Readers of my Dividend Growth Investor newsletter just received a list of ten dividend growth stocks I plan to purchase on today. This is a real money portfolio which I started in July, in an effort to educate investors on the process of building a portfolio to reach long-term objectives. I invest $1,000 in the ten companies I profile every single month, and let interested readers observe in real time how I build a dividend machine from scratch.
The report includes a detailed analysis of each company, using the methods I use to evaluate dividends for safety, valuation and whether dividend growth is on a solid footing. I used the same methods for building my dividend growth portfolio over the past decade.
The goal of the newsletter is to go beyond just identifying ten companies for investment every month. The real goal is to educate investors how real wealth can be built in the stock market. The process of building an income portfolio is very simple, but not easy. An investor simply needs to save money and put them to work in attractively valued stocks regularly. The next step involves reinvesting dividends either selectively or through a DRIP. The last step is the most exciting one – to patiently hold on to your collection of businesses for the long-term. To build a dividend machine, one has to arm themselves with a lot of patience and a long-term focus. This means avoiding the expensive habit of timing the market because it “looks high” or because “it is crashing”. Having the patience to hold on to your investments through thick or thin is a habit that is within the control of the investor.
I try to select companies that I believe will be around in a decade or so, and will be more profitable and pay higher dividend payments along the way. I also evaluate dividends for safety. I focus on valuation today as well as long-term fundamentals. Without growth in fundamentals, and the ability of the business to grow them over time, the companies I invest in will be unable to achieve future dividend growth. As a long-term investor, I buy companies to hold for years if not decades. This is not a newsletter where I will buy securities with the intent of selling them a few months later.
The price for the monthly subscription is just $6/month to new subscribers who sign up for the service. The price for the annual subscription is only $65/year for new subscribers. If you subscribe at the low introductory rate today, the price will never increase for you.
I offer a 7 day free trial for new readers. If you want to give my newsletter a try, you may do so by signing up below:
Once you sign up, I will add you to my premium mailing list, and you will receive all exclusive content related to the portfolio.
Each month, I will be allocating $1,000 to my dividend portfolio by buying stakes in ten attractively valued companies. The newsletter will include information on the companies I am purchasing, along with a brief analysis of each company.
The ultimate goal of the portfolio is to generate $1,000 in monthly dividend income.
I plan to track this portfolio in real time over the next few years, and track our progress towards our goal.
Thank you for reading Dividend Growth Investor.
Monday, December 31, 2018
Thursday, December 27, 2018
Dividend Growth Investor New Year’s Sale
The bull market is dead after an almost ten year run off the 2009 lows. The US stock market is now in a bear market – characterized by a 20% correction from the all time highs reached in September.
I do not know if stock prices will go lower from here, or reach new record highs by 2019. If history is any guide, we may have turbulence in stock prices. However, it is very likely that a diversified collection of good businesses will be earning more a decade from now. As a result, these businesses will be able to pay more in dividends to their shareholders. It is also very likely that those businesses will be worth more a decade from now, given that higher earning power they are generating.
Keeping a longer term perspective is helpful in turbulent times. We should be thinking like business owners, and care about the revenues, earnings and dividends that businesses generate, and less about stock price fluctuations. Perhaps the only advantage of watching stock market prices is the ability to buy shares in great companies when Mr Market offers them at lower prices. Taking advantage of other people’s fears is a behavior trait that has always been a profitable long-term investment strategy, for as long as stock markets have existed. That, and having a patient long term focus to let the power of compounding do the heavy lifting for you. You may not make money every year, but if you select companies with defensive business models and safe dividends at attractive valuations, you will likely generate a dependable stream of dividend income to pay for your retirement. As you are well aware, divdends are more stable and dependable than share prices. This is why we focus on the growth in annual dividends for retirement income. This is why I view stock market declines as an opportunity to acquire future income on sale. In this case, your future income is available at a 20% discount from recent highs.
This is where I will make my plug for my dividend growth investor newsletter. I will be sending out a new issue to subscribers on Sunday, December 30th. This issue will list ten dividend growth stocks that I will be buying for my dividend growth portfolio. A few days after the newsletter is out, I will send out an updated list of dividend portfolio holdings for the newsletter. This is a real money portfolio, where I place my money where my mouth is. I buy ten companies every month, and reinvest dividends strategically into the best values I can find at the moment. I try to view this as a tool to educate fellow dividend investors.
I follow a few simple principles where I select companies selling at attractive valuations, which have a track record of annual dividend increases and have safe dividends.
I also believe in principles such as diversification, regular investment, keeping costs low and having a patient long-term focus. This is a newsletter where I buy and hold companies for the long run, not to flip them for a quick profit. My ultimate goal is to generate $1,000 in monthly dividend income, through regular investing of about $1,000/month and strategic dividend reinvestment. It is very likely that this goal will be accomplished in 10 – 15 years from now. As a result of having this long-term goal, I am very careful in selecting companies that have some staying power and will be able to pay more a decade from now.
I offer a seven day free trial for readers who are interested in learning how I am building this portfolio from scratch in real time.
If you subscribe using the annual plan, your cost will be only $65/year. The monthly plan costs $6/month. With the annual plan, you are essentially getting one month free.
You can subscribe using this Paypal form:
Once you subscribe, I will add you to my exclusive email list, and you will be able to receive premium information about the dividend growth investor portfolio.
The price will increase over time, so you have a limited chance to grab this subscription today. If you subscribe today however, your price will never increase. I guarantee it.
I do not know if stock prices will go lower from here, or reach new record highs by 2019. If history is any guide, we may have turbulence in stock prices. However, it is very likely that a diversified collection of good businesses will be earning more a decade from now. As a result, these businesses will be able to pay more in dividends to their shareholders. It is also very likely that those businesses will be worth more a decade from now, given that higher earning power they are generating.
Keeping a longer term perspective is helpful in turbulent times. We should be thinking like business owners, and care about the revenues, earnings and dividends that businesses generate, and less about stock price fluctuations. Perhaps the only advantage of watching stock market prices is the ability to buy shares in great companies when Mr Market offers them at lower prices. Taking advantage of other people’s fears is a behavior trait that has always been a profitable long-term investment strategy, for as long as stock markets have existed. That, and having a patient long term focus to let the power of compounding do the heavy lifting for you. You may not make money every year, but if you select companies with defensive business models and safe dividends at attractive valuations, you will likely generate a dependable stream of dividend income to pay for your retirement. As you are well aware, divdends are more stable and dependable than share prices. This is why we focus on the growth in annual dividends for retirement income. This is why I view stock market declines as an opportunity to acquire future income on sale. In this case, your future income is available at a 20% discount from recent highs.
This is where I will make my plug for my dividend growth investor newsletter. I will be sending out a new issue to subscribers on Sunday, December 30th. This issue will list ten dividend growth stocks that I will be buying for my dividend growth portfolio. A few days after the newsletter is out, I will send out an updated list of dividend portfolio holdings for the newsletter. This is a real money portfolio, where I place my money where my mouth is. I buy ten companies every month, and reinvest dividends strategically into the best values I can find at the moment. I try to view this as a tool to educate fellow dividend investors.
I follow a few simple principles where I select companies selling at attractive valuations, which have a track record of annual dividend increases and have safe dividends.
I also believe in principles such as diversification, regular investment, keeping costs low and having a patient long-term focus. This is a newsletter where I buy and hold companies for the long run, not to flip them for a quick profit. My ultimate goal is to generate $1,000 in monthly dividend income, through regular investing of about $1,000/month and strategic dividend reinvestment. It is very likely that this goal will be accomplished in 10 – 15 years from now. As a result of having this long-term goal, I am very careful in selecting companies that have some staying power and will be able to pay more a decade from now.
I offer a seven day free trial for readers who are interested in learning how I am building this portfolio from scratch in real time.
If you subscribe using the annual plan, your cost will be only $65/year. The monthly plan costs $6/month. With the annual plan, you are essentially getting one month free.
You can subscribe using this Paypal form:
Once you subscribe, I will add you to my exclusive email list, and you will be able to receive premium information about the dividend growth investor portfolio.
The price will increase over time, so you have a limited chance to grab this subscription today. If you subscribe today however, your price will never increase. I guarantee it.
Wednesday, December 26, 2018
Analysis of Altria's Recent Deal Activity
Last week, we had Altria Group (MO) announce a major investment in JUUL, which makes e-cigarettes. You can read the press release here:
www.altria.com/Media/Press-Releases/Pages/PressReleaseDetails.aspx?reqID=2381292
As part of the agreement, Altria will participate in the e-cigarette category only through JUUL. The investment complements Altria’s non-combustible offerings in smokeless and heat-not-burn, upon FDA authorization of IQOS. JUUL has a large market share in e-vapor market in the US, and has global operations.
Earlier this month, Altria announced an investment in cannabis company Cronos.
www.altria.com/Media/Press-Releases/Pages/PressReleaseDetails.aspx?reqID=2379927
As a shareholder, I am not overly excited about these moves. There are several risks I am seeing behind this investment.
The first risk is that they are investing in a business at a high valuation. This is a business that has only been around for a few years, and has an exciting product that can offer a lot of growth for the future. t has had some rapid growth, although we do not know if we can easily project it onto the future. At a high enough price however at a high sales multiple a lot of the future profits are already baked in. We live in an era where we have a lot of cash chasing private equity deals, which increases their valuation. The implied value of Juul is $38 billion, versus $16 billion during the summer, when the company closed a round of funding from venture capitalists.
Altria has had success in the past with other investments and acquisitions, including those of UST, General Foods etc. So I am going to give them the benefit’s of the doubt of course. But it does seem like JUUL is getting Altria’s shelf space, distribution, relationships with retailers and customers, and Altria is seemingly trying to disrupt its own business. Too much deal activity in such a short period of time, at such inflated valuations seem a little concerning. I am hopeful to be wrong on this one.
Second, I am always concerned when mature and successful companies buy their way to future growth. There is always the risk that you are overpaying, and that the investment banker projections do not turn out as expected. The deals for a marijuana company and Juul make it seem like Altria does not believe in the future of cigarettes. However, we do not know whether there will be the same level of brand awareness that Altria’s products generate. So if you pay too much, and turns out that the product doesn’t have the same lasting value and brand awareness that traditional tobacco products have, you may have to deal with impairments. If a $12 billion investment goes sour, the debt still stays on the balance sheet.
Third, there is a risk that Altria is going to cannibalize existing sales, because it will help Jul distribute products and give up its shelf space. This is for a company that Altria only has 35% interest in and overpaid for. This move looks like a desperate one or it shows that executives want to leverage the stable cash flows of Altria on a gamble for a hot new product.
The other risk is of increased regulatory oversight of alternative tobacco products. If those are viewed as gateway drugs into nicotine addiction, we may get more regulation. We do not have the same level of visibility that we have with the Master Settlement Agreement of 1998.
I read some articles that stated how JUUL employees will be receiving massive bonuses after the deal closes. I am really hoping that these employees do not leave their work after this – there is a real risk that their productivity will be lower and they won’t be as hungry as before.
The real risk as a dividend investor is that the added debt will result in less flexibility with future dividend growth. The company did announce some cost savings, but the amount of new debt is going to be pretty high. I would state that the risk of a dividend cut is higher today than a few months ago. In my reviews of dividend paying companies and why they cut dividends, I have learned that large investments made with debt increase the risk of dividend cuts down the road. I am hopeful that Altria’s management will not make any drastic changes, and I am certainly not forecasting a dividend cut. However, I will monitor the situation closely. I do hope they manage to join the dividend kings list in 2020.
While I will hold on to my shares for the foreseeable future, I may think before from buying more shares. It is possible that earnings per share will continue growing over time driven by the core tobacco business. The valuation is attractive at 12 times forward earnings. However, the situation is different today, and I am a little concerned about the size and premium paid for recent acquisitions in new and untested markets. The concern is that with the added emphasis on growth, Altria of 2019 will be different than the Altria I invested in the first place. It is possible that dividend growth will be curtailed. I believe that the dividend will likely become less of a priority, and the risk of a dividend cut, although very remote, is increased. I also have a high position in Altria in my personal portfolio, which is another reason why I may not buy more, due to risk management.
Relevant Articles:
- How to avoid dividend cuts
- The importance of pricing and valuation in dividend investing
- Altria Rewards Shareholders With a Smoking Hot Dividend Increase
- September 2018 Dividend Champions List
https://www.dividendgrowthinvestor.com/2018/08/september-2018-dividend-champions-list.html
www.altria.com/Media/Press-Releases/Pages/PressReleaseDetails.aspx?reqID=2381292
As part of the agreement, Altria will participate in the e-cigarette category only through JUUL. The investment complements Altria’s non-combustible offerings in smokeless and heat-not-burn, upon FDA authorization of IQOS. JUUL has a large market share in e-vapor market in the US, and has global operations.
Earlier this month, Altria announced an investment in cannabis company Cronos.
www.altria.com/Media/Press-Releases/Pages/PressReleaseDetails.aspx?reqID=2379927
As a shareholder, I am not overly excited about these moves. There are several risks I am seeing behind this investment.
The first risk is that they are investing in a business at a high valuation. This is a business that has only been around for a few years, and has an exciting product that can offer a lot of growth for the future. t has had some rapid growth, although we do not know if we can easily project it onto the future. At a high enough price however at a high sales multiple a lot of the future profits are already baked in. We live in an era where we have a lot of cash chasing private equity deals, which increases their valuation. The implied value of Juul is $38 billion, versus $16 billion during the summer, when the company closed a round of funding from venture capitalists.
Altria has had success in the past with other investments and acquisitions, including those of UST, General Foods etc. So I am going to give them the benefit’s of the doubt of course. But it does seem like JUUL is getting Altria’s shelf space, distribution, relationships with retailers and customers, and Altria is seemingly trying to disrupt its own business. Too much deal activity in such a short period of time, at such inflated valuations seem a little concerning. I am hopeful to be wrong on this one.
Second, I am always concerned when mature and successful companies buy their way to future growth. There is always the risk that you are overpaying, and that the investment banker projections do not turn out as expected. The deals for a marijuana company and Juul make it seem like Altria does not believe in the future of cigarettes. However, we do not know whether there will be the same level of brand awareness that Altria’s products generate. So if you pay too much, and turns out that the product doesn’t have the same lasting value and brand awareness that traditional tobacco products have, you may have to deal with impairments. If a $12 billion investment goes sour, the debt still stays on the balance sheet.
Third, there is a risk that Altria is going to cannibalize existing sales, because it will help Jul distribute products and give up its shelf space. This is for a company that Altria only has 35% interest in and overpaid for. This move looks like a desperate one or it shows that executives want to leverage the stable cash flows of Altria on a gamble for a hot new product.
The other risk is of increased regulatory oversight of alternative tobacco products. If those are viewed as gateway drugs into nicotine addiction, we may get more regulation. We do not have the same level of visibility that we have with the Master Settlement Agreement of 1998.
I read some articles that stated how JUUL employees will be receiving massive bonuses after the deal closes. I am really hoping that these employees do not leave their work after this – there is a real risk that their productivity will be lower and they won’t be as hungry as before.
The real risk as a dividend investor is that the added debt will result in less flexibility with future dividend growth. The company did announce some cost savings, but the amount of new debt is going to be pretty high. I would state that the risk of a dividend cut is higher today than a few months ago. In my reviews of dividend paying companies and why they cut dividends, I have learned that large investments made with debt increase the risk of dividend cuts down the road. I am hopeful that Altria’s management will not make any drastic changes, and I am certainly not forecasting a dividend cut. However, I will monitor the situation closely. I do hope they manage to join the dividend kings list in 2020.
While I will hold on to my shares for the foreseeable future, I may think before from buying more shares. It is possible that earnings per share will continue growing over time driven by the core tobacco business. The valuation is attractive at 12 times forward earnings. However, the situation is different today, and I am a little concerned about the size and premium paid for recent acquisitions in new and untested markets. The concern is that with the added emphasis on growth, Altria of 2019 will be different than the Altria I invested in the first place. It is possible that dividend growth will be curtailed. I believe that the dividend will likely become less of a priority, and the risk of a dividend cut, although very remote, is increased. I also have a high position in Altria in my personal portfolio, which is another reason why I may not buy more, due to risk management.
Relevant Articles:
- How to avoid dividend cuts
- The importance of pricing and valuation in dividend investing
- Altria Rewards Shareholders With a Smoking Hot Dividend Increase
- September 2018 Dividend Champions List
https://www.dividendgrowthinvestor.com/2018/08/september-2018-dividend-champions-list.html
Thursday, December 20, 2018
Best Dividend Stocks For The Long Run – 10 years later
Exactly a decade ago, I wrote an article that outlined the best dividend stocks for the long run. I have used the criteria to create this list in my newly started dividend investing newsletter.
The article from a decade ago had a few simple ideas behind it:
1) Buy and hold works, which is why it makes sense to hold stocks for the long run.
2) Owning quality companies is important. A history of consistent dividend increases shows a company which is good at capital allocation and has a business model worth studying
3) Purchasing equities at attractive valuation is as important as selecting great companies with outstanding fundamentals. Even better, it was a perfect time to be buying equities at the depth of the Great Recession
4) Diversification is important – while I looked for strong companies with durable business models, I also wanted to avoid concentrating too much on a single sector. An ounce of prevention is worth a pound of cure.
5) Dividends are a key component of investor returns. Dividends are more stable and reliable than share prices, and are easier to forecast. The portfolio has an average yield of close to 3.50% in 2008, with a low P/E ratio and a low dividend payout ratio. While there were some cuts along the way, the dividend income was sufficient for an imaginary retiree with a nest egg to
A decade ago I created a list of 40 dividend growth companies from a variety of sectors. The average P/E ratio was 11.70, and the average yield was 3.45%. The 5-year average dividend growth rate was over 15%/year. It was relatively “easy” in hindsight to find quality companies at depressed valuations back then. The only problem was that most individuals were scared of stocks, given the recession, growing unemployment, bank failures and the daily reminders of how tough things really are. I do believe that if you select the right businesses, and think like a business owner, you can do well over time as an investor. As we all know, by focusing on the passive dividend income, dividend investors can afford to ignore the news and stock market fluctuations. Investing for the long-term could pay off for the rare soul who has patience on their hands.
I created the list by studying companies in the dividend aristocrats and dividend achievers lists. While I was familiar with the list of dividend champions, I hadn’t utilized it as fully as I am today. The list is here:
Data s of Dec 12, 2008
So where are all these companies today? I decided to look and see how these companies are doing.
We had different things happen to each security. I adjusted the original numbers for stock splits, to calculate changes in dividend rates and total returns.
You can view the tables in a spreadsheet from this location. You can download as excel from here. I added a field for yield on cost for the companies that are still active today.
Three companies ended up being acquired. Those include Family Dollar, Valspar and Chubb. They kept their streak of annual dividend increases up to the acquisition date.
Two companies ended up cutting dividends. These include State Street and British Petroleum.
No companies ended up failing outright after a decade.
34 companies raised dividends, which is 85% of the whole population of 40 companies. This figure excludes the three companies being acquired of course.
One company kept dividends unchanged – Teleflex.
I looked at total returns, between December 12, 2008 and December 14, 2018. A $400,000 investment, equally weighted between the 40 companies turned out to $1.6 million ten years later ( assuming dividend reinvestment).
The five best performing securities were:
The five worst performing securities were:
I would have never expected what the best and worst performers would be. It does seem interesting that the two dividend cuts we experienced are part of the worst performing equities. Back in 2007 and 2008, energy companies were very hot, as we had fears of oil prices going into the stratosphere. After looking at the results, it is obvious that it is important to be diversified. The worst performers includes three energy companies.
The best performers include several dividend growth stocks that I have rarely seen in dividend growth investors portfolios. Several of these companies also ended up with high yields on cost. It is also important to try to own as many companies you can find, that make sense from a valuation and qualitative point of view. I do not subscribe to the idea of limiting yourself to 15 or 20 companies, because you supposedly find them to be your best ideas. I have found that my best ideas were when I expanded my portfolio size beyond 40 dividend paying stocks. It is also important to let companies do the heavy lifting for you, and not interrupt the compounding process unnecessarily. The itch to book a gain can be expensive in the long run. Timing the market and active trading are hazardous to your wealth and dividend income.
Relevant Articles:
- Best Dividends Stocks for the Long Run
- 26 Dividend Champions For Further Research
- Dividend Kings List For 2019
- How to value dividend stocks
The article from a decade ago had a few simple ideas behind it:
1) Buy and hold works, which is why it makes sense to hold stocks for the long run.
2) Owning quality companies is important. A history of consistent dividend increases shows a company which is good at capital allocation and has a business model worth studying
3) Purchasing equities at attractive valuation is as important as selecting great companies with outstanding fundamentals. Even better, it was a perfect time to be buying equities at the depth of the Great Recession
4) Diversification is important – while I looked for strong companies with durable business models, I also wanted to avoid concentrating too much on a single sector. An ounce of prevention is worth a pound of cure.
5) Dividends are a key component of investor returns. Dividends are more stable and reliable than share prices, and are easier to forecast. The portfolio has an average yield of close to 3.50% in 2008, with a low P/E ratio and a low dividend payout ratio. While there were some cuts along the way, the dividend income was sufficient for an imaginary retiree with a nest egg to
A decade ago I created a list of 40 dividend growth companies from a variety of sectors. The average P/E ratio was 11.70, and the average yield was 3.45%. The 5-year average dividend growth rate was over 15%/year. It was relatively “easy” in hindsight to find quality companies at depressed valuations back then. The only problem was that most individuals were scared of stocks, given the recession, growing unemployment, bank failures and the daily reminders of how tough things really are. I do believe that if you select the right businesses, and think like a business owner, you can do well over time as an investor. As we all know, by focusing on the passive dividend income, dividend investors can afford to ignore the news and stock market fluctuations. Investing for the long-term could pay off for the rare soul who has patience on their hands.
I created the list by studying companies in the dividend aristocrats and dividend achievers lists. While I was familiar with the list of dividend champions, I hadn’t utilized it as fully as I am today. The list is here:
Symbol
|
Name
|
Sector
|
Consecutive Years of Higher
Dividends
|
5 year Dividend Growth
|
Yield
|
P/E
|
Div/Shr
|
Dividend Payout Ratio
|
Last Price
|
FDO
|
Family Dollar Stores
|
Consumer Discretionary
|
32
|
11.32%
|
2.10%
|
14.77
|
0.5
|
30.12%
|
24.51
|
MCD
|
McDonald's Corp
|
Consumer Discretionary
|
32
|
43.94%
|
3.30%
|
15.31
|
2
|
50.51%
|
60.59
|
MHP
|
McGraw-Hill Companies
|
Consumer Discretionary
|
35
|
9.87%
|
3.80%
|
9.07
|
0.88
|
34.51%
|
23.14
|
SHW
|
Sherwin-Williams
|
Consumer Discretionary
|
30
|
17.78%
|
2.60%
|
12.76
|
1.4
|
32.18%
|
55.53
|
VFC
|
VF Corp
|
Consumer Discretionary
|
36
|
20.86%
|
4.60%
|
9.1
|
0.59
|
40.48%
|
13.265
|
CLX
|
Clorox Co
|
Consumer Staples
|
31
|
9.39%
|
3.50%
|
15.6
|
1.84
|
54.12%
|
53.04
|
KO
|
Coca-Cola Co
|
Consumer Staples
|
46
|
9.34%
|
3.40%
|
17.32
|
0.76
|
59.14%
|
22.285
|
CL
|
Colgate-Palmolive
|
Consumer Staples
|
45
|
11.27%
|
2.70%
|
16.99
|
0.8
|
45.85%
|
29.61
|
KMB
|
Kimberly-Clark
|
Consumer Staples
|
36
|
10.81%
|
4.50%
|
12.58
|
2.32
|
56.59%
|
51.53
|
PEP
|
PepsiCo Inc
|
Consumer Staples
|
36
|
19.72%
|
3.20%
|
14.82
|
1.7
|
48.43%
|
52.03
|
PG
|
Procter & Gamble
|
Consumer Staples
|
52
|
11.07%
|
2.70%
|
15.7
|
1.6
|
42.67%
|
58.94
|
SYY
|
Sysco Corp
|
Consumer Staples
|
38
|
13.81%
|
4%
|
11.95
|
0.88
|
47.83%
|
21.92
|
WMT
|
Wal-Mart Stores
|
Consumer Staples
|
34
|
20.28%
|
1.70%
|
15.81
|
0.95
|
27.46%
|
54.63
|
ADM
|
Archer Daniels Midland
|
Consumer Staples
|
33
|
15.13%
|
1.90%
|
7.12
|
0.52
|
13.90%
|
26.6
|
HRL
|
Hormel Foods Corp.
|
Consumer Staples
|
43
|
14.49%
|
2.70%
|
14.1
|
0.19
|
36.54%
|
7.34
|
CVX
|
Chevron Corp
|
Energy
|
21
|
11.63%
|
3.30%
|
6.85
|
2.6
|
59.41%
|
79
|
XOM
|
Exxon Mobil
|
Energy
|
26
|
8.64%
|
2%
|
8.7
|
1.6
|
17.32%
|
80.45
|
BP
|
British Petroleum
|
Energy
|
7
|
11.45%
|
7.10%
|
5.2
|
3.36
|
37%
|
47.04
|
AFL
|
AFLAC Inc
|
Financials
|
27
|
25.02%
|
2.70%
|
13.95
|
0.56
|
37.71%
|
20.72
|
CINF
|
Cincinnati Financial
|
Financials
|
48
|
10.30%
|
5.40%
|
10.97
|
1.56
|
56.73%
|
30.2
|
STT
|
State Street Corp
|
Financials
|
27
|
11.14%
|
2.50%
|
8.51
|
0.96
|
21.92%
|
37.24
|
CBSH
|
Commerce Bancshares
|
Financials
|
40
|
10.05%
|
2.60%
|
16.52
|
0.585
|
40.32%
|
25.13
|
CB
|
Chubb Corp.
|
Financials
|
43
|
11.50%
|
2.80%
|
8.96
|
1.32
|
24.09%
|
49.07
|
BDX
|
Becton, Dickinson
|
Health Care
|
36
|
21.75%
|
2%
|
14.35
|
1.32
|
29.60%
|
63.99
|
JNJ
|
Johnson & Johnson
|
Health Care
|
46
|
13.60%
|
3.20%
|
12.97
|
1.84
|
41.63%
|
57.25
|
MDT
|
Medtronic, Inc
|
Health Care
|
31
|
14.78%
|
2.40%
|
15.32
|
0.75
|
38.46%
|
29.91
|
MMM
|
3M Co
|
Industrials
|
50
|
8.89%
|
3.60%
|
10.6
|
2
|
37.81%
|
56.04
|
EMR
|
Emerson Electric
|
Industrials
|
52
|
8.96%
|
4.10%
|
10.59
|
1.32
|
43.14%
|
32.36
|
GWW
|
Grainger (W.W.)
|
Industrials
|
37
|
15.58%
|
2.40%
|
11.62
|
1.6
|
27.03%
|
68.74
|
ITW
|
Illinois Tool Works
|
Industrials
|
45
|
18.49%
|
4%
|
9.45
|
1.24
|
37.46%
|
31.3
|
TFX
|
Teleflex Inc
|
Industrials
|
31
|
11.40%
|
3%
|
11.04
|
1.36
|
32.46%
|
46.27
|
UTX
|
United Technologies
|
Industrials
|
14
|
18.03%
|
3.30%
|
10.27
|
1.54
|
32.42%
|
48.82
|
DOV
|
Dover Corp.
|
Industrials
|
53
|
22.23%
|
3.50%
|
8.68
|
1
|
29.33%
|
29.63
|
ADP
|
Automatic Data Proc
|
Information Technology
|
34
|
20.42%
|
3.50%
|
16.42
|
1.32
|
56.65%
|
38.27
|
APD
|
Air Products & Chem
|
Materials
|
26
|
13.60%
|
3.60%
|
11.71
|
1.76
|
42.41%
|
48.59
|
VAL
|
Valspar Corp
|
Materials
|
27
|
13.13%
|
3.60%
|
12.77
|
0.6
|
43.48%
|
17.63
|
NUE
|
Nucor Corp.
|
Materials
|
34
|
77.90%
|
3.20%
|
6.31
|
1.4
|
20.06%
|
44.04
|
ATO
|
Atmos Energy Corp
|
Utilities
|
21
|
1.62%
|
5.80%
|
11.75
|
1.32
|
66%
|
23.47
|
ED
|
Consolidated Edison
|
Utilities
|
34
|
0.83%
|
6%
|
8.54
|
2.34
|
51.43%
|
38.88
|
BKH
|
Black Hills Corp.
|
Utilities
|
37
|
3.10%
|
5.60%
|
4.27
|
1.4
|
23.57%
|
25.37
|
So where are all these companies today? I decided to look and see how these companies are doing.
We had different things happen to each security. I adjusted the original numbers for stock splits, to calculate changes in dividend rates and total returns.
Symbol
|
2018 Dividends Per Share
|
Stock Price -12/14/18
|
Trailing P/E
|
2018 Dividend Payout
|
Dividend Increase
|
Total Returns (from a $10K investment)
|
DGI Notes
|
FDO
|
35,444.94
|
acquired by Dollar Tree in 2015
|
|||||
MCD
|
4.64
|
183.29
|
27.85
|
70.52%
|
132.00%
|
41,192.75
|
|
MHP
|
2.00
|
166.62
|
24.81
|
29.76%
|
127.27%
|
91,287.72
|
Changed symbol to SPGI
|
SHW
|
3.44
|
386.00
|
19.29
|
17.19%
|
145.71%
|
79,893.23
|
|
VFC
|
2.04
|
75.15
|
25.66
|
69.62%
|
245.76%
|
72,488.01
|
Dec 2013 - 4:1 stock split
|
CLX
|
3.84
|
164.52
|
25.63
|
59.81%
|
108.70%
|
42,023.60
|
|
KO
|
1.56
|
49.34
|
74.98
|
236.36%
|
105.26%
|
30,191.90
|
Aug 2012 - 2:1 stock split
|
CL
|
1.68
|
65.17
|
26.97
|
69.42%
|
110.00%
|
27,867.68
|
May 2013 - 2:1 Split
|
KMB
|
4.00
|
117.42
|
25.54
|
86.96%
|
72.41%
|
33,930.99
|
|
PEP
|
3.71
|
113.95
|
32.88
|
106.92%
|
118.24%
|
29,495.51
|
|
PG
|
2.87
|
96.64
|
25.25
|
74.93%
|
79.38%
|
22,567.50
|
|
SYY
|
1.56
|
65.45
|
23.21
|
55.32%
|
77.27%
|
41,085.48
|
|
WMT
|
2.08
|
91.85
|
52.46
|
118.86%
|
118.95%
|
21,587.45
|
|
ADM
|
1.34
|
44.61
|
11.07
|
33.25%
|
157.69%
|
21,408.01
|
|
HRL
|
0.84
|
44.57
|
23.96
|
45.16%
|
342.11%
|
73,386.08
|
Two @:1 stock splits in Feb 2011 and Feb 2016
|
CVX
|
4.48
|
113.83
|
15.32
|
60.30%
|
72.31%
|
20,877.73
|
|
XOM
|
3.28
|
75.58
|
13.9
|
60.29%
|
105.00%
|
12,470.64
|
|
BP
|
2.46
|
38.66
|
14.95
|
94.98%
|
-26.79%
|
13,948.37
|
Dividend cut in 2010
|
AFL
|
1.04
|
44.61
|
6.99
|
16.30%
|
85.71%
|
27,842.51
|
Mar 2018 - 2:1 stock split
|
CINF
|
2.12
|
79.41
|
9.48
|
25.30%
|
35.90%
|
40,166.25
|
|
STT
|
1.88
|
63.53
|
10.15
|
30.03%
|
95.83%
|
19,649.30
|
Dividend Cut in 2009, dividend recovered in 2012
|
CBSH
|
0.90
|
58.05
|
15.96
|
24.73%
|
53.85%
|
25,635.60
|
Annual 5% stock dividends paid
|
CB
|
30,173.40
|
Acquired by ACE LTD, which changed name to Chubb
|
|||||
BDX
|
3.08
|
231.45
|
385.75
|
513.33%
|
133%
|
43,542.16
|
|
JNJ
|
3.60
|
133.00
|
233.74
|
631.58%
|
96%
|
31,544.68
|
|
MDT
|
2.00
|
93.72
|
58.8
|
125.79%
|
167%
|
38,890.03
|
|
MMM
|
5.44
|
196.10
|
26.33
|
73.02%
|
172%
|
45,343.58
|
|
EMR
|
1.96
|
60.44
|
17.47
|
56.65%
|
48%
|
25,449.33
|
|
GWW
|
5.44
|
284.41
|
22.45
|
42.94%
|
240%
|
49,994.88
|
|
ITW
|
4.00
|
131.04
|
23.73
|
72.46%
|
223%
|
53,601.50
|
|
TFX
|
1.36
|
247.43
|
170.17
|
93.79%
|
0%
|
62,665.10
|
Dividend unchanged
|
UTX
|
2.94
|
118.80
|
19.09
|
47.27%
|
91%
|
30,930.71
|
|
DOV
|
1.92
|
76.32
|
16.27
|
40.94%
|
92%
|
48,109.88
|
|
ADP
|
3.16
|
134.82
|
34.76
|
81.44%
|
139%
|
52,300.08
|
|
APD
|
4.40
|
155.41
|
22.92
|
64.90%
|
150%
|
44,722.94
|
|
VAL
|
74,760.89
|
Acquired by Sherwin Williams in 2017
|
|||||
NUE
|
1.60
|
56.39
|
8.61
|
24.43%
|
14%
|
17,551.05
|
|
ATO
|
2.10
|
98.47
|
18.14
|
38.67%
|
59%
|
59,004.77
|
|
ED
|
2.86
|
83.83
|
16.78
|
57.20%
|
22%
|
32,805.65
|
|
BKH
|
2.02
|
66.66
|
16.34
|
49.51%
|
44%
|
38,349.55
|
You can view the tables in a spreadsheet from this location. You can download as excel from here. I added a field for yield on cost for the companies that are still active today.
Three companies ended up being acquired. Those include Family Dollar, Valspar and Chubb. They kept their streak of annual dividend increases up to the acquisition date.
Two companies ended up cutting dividends. These include State Street and British Petroleum.
No companies ended up failing outright after a decade.
34 companies raised dividends, which is 85% of the whole population of 40 companies. This figure excludes the three companies being acquired of course.
One company kept dividends unchanged – Teleflex.
I looked at total returns, between December 12, 2008 and December 14, 2018. A $400,000 investment, equally weighted between the 40 companies turned out to $1.6 million ten years later ( assuming dividend reinvestment).
The five best performing securities were:
The five worst performing securities were:
I would have never expected what the best and worst performers would be. It does seem interesting that the two dividend cuts we experienced are part of the worst performing equities. Back in 2007 and 2008, energy companies were very hot, as we had fears of oil prices going into the stratosphere. After looking at the results, it is obvious that it is important to be diversified. The worst performers includes three energy companies.
The best performers include several dividend growth stocks that I have rarely seen in dividend growth investors portfolios. Several of these companies also ended up with high yields on cost. It is also important to try to own as many companies you can find, that make sense from a valuation and qualitative point of view. I do not subscribe to the idea of limiting yourself to 15 or 20 companies, because you supposedly find them to be your best ideas. I have found that my best ideas were when I expanded my portfolio size beyond 40 dividend paying stocks. It is also important to let companies do the heavy lifting for you, and not interrupt the compounding process unnecessarily. The itch to book a gain can be expensive in the long run. Timing the market and active trading are hazardous to your wealth and dividend income.
Ten years ago, the conditions were hard, which translated in great entry points for enterprising dividend investors. Future dividend income was essentially on sale when stock prices went down.
As a result, the list of companies identified a decade ago has done well. It is a testament to the idea of selecting quality companies with long streaks of annual dividend increases, purchased at attractive valuations. It is also a testament to the idea of buy and hold investing and the idea of holding quality companies inside diversified dividend portfolios. The list of companies is not a recommendation today however. If I were to invest in new companies today, I would not pay more than 20 times earnings and I would only select the companies which have managed to grow earnings per share over the past decade. I use a variety of qualitative and quantitative factors in my investing.Relevant Articles:
- Best Dividends Stocks for the Long Run
- 26 Dividend Champions For Further Research
- Dividend Kings List For 2019
- How to value dividend stocks
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