Wednesday, September 1, 2010

The New Dividend Achievers of 2010

The dividend achievers index consists of US stocks which have raised their dividends each year for at least a decade. Over the past 20 years, this index has managed to outperform the S&P 500 by half a percentage point annually. The dividend achievers index is a great list of dividend stocks as a start. After applying criteria specific to one’s investment strategy, a manageable list for further research could be easily generated. For busy investors who would rather not have their hands dirty, there are several dividend etfs focusing on the dividend achievers. One such option is the Powershares Dividend Achievers (PFM) ETF. Another option is the Vanguard Dividend Appreciation ETF (VIG).

The index is rebalanced every year by deleting companies which have cut or eliminated distributions as well as the ones that have been acquired. Earlier in 2010 the newest addition to the index were announced:

Altria Group, Inc. (MO), through its subsidiaries, engages in the manufacture and sale of cigarettes, wine, and other tobacco products in the United States and internationally. The stock yields 6.30% and trades at a P/E of 13.60. (analysis)

Atlantic Tele-Network, Inc. (ATNI), through its subsidiaries, provides wireless and wireline telecommunications services in North America and the Caribbean. The stock yields 1.70% and trades at a P/E of 24.

Casey’s General Stores, Inc. (CASY), together with its subsidiaries, operates convenience stores under the Casey’s General Store, HandiMart, and Just Diesel brand names in the Midwestern states. The stock yields 1.00% and trades at a P/E of 16.70.

EOG Resources, Inc.(EOG), together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas and crude oil. The stock yields 0.60% and trades at a P/E of 49.60.

FactSet Research Systems Inc. (FDS) provides financial and economic information on various companies, analytical applications, and client services to the portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers, and fixed income professionals worldwide. The stock yields 1.20% and trades at a P/E of 25.80.

Graco Inc. (GGG), together with its subsidiaries, provides fluid handling solutions to manufacturing, processing, construction, and maintenance sectors worldwide. The stock yields 2.50% and trades at a P/E of 24.30.

Hudson City Bancorp, Inc. (HCBK) operates as the bank holding company for Hudson City Savings Bank that provides a range of retail banking services. The stock yields 4.90% and trades at a P/E of 10.60.

Murphy Oil Corporation (MUR) engages in the exploration and production of oil and gas properties worldwide. The stock yields 1.70% and trades at a P/E of 13.40.

Northeast Utilities ( NU), a public utility holding company, engages in the energy delivery business for residential, commercial, and industrial customers in Connecticut, New Hampshire, and western Massachusetts. The stock yields 3.50% and trades at a P/E of 16.70.

NSTAR (NST), through its subsidiaries, engages in the distribution, transmission, and sale of energy in Massachusetts. The stock yields 4.20% and trades at a P/E of 11.20.

People’s United Financial, Inc. (PBCT) operates as the bank holding company for People’s United Bank that provides commercial banking, retail and small business banking, and wealth management services to individual, corporate, and municipal customers. The stock yields 4.50% and trades at a P/E of 58.60.

Plains All American Pipeline, L.P. (PAA), through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquefied petroleum gas and other natural gas-related petroleum products. The units of this master limited partnership yield 5.90% and trade at a P/E of 23.

PPL Corporation (PPL), through its subsidiaries, generates and markets electricity to approximately 4 million retail, commercial, and industrial customers in the northeastern and western United States and the United Kingdom. The stock yields 5.20% and trades at a P/E of 24.20.

Prosperity Bancshares, Inc. (PRSP) operates as the holding company for Prosperity Bank that provides retail and commercial banking services to small and medium-sized businesses and consumers. The stock yields 1.80% and trades at a P/E of 13.

South Jersey Industries, Inc. (SJI), through its subsidiaries, engages in the purchase, transmission, and sale of natural gas for residential, commercial, and industrial customers. The stock yields 2.70% and trades at a P/E of 24.40.

StanCorp Financial Group, Inc. (SFG), through its subsidiaries, provides group insurance products and services in the United States. The stock yields 2.10% and trades at a P/E of 9.

TC PipeLines, LP (TCLP), together with its subsidiaries, transports natural gas in the United States, eastern Canada, and Mexico. The units of this master limited partnership yield 6.70% and trades at a P/E of 17.20.

Telephone and Data Systems, Inc. (TDS), through its subsidiaries, provides wireless and wireline telecommunications services in the United States. The stock yields 1.30% and trades at a P/E of 21.10.

Before rushing to purchase those stocks however, investors should evaluate the sustainability of the distributions from each individual company first. In reality, few of the companies added to the index in 2010 would be part of it 20 years from now. When I examined the 1991 Dividend Achievers additions, I noticed an interesting trend. Of the 20 additions for 1991 only 2 remained in the index 19 years later. On average the expectation is that a company would keep raising distributions for ten years after being admitted in. Check the research and the findings here.
The new additions list is also heavy on utilities, energy companies and financials, with the exception of Altria (MO), Graco Inc. (GGG) and Casey’s General Stores, Inc. (CASY).

Full Disclosure: Long MO

This article was included in the Carnival of Personal Finance #274: I Love NY Edition

Relevant Articles:

- Why do I like Dividend Achievers
- Dividend ETF or Dividend Stocks?
- Dividend ETF’s for busy investors
- 1991 Dividend Achievers additions- Where are they now?

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