents/share. This marked the 29th consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 2.50% per year over the past decade. Yield: 5.90%
Sigma-Aldrich Corporation (SIAL), together with its subsidiaries, develops, manufactures, purchases, and distributes a range of chemicals, biochemicals, and equipment worldwide. The company raised its quarterly dividend by 12.50% to 18 cents/share. This marked the 35th consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 15.20% per year over the past decade. Yield: 1.20%
Thomson Reuters Corporation (TRI) provides intelligent information for businesses and professionals in the financial, legal, tax and accounting, healthcare, science, and media markets worldwide. The company raised its quarterly dividend by 6.90% to 31 cents/share. This marked the tenth consecutive annual dividend increase for this international dividend achiever. This dividend growth stock has managed to increase distributions by 9.50% per year over the past five years. Yield: 3.10%
Digital Realty Trust, Inc. (DLR), a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company raised its quarterly dividend by 28.30% to 68 cents/share. This marked the seventh consecutive annual dividend increase for this dividend stock. Yield: 4.80%
SCANA Corporation (SCG) and its subsidiaries engage in the generation, transmission, distribution, and sale of electricity to retail and wholesale customers in South Carolina. The company raised its quarterly dividend by 2.10% to 48.50 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 5.30% per year over the past decade. Yield: 4.80%
AGL Resources Inc. (AGL), an energy services holding company, distributes natural gas primarily in Florida, Georgia, Maryland, New Jersey, Tennessee, and Virginia. It operates in four segments: Distribution Operations, Retail Energy Operations, Wholesale Services, and Energy Investments. The company raised its quarterly dividend by 2.30% to 45 cents/share. This marked the ninth consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 5% per year over the past decade. Yield: 4.80%
Auburn National Bancorporation, Inc. (AUBN) operates as a holding company for AuburnBank that offers various banking products and services in east Alabama. The company raised its quarterly dividend by 2.60% to 20 cents/share. This marked the tenth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 6.90% per year over the past decade. Yield: 4%
L-3 Communications Holdings, Inc. (LLL) provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; aircraft modernization and maintenance; and government services in the United States and internationally. The company raised its quarterly dividend by 12.50% to 45 cents/share. This marked the eight consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 26.20% per year over the past five years. Yield: 2.20%
Northeast Utilities (NU), a public utility holding company, engages in the energy delivery business for residential, commercial, and industrial customers in Connecticut, New Hampshire, and western Massachusetts. It operates in three segments: Electric Distribution, Natural Gas Distribution, and Electric Transmission. The company raised its quarterly dividend by 7.30% to 27.50 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 7.30% per year over the past decade. Yield: 3.30%
Owens & Minor, Inc. (OMI), together with its subsidiaries, distributes medical and surgical supplies, as well as provides supply chain management services in the United States. The company raised its quarterly dividend by 13% to 20 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 15.70% per year over the past decade. Yield: 2.60%
Church & Dwight Co. (CHD), Inc., together with its subsidiaries, develops, manufactures, and markets a range of household, personal care, and specialty products under various brand names in the United States and internationally. The company raised its quarterly dividend by 100% to 34 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 12.80% per year over the past decade. Yield: 1.90%
Infinity Property and Casualty Corporation (IPCC) , through its subsidiaries, provides personal automobile insurance with a concentration on nonstandard auto insurance in the United States The company raised its quarterly dividend by 28.60% to 18 cents/share. This marked the ninth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 18.50% per year over the past decade. Yield: 1.20%
Robert Half International Inc. (RHI) provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. The company raised its quarterly dividend by 7.70% to 14 cents/share. This marked the eighth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 13.20% per year over the past five years. Yield: 1.70%
Noble Corporation (NE) provides offshore contract drilling services for the oil and gas industry worldwide. The company raised its quarterly dividend to 13.47 cents/share. This marked the 7th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 43.90% per year over the past five years. Yield: 1.40%
Occidental Petroleum Corporation (OXY), together with its subsidiaries, operates as an oil and gas exploration and production company primarily in the United States. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other. The company raised its quarterly dividend by 21.10% to 46 cents/share. This marked the tenth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 11.40% per year over the past decade. Yield: 1.90%
Full Disclosure: Long MMM
Relevant Articles:
- Dividend Achievers Offer Income Growth and Capital Appreciation
- Dividend Champions - The Best List for Dividend Investors
- Dividend growth stocks are attractive buyout targets
- Ten Dividend Stocks Beating Inflation
Friday, February 11, 2011
Abbott Laboratories (ABT) Dividend Stock Analysis
Abbott Laboratories engages in the discovery, development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. The company is a dividend aristocrat which has increased distributions for 38 years in a row.
Over the past decade this dividend stock has delivered an annualized total return of 3.10% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 8.40% per year since 2000. Analysts expect Abbott Laboratories to earn $4.17 per share in 2010 and $4.66 per share in 2011. This would be a nice increase from the $3.69/share the company earned in 2009. The growth would come from increase in sales in rheumatoid arthritis and psoriatic arthritis drug Humira, cholesterol treatment drug Niaspan and the Xience drug eluting stent. The company’s growth is also dependent on the successful integration of the pharmaceuticals unit that it purchased from Solvay for $6.2 billion in 2010, which included Abbott with the cholesterol drugs Tricor and Trilipix.
The company has a high return on equity, which has remained above 20%, with the exception of a brief decrease in 2001 and 2006. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment in US dollars has increased by 8.60% per year since 2000. A 9% growth in distributions translates into the dividend payment doubling every eight years. If we look at historical data, going as far back as 1986, we see that Abbott Laboratories has actually managed to double its dividend every six years on average.
Over the past decade the dividend payout ratio has remained above 50% Only in the past few years has the dividend payout ratio remained below 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Abbott Laboratories is attractively valued at 15.60 times earnings, yields 3.80% and has a sustainable dividend payout. In comparison Johnson & Johnson (JNJ) yields 3.60% and trades at a P/E of 12.70. I would continue monitoring Abbott Labs and will consider adding to a position in the stock on dips.
Full Disclosure: Long ABT
Relevant Articles:
Over the past decade this dividend stock has delivered an annualized total return of 3.10% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 8.40% per year since 2000. Analysts expect Abbott Laboratories to earn $4.17 per share in 2010 and $4.66 per share in 2011. This would be a nice increase from the $3.69/share the company earned in 2009. The growth would come from increase in sales in rheumatoid arthritis and psoriatic arthritis drug Humira, cholesterol treatment drug Niaspan and the Xience drug eluting stent. The company’s growth is also dependent on the successful integration of the pharmaceuticals unit that it purchased from Solvay for $6.2 billion in 2010, which included Abbott with the cholesterol drugs Tricor and Trilipix.
The company has a high return on equity, which has remained above 20%, with the exception of a brief decrease in 2001 and 2006. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment in US dollars has increased by 8.60% per year since 2000. A 9% growth in distributions translates into the dividend payment doubling every eight years. If we look at historical data, going as far back as 1986, we see that Abbott Laboratories has actually managed to double its dividend every six years on average.
Over the past decade the dividend payout ratio has remained above 50% Only in the past few years has the dividend payout ratio remained below 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Abbott Laboratories is attractively valued at 15.60 times earnings, yields 3.80% and has a sustainable dividend payout. In comparison Johnson & Johnson (JNJ) yields 3.60% and trades at a P/E of 12.70. I would continue monitoring Abbott Labs and will consider adding to a position in the stock on dips.
Full Disclosure: Long ABT
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Wednesday, February 9, 2011
Dividend Champions - The Best List for Dividend Investors
Investors who are looking for quality stocks that regularly raise dividends have several lists available as a starting point in their research. The typical lists include the S&P Dividend Aristocrats index, which consists of 42 constituents of the S&P 500 which have raised distributions for over a quarter of a century and also have certain capitalization, liquidity requirements. Another popular list includes the Dividend Achievers Index, which includes almost all companies traded on US exchanges which have consistently raised distributions for over one decade, and which also meet a certain liquidity threshold as well. The third list, the dividend champions, is maintained by Dave Fish. This is by far the most comprehensive list of dividend growth stocks available for free. It breaks down the dividend growth universe into dividend champions, dividend contenders and dividend challengers. The list could be obtained from this link.
The dividend champions list includes all stocks traded in the US, which have raised dividends for at least twenty-five consecutive years. I prefer the dividend champions list than the dividend aristocrats index, since it is more complete and does not have artificial requirements such as index membership or minimum trading volume. These requirements are typically irrelevant to long-term dividend investors, who focus on fundamentals that could support a growing distribution, not on day to day market fluctuations. Currently there are 97 dividend champions, which yield 2.94% on average. Some notable dividend champions include Colgate-Palmolive (CL), Procter & Gamble (PG) and Coca-Cola (KO). Colgate-Palmolive (CL) has consistently raised dividends for 47 years in a row, but for some strange reason is not a part of the dividend aristocrats index. This is a great example why focusing on the dividend champions list could provide a more comprehensive selection of elite dividend stocks. Another dividend champion is Altria Group (MO). The only reason why the company is not on the dividend aristocrat list is because its dividend payment is lower due to the spin-off of Phillip Morris International (PM) in 2008 and Kraft Foods (KFT) in 2007. Other than that, the tobacco company has managed to increase dividends for 43 years in a row.
The dividend contenders list consists of all publicly traded stocks in the US, which have raised distributions for over one decade, but less than 25 years. This list is similar to the dividend achievers index. In a previous study of the dividend achievers index, where I focused on the 1991 additions, I noted that almost 10% of companies that raise distributions for a decade will keep raising them for the next two decades. Most of the companies that end up on this list have gone through several economic cycles and kept growing distributions, which is the type of consistently positive feedback dividend income investors like in any market. Currently there are 131 contenders, yielding 3.12% on average. Some notable contenders include Chevron Corp(CVX), Kinder Morgan Partners (KMP) and United Technologies (UTX). Chevron has raised distributions for 23 years in a row, while United Technologies (UTX) has delivered sixteen years of consecutive dividend increases to its shareholders. Kinder Morgan (KMP) on the other hand has only raised distributions for fourteen years in a row.
The dividend challengers list includes companies which have raised dividends for at least five years in a row. Most of the companies on this list would probably stop growing distributions sometime before hitting the tenth year of dividend growth, particularly if it was a function of the companies being at the right place at the right time. However there is a big chance that this list includes the next dividend king like Procter & Gamble (PG), which would raise distributions for the next 50 years. Currently there are 189 dividend contenders with an average yield of 2.94%.
Some notable dividend challengers include Intel Corporation (INTC), Waste Management (WM) and Oneok (OKE). Intel and Waste Management have raised distributions for seven years each, while Oneok Inc (OKE) has raised distributions for eight consecutive years.
In summary, I use the dividend champions spreadsheet in order to uncover hidden dividend gems. It is the most comprehensive tool available to dividend growth investors, as it consists of more constituents than the total number of members of the dividend aristocrats and the dividend achievers indexes combined.
Full disclosure: Long PG, JNJ, UTX, KO, OKE, KMR, CVX, CL
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- How to Uncover Hidden Dividend Gems
- Dividend Conspiracies
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- 1991 Dividend Achievers additions- Where are they today
Monday, February 7, 2011
Ten Dividend Stocks Beating Inflation
One of the biggest threats behind income investors who are living off dividends in retirement is inflation. Even a portfolio consisting of the highest yielding stocks today, which maintain their distributions, would produce an income which loses purchasing power over time. As a result investors should focus on companies which can afford to regularly raise distributions every year. A good starting point includes companies which have consistently raised dividends for a long period of time.
I have highlighted several stocks, which not only have raised distributions for over five years in a row, but also announced dividend increases over the past week:
Archer Daniels Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. It operates in three segments: Oilseeds Processing, Corn Processing, and Agricultural Services. The company raised its quarterly dividend by 6.70% to 16 cents/share. This marked the thirty-sixth consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 12.60% per year over the past decade. Yield: 1.80% (analysis)
Avon Products Inc. (AVP) manufactures and markets beauty and related products worldwide. The company raised its quarterly dividend by 4.50 % to 23 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 9.10% per year over the past decade. Yield: 3.20%
Meredith Corporation (MDP) a media and marketing company, engages in magazine and book publishing, television broadcasting, integrated marketing, and interactive media business in the United States. It operates in two segments, Publishing and Broadcasting. The company raised its quarterly dividend by 10.90% to 25.50 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 11.10% per year over the past decade. Yield: 3%
Avista Corporation (AVA), an energy company, engages in the generation, transmission, and distribution of energy and energy-related businesses in the United States and Canada. The company operates through two segments, Avista Utilities and Advantage IQ. The company raised its quarterly dividend by 10% to 27.50 cents/share. This marked the ninth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 7.60% per year over the past decade. Yield: 4.80%
DCP Midstream Partners, LP (DPM) engages in gathering, compressing, treating, processing, transporting, and selling natural gas. The company raised its quarterly distribution to 61.75 cents/unit. This marked the sixth consecutive annual distribution increase for this master limited partnership. This dividend growth stock has managed to increase distributions by 7.00% per year over the past three years. Yield: 6.30%
Nu Skin Enterprises, Inc. (NUS) develops and distributes anti-aging personal care products and nutritional supplements worldwide. The company raised its quarterly dividend by 8% to 13.50 cents/share. This marked the eleventh consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 6.80% per year over the past five years. Yield: 1.80%
Jack Henry & Associates, Inc. (JKHY) provides integrated computer systems and services for in-house and outsourced data processing to commercial banks, credit unions, and other financial institutions primarily in the United States. The company raised its quarterly dividend by 10.50% to 10.50 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 14.30% per year over the past decade. Yield: 1.40%
Ross Stores, Inc. (ROST), together with its subsidiaries, operates two chains of off-price retail apparel and home accessories stores in the United States. The company raised its quarterly dividend by 37.50% to 22 cents/share. This marked the sixteenth consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 23.70% per year over the past decade. Yield: 1.30%
Hasbro, Inc. (HAS) engages in the design, manufacture, and marketing of games and toys. The company raised its quarterly distributions by 20% to 30 cents/share. This marked the eight consecutive annual dividend increase for Hasbro. This dividend growth stock has managed to increase distributions by 14.70% per year over the past decade. Yield: 2.70%
J.B. Hunt Transport Services, Inc. (JBHT), together with its subsidiaries, operates as a surface transportation and delivery services company in North America. The company raised its quarterly dividend by 8.33 % to 13 cents/share. This marked the eight consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 14.90% per year over the past five years. Yield: 1.30%
All of the stocks mentioned above have managed to increase distributions at a rate that is higher than the rate of inflation. Before initiating a position in a prospective dividend stock however, investors should evaluate the business, try to avoid paying top dollar for it and ensure that distributions are sustainable.
Full Disclosure: Long ADM
Relevant Articles:
- Dividend Achievers Offer Income Growth and Capital Appreciation
- The Future for Dividend Investors
- How to select dividend stocks?
- Inflation Proof your income in retirement with Dividends Stocks
I have highlighted several stocks, which not only have raised distributions for over five years in a row, but also announced dividend increases over the past week:
Archer Daniels Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. It operates in three segments: Oilseeds Processing, Corn Processing, and Agricultural Services. The company raised its quarterly dividend by 6.70% to 16 cents/share. This marked the thirty-sixth consecutive annual dividend increase for this dividend aristocrat. This dividend growth stock has managed to increase distributions by 12.60% per year over the past decade. Yield: 1.80% (analysis)
Avon Products Inc. (AVP) manufactures and markets beauty and related products worldwide. The company raised its quarterly dividend by 4.50 % to 23 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 9.10% per year over the past decade. Yield: 3.20%
Meredith Corporation (MDP) a media and marketing company, engages in magazine and book publishing, television broadcasting, integrated marketing, and interactive media business in the United States. It operates in two segments, Publishing and Broadcasting. The company raised its quarterly dividend by 10.90% to 25.50 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 11.10% per year over the past decade. Yield: 3%
Avista Corporation (AVA), an energy company, engages in the generation, transmission, and distribution of energy and energy-related businesses in the United States and Canada. The company operates through two segments, Avista Utilities and Advantage IQ. The company raised its quarterly dividend by 10% to 27.50 cents/share. This marked the ninth consecutive annual dividend increase for this dividend stock. This dividend growth stock has managed to increase distributions by 7.60% per year over the past decade. Yield: 4.80%
DCP Midstream Partners, LP (DPM) engages in gathering, compressing, treating, processing, transporting, and selling natural gas. The company raised its quarterly distribution to 61.75 cents/unit. This marked the sixth consecutive annual distribution increase for this master limited partnership. This dividend growth stock has managed to increase distributions by 7.00% per year over the past three years. Yield: 6.30%
Nu Skin Enterprises, Inc. (NUS) develops and distributes anti-aging personal care products and nutritional supplements worldwide. The company raised its quarterly dividend by 8% to 13.50 cents/share. This marked the eleventh consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 6.80% per year over the past five years. Yield: 1.80%
Jack Henry & Associates, Inc. (JKHY) provides integrated computer systems and services for in-house and outsourced data processing to commercial banks, credit unions, and other financial institutions primarily in the United States. The company raised its quarterly dividend by 10.50% to 10.50 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 14.30% per year over the past decade. Yield: 1.40%
Ross Stores, Inc. (ROST), together with its subsidiaries, operates two chains of off-price retail apparel and home accessories stores in the United States. The company raised its quarterly dividend by 37.50% to 22 cents/share. This marked the sixteenth consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 23.70% per year over the past decade. Yield: 1.30%
Hasbro, Inc. (HAS) engages in the design, manufacture, and marketing of games and toys. The company raised its quarterly distributions by 20% to 30 cents/share. This marked the eight consecutive annual dividend increase for Hasbro. This dividend growth stock has managed to increase distributions by 14.70% per year over the past decade. Yield: 2.70%
J.B. Hunt Transport Services, Inc. (JBHT), together with its subsidiaries, operates as a surface transportation and delivery services company in North America. The company raised its quarterly dividend by 8.33 % to 13 cents/share. This marked the eight consecutive annual dividend increase for this dividend achiever. This dividend growth stock has managed to increase distributions by 14.90% per year over the past five years. Yield: 1.30%
All of the stocks mentioned above have managed to increase distributions at a rate that is higher than the rate of inflation. Before initiating a position in a prospective dividend stock however, investors should evaluate the business, try to avoid paying top dollar for it and ensure that distributions are sustainable.
Full Disclosure: Long ADM
Relevant Articles:
- Dividend Achievers Offer Income Growth and Capital Appreciation
- The Future for Dividend Investors
- How to select dividend stocks?
- Inflation Proof your income in retirement with Dividends Stocks
Friday, February 4, 2011
Johnson & Johnson (JNJ) Dividend Stock Analysis
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company is a dividend aristocrat which has increased distributions for 48 years in a row. One of the company’s largest investors is no other than Warren Buffett’s Berkshire Hathaway.
Over the past decade this dividend stock has delivered an annualized total return of 4.10% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 11.10% per year since 2000. Analysts expect Johnson & Johnson to earn $4.75 per share in 2010 and $4.99 per share in 2011. This would be a nice increase from the $4.40/share the company earned in 2009.
The company has a diversified product line across medical devices, consumer products and drugs, which should serve it well in the future. In addition ot that Johnson & Johnson is expanding into new long term opportunities such as vaccines business of Crucell NV. As usual growth in emerging markets and opportunities for cost restructurings should further help the company in squeezing out extra profits in the long run. Sales in drugs like Simponi, Stelara and Prezista should more than offset the generic erosion from older drugs which are losing their patent protection.
The company’s return on equity has remained above 25%, with the exception of a brief decrease in 2006 and 2007. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment in US dollars has increased by 13.40% per year since 2000. A 13% growth in distributions translates into the dividend payment doubling every five and a half. If we look at historical data, going as far back as 1972, we see that Johnson & Johnson has actually managed to double its dividend every five years on average.
Over the past decade the dividend payout ratio has increased from 37% in 2000 to 44% in 2009. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Johnson & Johnson is attractively valued at 12.70 times earnings, yields 3.60% and has a sustainable dividend payout. In comparison Abbott Laboratories (ABT) yields 3.90% and trades at a P/E of 15.50. I would continue monitoring Johnson & Johnson and will consider adding to a position in the stock on dips.
Full Disclosure: Long ABT and JNJ
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Over the past decade this dividend stock has delivered an annualized total return of 4.10% to its loyal shareholders.
The company has managed to deliver an average increase in EPS of 11.10% per year since 2000. Analysts expect Johnson & Johnson to earn $4.75 per share in 2010 and $4.99 per share in 2011. This would be a nice increase from the $4.40/share the company earned in 2009.
The company has a diversified product line across medical devices, consumer products and drugs, which should serve it well in the future. In addition ot that Johnson & Johnson is expanding into new long term opportunities such as vaccines business of Crucell NV. As usual growth in emerging markets and opportunities for cost restructurings should further help the company in squeezing out extra profits in the long run. Sales in drugs like Simponi, Stelara and Prezista should more than offset the generic erosion from older drugs which are losing their patent protection.
The company’s return on equity has remained above 25%, with the exception of a brief decrease in 2006 and 2007. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment in US dollars has increased by 13.40% per year since 2000. A 13% growth in distributions translates into the dividend payment doubling every five and a half. If we look at historical data, going as far back as 1972, we see that Johnson & Johnson has actually managed to double its dividend every five years on average.
Over the past decade the dividend payout ratio has increased from 37% in 2000 to 44% in 2009. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Johnson & Johnson is attractively valued at 12.70 times earnings, yields 3.60% and has a sustainable dividend payout. In comparison Abbott Laboratories (ABT) yields 3.90% and trades at a P/E of 15.50. I would continue monitoring Johnson & Johnson and will consider adding to a position in the stock on dips.
Full Disclosure: Long ABT and JNJ
Relevant Articles:
Wednesday, February 2, 2011
How to select dividend stocks?
One of the main characteristics of quality dividend stocks is that they have a strong brand name. Strong brand by itself would not provide the type of consistent long-term returns that dividend growth investors expect. Add in a wide economic moat, or a strong competitive advantage, which ensures strong pricing power and the qualitative screen for selecting stocks is complete.
Examples of companies with a wide moat include Coca Cola (KO), whose products are well-recognized worldwide and are desirable by consumers, which are willing to pay extra in order to have that specific brand. The company has been able to realize above average returns on capital, which has also allowed it to generate a lot in excess cash flows, which fuel future dividend hikes. Because of these characteristics, Coca Cola (KO) has managed to raise distributions over the past 48 consecutive years.
Another important characteristic for selecting quality dividend stocks is a history of consistently growing distributions. I like it when a company pays a stable dividends, but I really prefer a company that manages to surprise me by repeatedly raising distributions for many years. This is what truly separates the best companies from the mediocre ones. After all, any company can manage to pay a dividend, but only the best ones with the widest economic moats can afford to grow distributions for many years.
Growing dividends are a function of earnings growth. Companies with wide moats and strong brands are able to pass increases in expenses to consumers over time, while also generating efficiencies through innovation and reinvesting in the business, which leads to higher profits. As a result, these types of companies should do well during inflationary economic conditions, as they would be able to pass cost increases over the consumers, who demand that specific product type. The rising dividend would also provide investors with an inflation adjusted stream of income, which would maintain and grow its purchasing power over time.
Investors wish to select only the best dividend stocks, should also be careful not to overpay for them. The lost decade for stocks was caused exactly because investors bid up stock prices to stratospheric levels, which caused subpar market returns even though fundamentals were improving. As a result, paying more than 20 times earnings for a stock is generally not a very good idea. Another important factor is evaluating the sustainability of the dividend payment. If a company distributes out to shareholders more than 50% of its earnings, that could be a warning sign. As dividend investors, it is important to not only receive the growing stream of dividend income every quarter, but also to ensure that the business we have invested in keeps growing and innovating. A company that simply distributes all of its earnings to shareholders, would have to rely on increased lending and dilutive share sales in order to generate enough cash to grow the operations.
Four outstanding dividend growth stocks, besides Coca-Cola (KO) include Johnson & Johnson (JNJ), Procter & Gamble (PG), Wal-Mart Stores (WMT) and Colgate-Palmolie (CL).
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company has raised dividends for 48 years in a row. (analysis)
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. The company has raised dividends for 54 years in a row. (analysis)
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. It operates in two segments, Oral, Personal, and Home Care; and Pet Nutrition. This dividend champion has increased dividends for 47 years in a row. (analysis)
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. Wal-Mart Stores has consistently increased dividends every year for 36 years. (analysis)
Last but not least, it is important to spread your risks by diversifying into at least 30 individual investments. Sometimes there might not be 30 bargain dividend stocks in the markets, which is why the process of building a solid dividend portfolio would take time. Investors should start out slow, dollar cost averaging their way in as many positions as practicable, and always be on the lookout for undervalued dividend gems.
Full Disclosure: Long all companies listed above
Relevant Articles:
- Ten Dividend Stocks with High Returns on Equity
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Examples of companies with a wide moat include Coca Cola (KO), whose products are well-recognized worldwide and are desirable by consumers, which are willing to pay extra in order to have that specific brand. The company has been able to realize above average returns on capital, which has also allowed it to generate a lot in excess cash flows, which fuel future dividend hikes. Because of these characteristics, Coca Cola (KO) has managed to raise distributions over the past 48 consecutive years.
Another important characteristic for selecting quality dividend stocks is a history of consistently growing distributions. I like it when a company pays a stable dividends, but I really prefer a company that manages to surprise me by repeatedly raising distributions for many years. This is what truly separates the best companies from the mediocre ones. After all, any company can manage to pay a dividend, but only the best ones with the widest economic moats can afford to grow distributions for many years.
Growing dividends are a function of earnings growth. Companies with wide moats and strong brands are able to pass increases in expenses to consumers over time, while also generating efficiencies through innovation and reinvesting in the business, which leads to higher profits. As a result, these types of companies should do well during inflationary economic conditions, as they would be able to pass cost increases over the consumers, who demand that specific product type. The rising dividend would also provide investors with an inflation adjusted stream of income, which would maintain and grow its purchasing power over time.
Investors wish to select only the best dividend stocks, should also be careful not to overpay for them. The lost decade for stocks was caused exactly because investors bid up stock prices to stratospheric levels, which caused subpar market returns even though fundamentals were improving. As a result, paying more than 20 times earnings for a stock is generally not a very good idea. Another important factor is evaluating the sustainability of the dividend payment. If a company distributes out to shareholders more than 50% of its earnings, that could be a warning sign. As dividend investors, it is important to not only receive the growing stream of dividend income every quarter, but also to ensure that the business we have invested in keeps growing and innovating. A company that simply distributes all of its earnings to shareholders, would have to rely on increased lending and dilutive share sales in order to generate enough cash to grow the operations.
Four outstanding dividend growth stocks, besides Coca-Cola (KO) include Johnson & Johnson (JNJ), Procter & Gamble (PG), Wal-Mart Stores (WMT) and Colgate-Palmolie (CL).
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company has raised dividends for 48 years in a row. (analysis)
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. The company has raised dividends for 54 years in a row. (analysis)
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. It operates in two segments, Oral, Personal, and Home Care; and Pet Nutrition. This dividend champion has increased dividends for 47 years in a row. (analysis)
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. Wal-Mart Stores has consistently increased dividends every year for 36 years. (analysis)
Last but not least, it is important to spread your risks by diversifying into at least 30 individual investments. Sometimes there might not be 30 bargain dividend stocks in the markets, which is why the process of building a solid dividend portfolio would take time. Investors should start out slow, dollar cost averaging their way in as many positions as practicable, and always be on the lookout for undervalued dividend gems.
Full Disclosure: Long all companies listed above
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