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