I like purchasing companies, which have dependable revenues and earnings. Companies that manage to generate dependable earnings throughout different phases of the economic cycle, and also grow them over time, have an especially important place in the portfolios of the dividend investors. This is because stable earnings reduce the likelihood of a dividend cut when things get tough. Since my goal is to one day live off dividends, the primary goal is to find those companies whose dividend streams are reliable, and can withstand short-term fluctuations in earnings. Another important factor is the ability of those companies to grow those earnings over time. Rising earnings per share are the secret ingredient behind future dividend growth. Companies that usually manage to keep growing earnings for many years tend to have some type of competitive advantage, and usually are in an industry where they provide a product or service that is well differentiated, and not commoditized.
Over the past week, I made two additional purchases, other than the Exxon Mobil one I previously discussed.
Diageo plc (DEO) manufactures and distributes premium drinks such as Johnnie Walker, Crown Royal, Buchanan’s, J&B, Baileys, Smirnoff, Captain Morgan, Guinness, Shui Jing Fang, and Yenì Raki.. The company has raised dividends for 15 years in a row. In the past decade, the company has managed to boost dividends by 5.80%/year. Currently, the stock is selling for 18.70 times forward earnings and yields 2.70%. Check my analysis of Diageo.
United Technologies Corporation (UTX) provides technology products and services to the building systems and aerospace industries worldwide. The company has raised dividends for 22 years in a row. In the past decade, the company has managed to boost dividends by 12.90%/year. Currently, this dividend achiever is selling for 17.10 times forward earnings and yields 2.10%. Check my analysis of United Technologies.
The nice thing was that the day of my scheduled purchase of United Technologies, the company also announced that it was raising its quarterly dividend by 8.50% to 64 cents/share. For Diageo, the interim dividend was raised in late January by 9% in British Pounds. While the interim dividend is usually 40% of the total annual dividend that will be paid, the growth in interim and final dividends for Diageo usually follow very similar rates of change.
A few other companies I own, which raised dividends last week include Archer Daniels Midland (ADM) and Dr. Pepper Snapple (DPS).
Archer Daniels Midland (ADM) raised its quarterly dividend by 16.70% to 28 cents/share. This marked the 40th consecutive annual dividend increase for this dividend champion.The stock yields 2.30%, and sells at 14 times forward earnings. I would probably consider adding to this stock on dips below $44.80/share. Check my analysis of ADM.
Dr. Pepper Snapple (DPS) raised its quarterly dividend by 17.10% to 48 cents/share. This marked the sixth consecutive annual dividend increase for the company. The stock yields 2.50%, but is overvalued at 21.40 times forward earnings. I would only consider the stock on dips below $73. Check my analysis of Dr. Pepper.
Since the purpose of my investment strategy is to generate enough dividends to cover my expenses, I receive a validation of my research any time a company I have purchased raises its dividend. Of course, it doesn't hurt that dividends represent cold hard cash deposited in my brokerage accounts, for which I didn't have to work 60 hours/week putting cover sheets on TPS reports. Dividends are the return on investment, which is always positive, almost always go up, and once paid to you can never be taken away from you. Any time a dividend payment is paid to me, it also serves as a kind of positive reinforcement that helps me reiterate to myself that I am a partial business owner of tens of companies in a variety of industries that have global operations and employ millions of workers.
Full Disclosure: Long DEO, UTX, XOM, DPS, ADM
Relevant Articles:
- The Energy Company I want to buy
- Six Quality Dividend Companies For Long Term Investors
- Two Dividend Stocks I Purchased in 2015
- Six Dividend Investments I Made Last Week
- Three Dividend Machines I Accumulated Recently
Popular Posts
-
I have a simple process for evaluating companies. I focus on several key factors, which tell me whether a company is worth putting on my lis...
-
I review the list of dividend increases each week as part of my monitoring process. I use this process to review existing holdings and poten...
-
I review the list of dividend increases every week, as part of my monitoring process. Dividends have signaling power about management's ...
-
I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me monitor existing holdings, but...
-
Life is full of choices. A few examples include: Should I spend money on things today, or save money for the future? Ultimately, you need t...
-
I review the list of dividends increases as part of my monitoring process. This exercise helps me monitor existing holdings and potentially ...
-
As a shareholder, there are two ways to make profits from a stock. The first way is when you sell your stock for a gain, after it has incre...
-
In terms of a somewhat succint summary, it is good to think in terms of trade-offs in the full picture. The expected returns formula I use r...
-
I came upon an interesting story about another dividend investor, this time a famous actor. This is Sean William Scott, who starred in such ...
-
I love the power of compound interest. I also love reading stories of ordinary folks, who invested for the long-run in blue chip, dividend ...
