Best Dividend Investing Articles For May

For your reading enjoyment, I have highlighted several articles that the readers found of particular interest this month. I have included the article title, as well as a short description.


38 Dividend Champions To Consider
As part of my investing process, I screen the list of dividend champions every month, looking for companies to add to my dividend portfolio. In this article, I discussed the entry criteria I used to come up with the list of 38 dividend champions for further research. I believe that the ability to develop a strategy to achieve your goals, and sticking to it is very important.

The ability to follow your strategy and making regular investments is very important. By buying stock regularly, you are dollar cost averaging your way into building your dividend machine. You are building your future income stream one investment at a time. The next step is the hard one – holding patiently for the long-term and reinvesting that dividend income during the accumulation phase.


Dividends Provide a Tax-Efficient Form of Income
In this article, I discuss the tax treatment of qualified dividends for US investors. Qualified dividend income receives a better tax treatment than wage income. Depending on your taxable income, you may end up without any taxable liability to the IRS if certain conditions are met. For my retirement strategy, I plan to live off qualified dividends to pay for expenses. For married couple today with no other forms of income, a qualified dividend income below $101,200 results in a zero tax rate at the Federal Level.


Three Dividend Growth Stocks Delivering Higher Returns To Shareholders
I discussed three companies that raised distributions to their shareholders over the preceding week. As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to check up on my holdings, and to get a feel for the rate of dividend increases for companies I may be interested in at some price point.

Five Dividend Contenders Raising The Bar
I discussed five companies which boosted dividends to their shareholders. I also discussed the general guidelines I utilize when reviewing any group of dividend growth stocks, be it the list of weekly dividend increases or the list of dividend champions. All of those guidelines help me get an adequate margin of safety when selecting companies for my dividend growth portfolio.

Relevant Articles:

- 2018 Dividend Kings List

- Dividend Champions, Contenders & Challengers: The most complete list of US dividend growth stocks available

- Dividend Aristocrats for 2018 Revealed

- Best Investing Articles For 2017
- Best Dividend Investing Articles For April

Five Dividend Stocks Working Hard For Their Owners

I review the list of dividend increases weekly, in order to monitor existing holdings and review companies on my list for accumulation at the right price. This exercise is part of my monitoring process.

It is helpful to check the rate of dividend growth relative to the historical average. In addition, it is helpful to see the earnings performance over the past decade. Looking at these two variables shows me whether there is room for further dividend growth, and whether I should spend my time digging further into a corporation.

I also find it helpful to review valuation, in order to acquire that future income stream at a discount. I review current P/E ratios relative to earnings growth expectations and current dividend yields. I use valuation as a tool to compare between different companies.

For the weekly review of dividend increases, I focus only on the companies that have managed to rewards shareholders with a raise for at least ten years in a row. That way, I focus on companies that have managed to boost dividends throughout a whole economic cycle of expansion and contraction. This indicates a higher likelihood that those businesses are resilient.

Over the past week, there were five companies which raised dividends and have a long track record of annual dividend increases. The companies include:

38 Dividend Champions To Consider

In order to succeed in dividend investing, you need to have a long-term focus, follow your strategy by making investments at regular intervals and by diversifying your exposure. I believe that the ability to sit tight for a long period of time is underrated, because short-term noise usually gets in the way by scaring off the inexperienced into mindless trading action.

I also believe that the ability to develop a strategy to achieve your goals, and sticking to it no matter what happens, is very important. The inability to develop a strategy would lead to chasing hot tips, and never really learning what works for you and what doesn’t ( while losing a lot of hard-earned money in the process).

The ability to follow your strategy and making regular investments is very important. By buying stock regularly, you are dollar cost averaging your way into building your dividend machine. You are building your future income stream one investment at a time. The next step is the hard one – holding patiently for the long-term and reinvesting that dividend income during the accumulation phase.

As part of my investing process, I screen the list of dividend champions every month, looking for companies to add to my dividend portfolio. I focus on the following criteria, in order to come up with a list of companies for further consideration:

Three Dividend Growth Stocks Delivering Higher Returns To Shareholders

As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to check up on my holdings, and to get a feel for the rate of dividend increases for companies I may be interested in at some price point.

I try to focus on companies that have raised distributions for at least a decade. I have found that the ten year requirement tends to remove a lot of companies which fail at getting serious about establishing a serious track record of annual dividend increases.

I then review the rate of the most recent dividend increase relative the ten year average. I have found that the latest dividend hikes in percentage terms reflect management expectations for near-term growth.

I also want to review the growth in earnings per share over the past decade, in order to determine whether dividend growth is sustainable or is running on fumes.

Last but not least, we also want to determine whether the valuation is attractive. In general, we want a good balance between valuation and the growth trajectory of fundamentals.

Over the past week, there were three companies which raised dividends to their shareholders and have managed to increase dividends for at least ten years in a row. The companies include:

Cardinal Health (CAH) Dividend Stock Analysis

Cardinal Health, Inc. (CAH) is a global, integrated healthcare services and products company, providing customized solutions for hospitals, health systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices worldwide. The company provides clinically-proven medical products and pharmaceuticals and cost-effective solutions that enhance supply chain efficiency from hospital to home. Cardinal Health connects patients, providers, payers, pharmacists and manufacturers for integrated care coordination and better patient management.

Cardinal Health is a dividend aristocrat, which has managed to reward shareholders with a dividend increase for 34 consecutive years. The last dividend increase was just last week, when the board of directors approved a 3% increase in the company’s quarterly dividend to 47.63 cents/share. This was the second dividend increase in a row of 3%. The slow rate of recent dividend hikes for two years in a row suggests that management sees turbulence ahead for the company’s business.

Cardinal Health has delivered an annualized total return of 5.18%/year over the past decade to its shareholders. The returns over the next decade could be better than the growth rate of earnings per share, due to the low valuation today.

Two Buy Stories from the Q2 Earnings Season

The following is a guest post from Mike, a former private banker and passionate investor blogging at The Dividend Guy Blog and founder of Dividend Stocks Rock.

In May, we often read a bunch of articles about stats telling us to sell away and come back in the fall. As a dividend growth investor, I always found those stories strange. After all, why would I sacrifice one or two dividend payments from my favorite stocks just because *they might* lose in value? So while others are selling, I’m keeping a close eye on the market to find buy stories.

Over the past month, I went through hundreds of quarterly earnings to find the most interesting stocks on the market. I’ve found many stories I liked, and I wanted to share 2 Kings stories with a happy ending for your portfolio. 

#1 The King with a Knee on the Floor

Source: Ycharts

Five Dividend Contenders Raising The Bar

As part of my monitoring process I review the list of dividend increases every week. I filter out the companies that have not reached dividend contender or dividend achiever status yet. I do this in order to focus on those companies that have a long track record which spans a period that covers a recession and an expansion.

The next step in the process involves reviewing the rate of most recent dividend increase relative to the ten year average. I have found that the rate of the latest dividend increase usually shows the confidence in near term business prospects for the company.

I also like to review trends in historical dividend growth relative to the trends in earnings per share during the same time periods. In general, we want roughly similar rates of earnings and dividend growth over time. However, there are individual exceptions for companies in the initial phases of dividend growth which tend to start off from a lower dividend payout ratio. In general, it is helpful to see an upward trend in earnings per share over time. Future dividend payments can be in danger when we have flat or declining earnings per share.

Last but not least, I also like to see quality companies available at attractive valuations. I try to avoid overpaying for future income streams. In order to do that, I have some pre-set maximum P/E ratios I will pay for a stock.

These are the general guidelines I utilize when reviewing any group of dividend growth stocks, be it the list of weekly dividend increases or the list of dividend champions. All of those guidelines help me get an adequate margin of safety when selecting companies for my dividend growth portfolio.
Over the past week, there were five dividend contender companies that raised dividends by more than a token amount. The companies include:

Paychex Dividend Stock Analysis

Paychex, Inc. (PAYX) provides payroll, human resource (HR), retirement, and insurance services for small to medium-sized businesses in the United States and Germany. The company is a dividend challenger, which has rewarded shareholders with an annual dividend raise since 2010. Paychex was a dividend achiever until 2009, when it stopped raising dividends during the Global Financial Crisis.

Last week, the company announced that its board of directors approved a $0.06 increase in the company’s regular quarterly dividend, an increase of 12 percent. The dividend will go from $.50 per share to $0.56 per share.

“This dividend increase demonstrates our commitment to providing a benefit to our shareholders as a result of the Tax Cuts and Jobs Act (TCJA) and continues the company’s history of providing outstanding shareholder value and a leading dividend yield,” said Martin Mucci, Paychex president and CEO. “Paychex is uniquely positioned in our industry to benefit from the TCJA due to our strong margins. As we realize these tax benefits, we continue to invest in strategic growth opportunities. These investments, combined with our financial strength, enable us to expand the returns we deliver to our shareholders.”

Over the past decade, this dividend growth stock has compounded shareholder wealth at an annual rate of 9.40%/year.

Five Tips to Avoid Dividend Cuts

Have you ever held a stock that eventually cut its dividend?

Or do you worry that a company you own might have to reduce its dividend in the future?

If so, you aren’t alone.

Most of the dividend investors I know are focused on building a safe income stream (typically for retirement) and want to preserve their capital.

Avoiding dividend cuts can help with both objectives, and in this article I will explore five techniques that can help identify companies with the best potential of delivering safe, growing dividends over time. 

But first, I want to thank Dividend Growth Investor for letting me share with you.

His blog has been an inspiration and a wealth of quality information for dividend investors for nearly a decade, and it’s an honor to be part of it today.

Let’s take a look at five of the most important factors you can use to understand the safety of a company’s dividend and make better informed investment decisions.