In a previous article I wrote that there are three types of dividend stocks. The first type includes high yielding stocks which seldom raise dividends. This type of stocks is more suited towards investors seeking current income, since distributions will not keep up with inflation over time. The second type of dividend stocks is one in the sweet spot, where strong earnings growth and average dividend yield would ensure high yield on cost in a few years in addition to decent total returns. The third type of dividends stocks is the type with the lowest yields, but the highest dividend growth. The last two are favorites among investors who want to generate income in retirement that keeps up with inflation. Furthermore the last two types of dividend stocks should do well over long periods. There are pros and cons of overly relying on any one group however, which is why creating a blended portfolio is a good strategy to employ.
When analyzing the dividend increases announced for the past week, I noticed that the data confirms my expectations. Most of the higher yielding stocks that announced dividend increases have had slow distributions growth, with some exceptions. Master Limited Partnerships seem to be on a roll this month. After dominating the list of distribution increases for the past few weeks, MLP’s are still a noticeable phenomenon among dividend raisers:
BreitBurn Energy Partners L.P. (BBEP) engages in the acquisition, exploitation, and development of oil and gas properties in the United States. This master limited partnership raised distributions by 2% to 38.25 cents/unit. The partnership suspended distributions in 2009 and reinstated them back in 2010. Yield: 9.80%
Williams Partners L.P., (WPZ) a diversified master limited partnership, focuses on transporting; gathering, treating, and processing; storing natural gas; and natural gas liquid fractionating and oil transporting activities. The partnership raised distributions by 2-percent over the partnership's first-quarter 2010 distribution of $0.6575 per unit and a 6-percent increase over the partnership's second-quarter 2009 distribution of $0.635 per unit. This MLP has raised distributions since 2006. Yield: 5.80%
Boardwalk Pipeline Partners, LP, (BWP) through its subsidiaries, engages in the interstate transportation and storage of natural gas in the United States. The company raised distributions by 1% to 51 cents/unit. This MLP has consistently raised distributions since 2006.Yield:6.60%
Alliance Holdings GP, L.P., (AHGP) through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. This MLP raised its quarterly distribution to 48.25 cents/unit. This MLP has consistently raised distributions since 2007. Yield: 5.10%
Suburban Propane Partners, L.P. (SPH), through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels, and the marketing of natural gas and electricity in the United States. The partnership raised its quarterly distributions from 84 to 84.50 cents/unit. This master limited partnership has consistently increased distributions since 1999. Yield: 6.90%
DCP Midstream Partners, LP (DPM) engages in gathering, compressing, treating, processing, transporting, and selling natural gas. The company raised its quarterly distributions by 1.70% to 61 cents/unit. This was the first increase since 2008. Yield: 6.80%
Inergy GP, LLC, managing general partner of Inergy, L.P. (NRGY) announced an increase in the Company’s quarterly cash distribution to $0.705 per limited partner unit ($2.82 annually) for the quarter ended June 30, 2010. This represents the 35th consecutive quarterly increase and an approximate 6.0% increase over the distribution for the same quarter of the prior year. At the same time The Board of Directors of Inergy Holdings GP, LLC, general partner of Inergy Holdings, L.P. (NRGP), today announced an increase in its quarterly cash distribution to $0.34 per limited partner unit ($1.36 annually) for the quarter ended June 30, 2010. This represents an approximate 4.6% increase over the previously declared quarterly distribution of $0.325 per limited partner unit and a 30.8% increase over the distribution for the same quarter of the prior year. The yield on NRGY is 6.60% and yield on NRGP is 4.50%.
Community Trust Bancorp, Inc. (CTBI) operates as the holding company for Community Trust Bank, Inc., which offers various commercial and personal banking services to small and mid-sized communities in Kentucky and West Virginia. The company increased its cash dividend by 1.70% to $0.305/share. This dividend champion has raised distributions for 29 years in a row. Yield: 4.40%
American Water Works Company, Inc. (AWK) provides water and wastewater services to residential, commercial, and industrial customers in the United States and Canada. Board of Directors increased its quarterly cash dividend payment by 5% from $0.21 to $0.22 per share. This is the second consecutive dividend increase since the company went public in 2008. Yield: 4.10%
DTE Energy Company (DTE), together with its subsidiaries, operates as an electric and natural gas utility company in Michigan. The company raised its quarterly dividends by 5.70% to 56 cents/share. This was the first dividends increase since 2006. Yield: 4.90%
Health Care REIT, Inc. (HCN) is an equity real estate investment trust. The firm engages in investment, development, and management of properties. The company raised distributions by 1.50% to 69 cents/share. This was the first dividend increase since 2008. Yield: 6.10%
The list of lower yielding stocks did include some companies raising dividend payments at astonishing rates. Unfortunately, with some exceptions, those rates were a onetime phenomenon. Nevertheless a high dividend increase, coupled with at least an average market yield and a sufficient history of raising distributions is a must for companies that dividend investors plan to hold on to for more than one decade:
Barrick Gold Corporation (ABX) primarily engages in the production and sale of gold, as well as related activities such as exploration and mine development worldwide. The company switched from paying dividends quarterly instead of paying semi-annually. The distribution was increased 20% to 12 cents/share. This was the first dividends increase since 2008. Yield: 1.20%
Newmont Mining Corporation (NEM), together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company increased it is quarterly dividend by 50% to 15 cents/share. This was the first dividend increase since 2004. Yield: 1.10%
Hawkins, Inc. (HWKN) manufactures, blends, and distributes bulk and specialty chemicals. It operates through two segments, Industrial and Water Treatment. The company’s board of directors raised its semi-annual dividend by 7.1% from $0.28 to $0.30 per share. The company has consistently raised dividends since 2005. Yield: 1.90%
Norfolk Southern Corporation (NSC), through its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods. The company raised its quarterly dividend by 5.9% from $0.34 to $0.36 per share. The company has raised dividends for nine consecutive years. Yield: 2.60%
International Flavors & Fragrances Inc. (IFF), together with its subsidiaries, creates, manufactures, and sells flavor and fragrance products in the United States and internationally. The company raised its dividend by 8% from $0.25 to $0.27/share. The company has raised annual distributions since 2003. Yield: 2.40%
Crane Co. (CR) manufactures engineered industrial products in the United States and internationally. The company increased its quarterly dividend by 15% to 23 cents/share. The company has managed to boost annual dividends since 2005. Yield: 2.60%
Republic Services, Inc. (RSG) provides nonhazardous solid waste collection, transfer, and disposal services in the United States. Republic's Board of Directors approved a five percent increase in the regular quarterly dividend to $0.20 per share. The company has raised its annual dividends since 2004. Yield: 2.50%
Donaldson Company, Inc., (DCI) together with its subsidiaries, engages in the manufacture and sale of filtration systems and replacement parts worldwide. The company’s board of directors authorized a 4% dividend increase to $0.125 per share. This dividend champion has raised distributions for 25 consecutive years. Yield: 1%
The above list of stocks is just for illustrative purposes only. Before committing any funds to dividend stocks of any type, investors should evaluate the entity’s ability to generate sufficient excess cash flows to maintain and even increase distributions over time in order to maintain the purchasing power of your dollars. Investors should purchase great businesses first, at attractive valuations rather than focusing exclusively on yield alone.
Full Disclosure: None
- Three Dividend Strategies to pick from
- Yield on Cost Matters
- Dividend yield or dividend growth?
- Dividend Investing Myths
One of my favorite books on investing is “ The Snowball: Warren Buffett and the Business of Life ” by Alice Schroeder. The book describes ho...
I view each investment I make as a seed that I plant for the long-term. Some seeds could turn into a tree that would provide fruit (dividen...
In my previous article, I discussed the concept of the dividend snowball as it applies to my dividend portfolio and dividend income. The po...
In a previous article, I discussed that I will reach Financial Independence some time in 2018 . After I reach the dividend crossover point ,...
One of my largest holdings is McDonald’s (MCD). The company recently raised its quarterly dividend by 4.7% to 89 cents/share. McDonald's...
In a previous article titled, My Dividend Retirement Plan , I outlined the concept of the dividend crossover point. This happens when your d...
One of the biggest mistakes I ever made was not maxing out my 401 (k), IRA and HSA accounts between 2007 and 2012. As a result, I ended up ...
The more I learn and experience about investing, the more convinced I become that doing nothing is the best strategy for long-term success i...
I started my site dedicated to dividend investing in January 2008 . I had been able to accumulate some money for the first time in 2007, and...
There are many risks to investing . One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are p...