Friday, February 26, 2010

Colgate-Palmolive (CL) Dividend Stock Analysis

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. It operates in two segments, Oral, Personal, and Home Care; and Pet Nutrition. The company recently increased its quarterly dividend by 20.40% to 53 cents/share. This is the forty-seventh consecutive dividend increase for Colgate-Palmolive, which is a dividend champion.


Over the past decade this dividend stock has returned 4.30% per annum.

Earnings per share have increased by 11.10% on average since 2000. Since 2000 the number of shares outstanding has decreased from 625 million to 525 million, or an average decrease of 1.90% annually. Analysts estimate that EPS would grow by 9.80% to $4.80 in FY 2010. FY 2011 EPS are expected to increase by 11.40% from there to $5.35.

Sales outside North America accounted for two-thirds of the company’srevenues. The company’s strong competitive advantages in the oral healthcare field plus the low capital requirements have enabled it to generate high returns on capital.

Returns on Equity have been truly phenomenal, having never fallen below 80% since 2000.

Annual dividends have increased by 11.80% on average over the past decade, which is slightly higher than the growth in earnings.

A 12 % growth in dividends translates into the dividend payment doubling every six years on average. If we look at historical data, going as far back as 1976, Colgate Palmolive has actually managed to double its dividend payment every eight and a half years on average.

The dividend payout ratio has consistently remained below 50%, with the exception of a brief spike to 50.80% in 2006. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

The company trades at a P/E of 18.80 times earnings and has an adequately covered dividend payment. The current yield of 2.60% is below my 3% entry threshold. If we look at the yield from the past decade however, CL has yielded more than 3% only during the lows in early 2009. Because of this I initiated a position in Colgate recently. I would look forward to add to this position on dips below $71, which would be my ideal entry price.

Full Disclosure: Long CL
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Wednesday, February 24, 2010

Seven dividend aristocrats that Buffett owns

Warren Buffett is arguably the best investor in the world. His main holding, Berkshire Hathaway (BRK.B) has delivered market beating returns during his leadership. Buffett’s strategy is characterized by purchasing stocks which have a long-term durable competitive advantage in a stable industry. Buffett then holds on to these companies and reinvests distributions either back into the business or by purchasing new businesses. In a previous article I mentioned that Berkshire’s portfolio has likely generated over $1.30 billion in dividends in 2009. Some of its holdings included seven dividend aristocrats.

Stocks which are included in the dividend aristocrat’s index represent companies which have raised dividends for over 25 years in a row. The companies included in the index represent some of the world’s most recognizable brands such as Coca Cola (KO), McDonald’s (MCD) or Procter & Gamble (PG). They have strong durable advantages, which have allowed them to increase profits and share the wealth with shareholders by consistently raising distributions, through several economic crises, oil shocks and asset bubbles. In addition to that these wide-moat companies derive substantial portions of their revenues globally, which makes them somewhat immune to local economic downturns.

I believe that by combining Buffett’s strategy of purchasing the companies with strong competitive advantages with my dividend growth strategy would produce exceptional results for enterprising dividend investors. The dividend stocks in Berkshire’s portfolio include:

Becton, Dickinson and Company (BDX), a medical technology company, which develops, manufactures, and sells medical supplies, devices, laboratory equipment, and diagnostic products worldwide. The company has increased its quarterly dividend in each of the past thirty-seven years. (analysis)

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company has increased distributions for 47 consecutive years. I would be a buyer of KO below $54.66. Check my analysis of the stock.

Exxon Mobil Corporation (XOM) engages in the exploration, production, transportation, and sale of crude oil and natural gas. The company is a component of the S&P 500, Dow Jones Industrials and the Dividend Aristocrats indexes. Exxon Mobil has been consistently increasing its dividends for 27 consecutive years. I would only be a buyer of XOM on dips below $60. Check my analysis of the stock.

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company has boosted distributions to shareholders for 47 years in a row. I would be a buyer of JNJ below $65.33. Check my analysis of the stock.

Lowe’s Companies (LOW) is one of the original components of the Dividend Aristocrats . The home improvement retailer which operates the United States and Canada has increased its dividends for 47 consecutive years.

The Procter & Gamble Company (PG) engages in the manufacture and sale of consumer goods worldwide. The company operates in three global business units (GBUs): Beauty, Health and Well-Being, and Household Care. The company has rewarded stockholders with dividend increases for 53 consecutive years. I would be a buyer of PG below $58.67. Check my analysis of the stock.

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The world’s largest retailer has a 35 year record of annual dividend raises. I would be a buyer of WMT on dips. Check my analysis of the stock.

Full Disclosure: Long KO, JNJ, PG and WMT

Relevant Articles:

- Buffett the dividend investor
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Monday, February 22, 2010

Four notable dividend increases

Three well-known dividend aristocrats raised dividends last week. The companies include Coca-Cola (KO), Abbott Labs (ABT) and Sherwin-Williams (SHW). Another promising dividend raiser included Swiss Company Nestle (NSRGY). In dividend investing it is important not only to concentrate on companies with solid competitive advantages, but also ones which grow earnings and dividends along the line.

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company’s board of directors recently approved the Company's 48th consecutive annual dividend increase, raising the quarterly dividend approximately 7 percent from $0.41 to $0.44/share. This dividend aristocrat currently yields 3.20%. (analysis)

Abbott Laboratories (ABT) manufactures and sells health care products worldwide. The company’s board of directors increased its quarterly dividend by 10% to 44 cents/share. This marks the 38th consecutive year that Abbott has increased its dividend. This dividend aristocrat currently yields 3.20%. (analysis)

Nestle (NSRGY) engages in the nutrition, health and wellness sectors. The company is proposing a dividend increase of 14.3% to CHF 1.60/share ($1.477). This international dividend achiever has raised distributions each year since 1997. The stock currently yields 3%.

The Sherwin-Williams Company (SHW) engages in the development, manufacture, distribution, and sale of paints, coatings, and related products. The company boosted its quarterly dividend by 1.40% to 36 cents/share. This marks the thirty-second consecutive annual dividend increase for this dividend aristocrat. The stock currently yields 2.20%.(analysis)

Of the four stocks mentioned, Coca-Cola (KO) and Abbott Labs (ABT) are attractively valued at the moment. Sherwin-Williams (SHW) not only has a low current yield but also the last two dividend increases have been disappointing, making the stock a hold. Nestle (NSRGY) does look like a promising candidate for addition to a dividend growth portfolio, since it would also bring in some international diversification. I would place it on my list for further research.

Full Disclosure: Long ABT and KO

Relevant Articles:

- Coca Cola (KO) Dividend Stock Analysis
- Abbott Labs (ABT) Dividend Stock Analysis
- Dividend Aristocrats List for 2010

Friday, February 19, 2010

McGraw-Hill (MHP) Dividend Stock Analysis

The McGraw-Hill Companies, Inc. provides information services and products to the financial services, education, and business information markets worldwide. The company operates in three segments: McGraw-Hill Education, Financial Services, and Information & Media. Just a few weeks ago this dividend aristocrat increased its quarterly dividend by 4.40% to 23.50 cents per share, which was the 37th consecutive annual dividend increase for the company.
The stock has delivered an average annual total return of 10.20% over the past decade.

Earnings per share have grown at an average pace of 7.60% per annum. The company has also has repurchased 2.80% of its outstanding stock annually on average since 2001. For FY 2010, analysts expect the company to earn $2.63/share, which is higher than 2008’s EPS of $2.33. For FY 2011 analysts expect McGraw-Hill to earn $2.95/share. A reduction in the amount of debt being offered could affect the company’s Financial Services segment, which accounts for almost three quarters of its operating profit. Changing regulations and competitive environment could also affect this major segment, which includes the Standard & Poors brand. The remaining 16% and 7% of operating profits are achieved from the company’s education and media segments.


Annual dividends per share have increase by an average of 7.50% annually, which is in line with the growth in earnings. A 7.50% growth in dividends translates into the payment doubling every almost ten years. McGraw-Hill has managed to double its distributions every eleven years on average since 1988.

The return on equity has fluctuated between a low of 12.80% in 2006 and a high of 55.30% in 2008. Over the past few years it has remained above 30%, which is impressive.


The dividend payout ratio has consistently remained below 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

McGraw-Hill currently trades at 14.50 times earnings, has an adequately covered dividend, and yields 2.60. I would consider adding to my position in McGraw-Hill on dips below $31.30.

Full Disclosure: Long MHP


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- Dividend Aristocrats List for 2010
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Wednesday, February 17, 2010

Ten Dividend Kings raising dividends for over 50 years

Many dividend investors focus on the dividend aristocrats, the dividend champions and the dividend achievers lists, as a starting point in their research. While most investors picture dividend stocks as slow growth and boring utility stocks, the three lists portray a different perspective. The dividend achievers list, which focuses on companies which have raised distributions for at least 10 consecutive years, consists of slightly less than 300 individual issues representing almost all industry groups out there. The dividend aristocrats list, which features companies which have boosted distributions for over a quarter of a century, is also sector-diversified. The dividend champions list also focuses on companies which have raised distributions for over a quarter of a century. I find the champions list more inclusive, whereas the aristocrats list has not included certain companies despite the fact that they have increased distributions for over 25 years in a row. Sometimes it is challenging to determine the actual record of dividend raises, especially when two companies merge.

I was amazed to find several companies on the champions list, which have raised distributions for over 50 consecutive years. The companies include:

Diebold (DBD) engages in the development, manufacture, sale, installation, and service of automated self-service transaction systems, electronic and physical security systems, and election systems and software worldwide. The company recently boosted its dividend for the 57th year in a row. Yield 3.70%.

American States Water Company (AWR), through its subsidiaries, provides water and electric utility services to residential and commercial customers in the United States. The company engages in the purchase, production, and distribution of water. The company has raised distributions for 55 years in a row. Yield 3.20%.

Dover Corporation (DOV), together with its subsidiaries, manufactures industrial products and components, as well as provides related services and consumables in the United States and internationally. Dover has raised its payout for 54 consecutive years. Yield 3.20%.(analysis)

Northwest Natural Gas Company (NWN), doing business as NW Natural, engages in the storage and distribution of natural gas in Oregon, Washington and California. The company operates in two segments, Local Gas Distribution and Gas Storage. This utility company has increased dividends for 54 years in a row. Yield 3.90%.

Genuine Parts Company (GPC) distributes automotive and industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, and Mexico. It has four segments: Automotive, Industrial, Office Products, and Electrical/Electronic Materials. The company has consistently boosted dividends for 53 years in a row. Yield 4.20%.

The Procter & Gamble Company (PG) engages in the manufacture and sale of consumer goods worldwide. The company operates in three global business units (GBUs): Beauty, Health and Well-Being, and Household Care. The company has increased dividends for 53 years in a row. Yield 2.80%. (analysis)

Emerson Electric Co. (EMR), a diversified global technology company, engages in designing and supplying product technology, as well as delivering engineering services and solutions to various industrial, commercial, and consumer markets worldwide. Yield 2.90%. (analysis)

3M Company, (MMM) together with its subsidiaries, operates as a diversified technology company worldwide. It operates in six segments: Industrial and Transportation; Health Care; Safety, Security and Protection Services; Consumer and Office; Display and Graphics; and Electro and Communications. The company has raised distributions for 51 years in a row. Yield 2.70%.(analysis)

Integrys Energy Group, Inc. (TEG), through its subsidiaries, operates as a regulated electric and natural gas utility company in the United States and Canada. This utility company has increased dividends for 51 years in a row. Yield 6.60%.

Vectren Corporation (VVC) provides energy delivery services to residential, commercial, and industrial and other customers in Indiana and Ohio. This utility company has increased dividends for 50 years in a row. Yield 6.00%.

I did check with the Moody’s dividend achievers handbook and each company’s website in order to confirm whether the companies have actually raised distributions for 50 years in a row. I didn’t include Parker-Hannifin Corporation (PH), despite the fact that it was on the champions list, because it failed to increase dividends in 1991.

Just because a company has raised distributions for 50 years does not necessarily mean that it would continue raising them for over a decade. Back in early 2000’s Winn-Dixie (WINN) had the longest record of dividend increases, after boosting its payout for over 56 years. The company was losing market share however and was heavily leveraged, which ultimately lead to its filing for chapter 11 protection and wiping out all shareholders equity in the process.

The positive factor in the story is that there is a chance that some of the best dividend stocks of today which are included in the dividend achievers or the dividend aristocrats lists could end up raising distributions for 40 more years. Even if a company drops from one of those elite dividend indexes, it typically does so either because it is acquired by a competitor at a handsome premium or because it simply freezes distributions. Kellogg’s (K) is a nice example of a company which had raised distributions for over 44 years, before freezing distributions in 2001. The company then started raising distributions again in 2005 and has been boosting its payout ever since.

Full Disclosure: Long EMR, MMM, PG,

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Monday, February 15, 2010

Four Prominent Dividend Growth Stocks with rising yields on cost

February seems to be a big month for dividend increases so far. Especially intriguing are ones about companies which continue their long history of dividend increases, which in some cases stretch over half of a century. The four prominent dividend growth stocks raising their distributions over the past week include United Technologies (UTX), 3M Company (MMM), Diebold (DBD) and PepsiCo (PEP).

United Technologies Corporation (UTX) provides technology products and services to the building systems and aerospace industries worldwide. The company’s board of directors raised its quarterly dividend by 10.40% to 42.50 cents/share. This dividend achiever has raised distributions for seventeen years in a row. The stock currently yields 2.60%. (analysis)

3M Company (MMM), together with its subsidiaries, operates as a diversified technology company worldwide. It operates in six segments: Industrial and Transportation; Health Care; Safety, Security and Protection Services; Consumer and Office; Display and Graphics; and Electro and Communications. The company announced a 3% boost in its quarterly dividend to 52.50 cents/share. This is the 52nd consecutive annual increase for this dividend aristocrat. The stock currently yields 2.60%.(analysis)

PepsiCo, Inc. (PEP) manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods worldwide. The company raised its quarterly dividend by 6% to 45 cents/share. This is the thirty-eight consecutive dividend increase for this dividend aristocrat. The stock currently yields 3%. (analysis)

Diebold, Incorporated (DBD) engages in the development, manufacture, sale, installation, and service of automated self-service transaction systems, electronic and physical security systems, and election systems and software worldwide. The company’s board of directors announced a 3.80% increase in its quarterly dividends to 27 cents/share. This marked the 57th consecutive annual increase for this dividend champion. The stock currently yields 3.80%.

At this moment only PepsiCo (PEP) seems attractively valued for my account. Diebold (DBD) does not seem to be covering its dividend from earnings, while United Technologies (UTX) and 3M (MMM) do not yield enough. Another problem with 3M is that the company not only yields only 2.60%, but has raised its dividend only nominally over the past several years. With United Technologies (UTX) at least you have some decent dividend growth.

Full Disclosure: Long MMM, PEP, UTX

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- Twenty Dividend Increases in the news
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Friday, February 12, 2010

Diageo (DEO) Dividend Stock Analysis

Diageo plc (DEO) engages in producing, distilling, brewing, bottling, packaging, distributing, developing, and marketing spirits, beer, and wine. The company offers a range of premium brands comprising Smirnoff vodka, Johnnie Walker scotch whiskies, Captain Morgan rum, Baileys Original Irish Cream liqueur, J&B scotch whisky, Tanqueray gin, and Guinness stout. Diageo is an international dividend achiever, which has raised distributions for over a decade.

The company has delivered annualized total returns of 12.4% on average.

Earnings per share have increased by 10% on average since 2000. EPS growth has been aided by a decade of share buybacks, which shrank the number of outstanding stock by a quarter. Emerging markets account for one third of company’s revenues. This is where many brand name consumer companies are currently experiencing growth. In 2009 Diageo earned $4.14/share. Analysts expect the company to earn $4.62 and $5.04 per share in 2010 and 2011 respectively.

The annual dividend payment has been increased by 6.80% on average, which is lower than the growth in EPS.

Return on equity has increased from 22.30% at the beginning of the study period to a very impressive 42% in 2009.

The dividend payout ratio has been volatile, and largely remaining above 50% during our study period. Currently this indicator sits at 55%.

Diageo currently trades at a P/E of 16, yields 4.20% but has a dividend payout ratio of 55%, which is a little bit higher for my taste. Other than that I like the company, the strong brand names it owns and its ability to raise dividends through thick and thin. I never really pulled the trigger on Diageo (DEO) since I analyzed it in 2008. I would try to initiate a position in the company on dips as soon as I have funds available.

Full Disclosure: None
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Wednesday, February 10, 2010

Dividend Growth beats Dividend Yield in the long run

As an individual investor and blogger I do what I preach. I have a dividend portfolio which consists of almost 40 individual issues, most of them dividend achievers or aristocrats. I often get criticized by readers for writing about stocks which many seem to have a low current yield, despite having a history of increasing in dividends. Those readers believe that finding a high yielding stock is the best income play for the long term. In other words stocks that pay over 8% but do not raise distributions are viewed favorably than stocks which currently yield 2%-3%, but grow their dividends consistently.

The reason why I consider dividend growth investing a superior investment strategy is because it focuses not only on delivering a rising stream of income but also on total returns. To the untrained eye it might appear that investing in Abbott Labs (ABT) or Johnson & Johnson (JNJ) is a poor choice, especially since these companies yield 3%. The main advantage of these companies of course is that they have always paid a low current dividend yield, but have grown their payment in the process. The stock price typically adjusts upward, which decreases the current yield to a normal range. Thus these dividend growth stocks deliver total returns which high yielders cannot match in the long run. In addition to that the rising dividend payment increases the yield on cost on the original investment.

Let’s illustrate this with an example. Abbott Labs (ABT) is a dividend aristocrat which has raised distributions for 37 years in a row. It yields 3% right now, but has a ten year dividend growth rate of 9%. At this rate the company would double its dividend every 8 years. The growth has slowed over the past decade however – since 1983 the dividend growth was almost 13.1% per annum. The stock yielded 2.2% in 1983, which was hardly under the radar of any yield chaser. In fact the current yield at year-end for Abbott fluctuated between a low of 1.20% in 1998 and a high of 2.89% in 2009. The visionary investor who purchased Abbott at the end of 1983 achieved a yield on cost of 10% in 1992 in addition to holding onto a five-bagger. Twenty six years later this investor would have achieved a yield on cost of 55%, which is something that even the highest yielding stock out there cannot match.


An investor in a high yielding stock in 1983 would have most likely kept on receiving a high current yield for a long period of time. The main issue with this scenario is that the purchasing power of the flat dividend payment would have been cut in half over the past quarter of a century. Similarly an investor in 30 year US Treasury Bonds would have kept receiving the same amount of income each year. Check my analysis of Abbott Labs.

Other companies which have a long history of raising dividends while also delivering a strong dividend growth, plus being attractively valued at the moment include Johnson & Johnson (JNJ) and Clorox (CLX).

Johnson & Johnson (JNJ) has raised distributions for 47 years in a row. The company has achieved a 10 year dividend growth rate of 13.30%. The latest dividend increase was 6.50% in 2009. The dividend payout ratio is at 43%, which makes it adequately covered. Check my analysis of the stock.

Clorox (CLX) has boosted dividends for 32 consecutive years. The company has achieved a ten year compound dividend growth rate of 9.60%. The company last raised its payout by 8.7% in 2009. Its dividend payout is at 50% right now, which means that the dividend is well-covered from earnings. Check my analysis of the stock.

Full Disclosure: Long ABT, CLX and JNJ

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Monday, February 8, 2010

Twenty Dividend Increases in the news

Last week was like a record week for dividend increases so far in 2010. I have included 20 dividend stocks which increased distributions for the week. I separated the dividend increasers into dividend growth stocks and potential dividend achievers.

Dividend Growth Stocks

The stocks which I classify as dividend growth stocks include the dividend achievers, dividend aristocrats and dividend champions. These are all stocks which have increased distributions for over ten years in a row. A rising dividend payment would increase your yield on cost over time, despite the average current yield on most issues being close to the yields on major market indices.

Colgate-Palmolive Company, (CL) together with its subsidiaries, manufactures and markets consumer products worldwide. The company increased its quarterly dividend by 20.40% to 53 cents/share. This is the forty-seventh consecutive dividend increase for Colgate-Palmolive, which is a dividend champion. The stock yields 2.70%. (analysis)

Commerce Bancshares, Inc., (CBSH) is a bank holding company, engages in general banking business. It offers retail, corporate, investment, trust, and asset management products and services to individuals and businesses. The company hiked its quarterly dividend by 2.80% to 23.50 cents/share. Commerce Bancshares is a dividend champion, which has raised dividends for forty-two years in a row. The stock currently yields 2.50%. (analysis)

Archer-Daniels-Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. The company raised its quarterly dividend by 7.10% to 15 cent/ share. This dividend aristocrat has raised distributions for thirty-five years in a row. The stock currently yields 2%. (analysis)

Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials primarily in the United States, Canada, Mexico, South America, Europe, and the Asia Pacific. The company’s board of directors approved a 2.20% increase in its quarterly distributions to 23 cents/share. Bemis is a dividend aristocrat, which has managed to boost dividends for twenty-seven consecutive years. The stock yields 3.20%. (analysis)

Health Care Property Investors, Inc. (HCP) operates as a real estate investment trust in the United States. The company raised its dividends by 1.10% to 46.5 cents/share. This is the twenty fourth consecutive annual dividend increase for this dividend achiever. The stock currently yields 6.40%.

Ross Stores, Inc.,(ROST) together with its subsidiaries, operates two chains of off-price retail apparel and home accessories stores in the United States. The company raised its dividends by 45% to 16 cents/share. Ross Stores is a dividend achiever which has raised distributions for 16 consecutive years. The stock yields 1.40%.

Potential Dividend Achievers

AGL Resources Inc.,(AGL) an energy services holding company, engages in the distribution of natural gas primarily in Florida, Georgia, Maryland, New Jersey, Tennessee, and Virginia. The company boosted its dividend by 2.30% to 44 cents/share. This is the eight consecutive annual dividend increase since 2003. The stock currently yields 4.90%.

L-3 Communications Holdings, Inc. (LLL) provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; and aircraft modernization and maintenance, and government services in the United States and internationally. The company hiked its quarterly dividend by 14% to 40 cents/share. This is the sixth consecutive annual dividend increase for the company. The stock yields 1.90%.

J.B. Hunt Transport Services, Inc. (JBHT), together with its subsidiaries, operates as a surface transportation company in North America. The company announced its plans to boost dividends by 9% to 12 cents/share. This is the sixth consecutive dividend increase for the company since 2004. The stock currently yields 1.40%.

Boardwalk Pipeline Partners, LP, (BWP) through its subsidiaries, engages in the interstate transportation and storage of natural gas in the United States. This master limited partnership raised its distributions to 50 cents/unit. Boardwalk Pipeline Partners has raised distributions every quarter since going public in 2006. The units currently yield 6.50%.

The Dun & Bradstreet Corporation (DNB) provides commercial information and insight on businesses worldwide. The company raised its quarterly dividend to 35 cents/share. This is the third consecutive dividend increase since the company started paying dividends in 2007. The stock yields 1.70%.

PennantPark Investment Corporation (PNNT) is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. The company raised its quarterly distributions by 4% to 26 cents/share. This is the second quarterly distribution increase for this BDC over the past one year. The company is on track to record dividend increases for a third year in a row. The stock yields 11.40%.

Unitrin, Inc., (UTR) through its subsidiaries, engages in the property and casualty insurance, life and health insurance, and automobile finance businesses primarily in the United States. The company raised its dividends by 10% to 22 cents/share. This is the first dividend increase since the company cut distributions in 2008. The stock yields 3.40%.

News Corporation (NWS) (NWSA) operates as a diversified media company worldwide. The company raised its dividends by 25% to 7.5 cents/share. The company currently yields 1.10% and also does not have a history of consistent dividend increases.

Time Warner Inc (TWX) operates as a media and entertainment company in the United States and internationally. It operates in three segments: Networks, Filmed Entertainment, and Publishing. The company announced plans to boost its dividend by 13.30% to 21.25 cents/share. This is the first dividend increase since 2007. The stock currently yields 3.10%.

The Hershey Company (HSY) engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, food and beverage enhancers, and gum and mint refreshment products. The company raised its dividends by 7.60% to 32 cents/share. This is the first dividend increase for the company since 2007. The stock currently yields 3.40%.

Source Capital Inc. (SOR) is a close-ended equity fund launched and managed by First Pacific Advisors, LLC. The fund invests in the public equity markets of the United States. The company raised its dividends by 20% to 60 cents/share. Source Capital has fluctuating dividends. The stock yields 9.40%.

Hasbro, Inc. (HAS) engages in the design, manufacture, and marketing of games and toys. The company raised its dividends by 25% to 25 cents/share. This was the first dividend increase for Hasbro since 2008. The stock yields 3.20%.

United Parcel Service, Inc. (UPS), a package delivery company, provides transportation, logistics, and financial services in the United States and internationally. The company raised its payment by 4.40% to 47 cents/share. This is the first dividend increase for UPS since 2008.

Temple-Inland Inc. (TIN), through its subsidiaries, manufactures corrugated packaging and building products primarily in the United States and Mexico. The company raised its dividend by 10% to 11 cents/share. The stock currently yields 2.60%.

Full Disclosure: Long ADM,

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- Why do I like Dividend Achievers
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Friday, February 5, 2010

Unilever (UL) Dividend Stock Analysis

Unilever PLC, together with its subsidiaries, engages in the production and supply of fast moving consumer goods in food, home, and personal care product categories in Western Europe, the Americas, Asia, Africa, and Central and Eastern Europe. This international dividend achiever has raised dividends for over one decade.

This dividend stock pays dividends semi-annually. Another odd factor about it is the fact that it trades in the UK and the Netherlands. In this analysis I am concentrating on the British based, American Depositary Receipts. Unilever operates as a single business entity. However, there are two owners: Unilever (NV) and Unilever (PLC) are the two parent companies of the Unilever Group, having separate legal identities and separate stock exchange listings for their shares. You can find Unilever shares trading on NYSE as (UN) or (UL) representing NV and PLC respectively. (source)

The stock has delivered an average annual total return of 10.20% over the past decade.

Earnings per share have grown at an average pace of 12.10% per annum. Future growth in EPS would depend on how the company balances its pricing with the need for volume growth in its segments. For 2009, analysts expect the company to earn $2.01/share, which is lower than 2008’s EPS of $2.53. For 2010 analysts expect Unilever PLC to earn $2.21/share.

Annual dividends per share have increase by an average of 10.30% annually, which is lower than the growth in earnings. The reason why the dividend fluctuates is because it is typically translated from the British Pound to the US Dollar, and the exchange rate is fluctuating constantly. A 10% growth in dividends translates into the payment doubling every seven years.

The return on equity has fluctuated between a low of 13.50% in 2001 and a high of 58.40% in 2004. Over the past few years it has remained above 30%, which is impressive.

The dividend payout ratio has consistently remained above 50%, with the exception of 2000, 2001 and 2009.

Unilever (UL) currently trades at a P/E of 15.50 times 2009 earnings, has an adequately covered dividend, and yields 3.20. Overall Unilever (UL) does seem attractively valued at the moment.
I would definitely consider initiating a position in the stock when funds are available.

Full Disclosure: None

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- Best International Dividend Stocks
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Thursday, February 4, 2010

Dividend Investors are getting paid for waiting

Many investors believe that successful dividend investing consists of identifying the highest yielding stocks in the market and then generating double digit returns on investment each year. The problem with this strategy it that it often overlooks the fact that such dividend yields are most often unsustainable in the long run. A much better strategy that could eventually produce double digit yield on cost to investors is dividend growth investing. Using this strategy a patient investor accumulates a diversified portfolio of stocks which have a long history of consistently growing dividends. The positive factor is that any investor can implement this strategy, especially now that brokerage commissions are almost zero.

Dividend investors are paid for holding common stocks, which is one reason why a company which keeps paying a stable or rising dividend does not fall as much during bear market declines. The dividend returns are always positive, which provides a safety cushion even in the worst times possible. Furthermore dividends cannot be faked, whereas earnings could be massaged within certain limits in order to reach performance targets that are not economically prudent.
This return can be reinvested which further magnifies long-term income growth as well as total returns. Companies that raise dividends also provide a tangible proof that companies do have the cashflows to pay them. A company which does not have a solid business model typically cannot afford to raise dividends for more than a few years.

Paying dividends also imposes a discipline upon companies, which restricts excessive empire building or "diworsification" through overpriced acquisitions. Opponents of dividend investing often claim that dividend stocks are boring and slow moving, and instead recommend purchasing fast growing rising stars, which reinvest everything back in their business. While re-investing back into the business is a good idea, expanding too rapidly might lead to excessive leverage build up with disastrous consequences for the owners of the business. Any solid company should be able to balance its capital investment needs with its shareholders demands for returns on their investment. Successful companies such as McDonald’s (MCD) and Wal-Mart (WMT) have not only grown their business in a smart way, but have also rewarded shareholders consistently as well.

Currently, the market is a little overextended off of its March lows. Many investors are wondering whether they should cash out or keep adding to their positions. Dividend investors on the other hand have the luxury to ignore market movements as long as distributions are intact and growing. After all solid companies with definite competitive advantages which throw off rising dividend payments each year do not lose their moats overnight. Such companies include Johnson & Johnson (JNJ), Procter and Gamble (PG), Chevron Corporation (CVX), Pepsi Co (PEP) and McDonald’s (MCD).

The Procter & Gamble Company (PG), together with its subsidiaries, provides branded consumer goods products worldwide. The company operates in three global business units (GBU): Beauty, Health and Well-Being, and Household Care. Procter & Gamble is a dividend aristocrat as well as a component of the S&P 500 index. One of its most prominent investors includes the legendary Warren Buffett. Procter & Gamble has been increasing its dividends for the past 53 consecutive years. (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants in the food service industry worldwide. The company's share of the US fast food market is several times larger than its closest competitors, Burger King (BKC) and Wendy's (WEN). McDonald’s is a major component of the S&P 500 and Dow Industrials indexes. The company is also a dividend aristocrat, which has been consistently increasing its dividends for 33 consecutive years. (analysis)

PepsiCo, Inc. (PEP) manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods worldwide. PepsiCo is a major component of the S&P 500, Dow Industrials and the Dividend Aristocrats Indexes. PepsiCo has been consistently increasing its dividends for 37 consecutive years. (analysis)

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. Johnson & Johnson is a major component of the S&P 500, Dow Industrials and the Dividend Aristocrats Indexes. One of the company’s largest shareholders includes Warren Buffett. JNJ has been consistently increasing its dividends for 47 consecutive years. (analysis)

Chevron Corporation (CVX) operates as an integrated energy company worldwide. Chevron Corporation is a component of the S&P 500 and Dow Jones Industrials Indexes. The company is also a dividend achiever, which has been consistently increasing its dividends for 21 consecutive years. (analysis)

Full disclosure: Long CVX, JNJ, MCD, PEP and PG

Relevant Articles:

- Chevron Corporation (CVX) Dividend Stock Analysis

- Procter & Gamble (PG) Dividend Stock Analysis

- Dividend Investing vs Trading

- The Sweet Spot of Dividend Investing

Monday, February 1, 2010

Twelve Dividend Stocks Increasing Dividends

A dividend increase is generally a bullish sign, which reflects management’s optimistic view on the near term prospects for the company. The sign of dividend increases is especially bullish for companies which have raised distributions for over one decade. One has to be careful however to avoid the excessively high yielding stocks which might not be able to sustain future dividend payments. Investors should also avoid chasing dividend growth stocks which don’t have a long history of dividend increases.

Several companies announced their intent to increase distributions to shareholders. I have separated the dividend raisers of the past week in three groups: dividend achievers, champions and aristocrats; master limited partnerships; and potential dividend achievers

Dividend Growth Stocks

Kimberly-Clark Corporation (KMB), which engages in the manufacture and marketing of health and hygiene products worldwide, announced that a high single-digit to low double-digit increase in the dividend is anticipated effective April 2010, subject to approval by the Board of Directors.. The company typically raises distributions in February. Kimberly-Clark Corporation is a dividend aristocrat, which has increased its quarterly dividend in each of the past thirty=seven consecutive years. The stock currently yields 3.90%. (analysis)

Praxair, Inc. (PX), which engages in the production and distribution of industrial gases, increased its quarterly dividend by 13% to 45 cents per share. Praxair, Inc. is a dividend achiever, which has increased its quarterly dividend in each of the past seventeen consecutive years. The stock currently yields 2.40%.

Energen Corporation (EGN), which is engages in the development, acquisition, exploration, and production of oil, natural gas, and natural gas liquids in the continental United States, increased its quarterly dividend by 4% to 13 cents per share. Energen Corporation is a dividend achiever, which has increased its quarterly dividend for twenty-eight consecutive years. The stock currently yields 1.10%.

SJW Corp. (SJW), engages in the production, purchase, storage, purification, distribution, and retail sale of water, increased its quarterly dividend by 3% to 17 cents per share. SJW Corp. is a dividend champion, which has increased its quarterly dividend in each of the past forty-three consecutive years. The stock currently yields 3.00%.

Master Limited Partnerships

El Paso Pipeline Partners, L.P. (EPB), which engages in the ownership and operation of natural gas transportation pipelines and storage assets in the United States, increased its quarterly distributions to 36 cents per unit. This is the eight consecutive quarterly distribution increase for the company since going public in 2007. The stock currently yields 5.60%.

Holly Energy Partners, L.P. (HEP), which operates a system of refined product and crude oil pipelines, storage tanks, and distribution terminals primarily in west Texas, New Mexico, Utah, and Arizona, increased its quarterly distribution to 80.5 cents per unit. Holly Energy has increased its distribution to unit holders every quarter since becoming a public partnership in July 2004. This increase marks the twenty-first consecutive quarterly increase. This master limited partnership currently yields 7.60%.

Sunoco Logistics Partners (SXL), which engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States, increased its quarterly distributions by $1.09 per unit. This master limited partnership has consistently raised distributions since 2002. Sunoco Logistics Partners currently yields 6.00%.

Inergy Holdings GP, LLC, (NRGP), has ownership interest in Inergy, L.P. that engages in the
sale, distribution, storage, marketing, trading, processing, and fractionation of propane, natural gas, and other natural gas liquids to residential, commercial, industrial, and agricultural customers. This master limited partnership increased its quarterly distributions to 94 cents per unit. Inergy Holdings GP, LLC has increased its quarterly distributions since 2005. Inergy Holdings GP, LLC, currently yields 5.20%.

Potential Dividend Achievers

Rollins, Inc. (ROL), which provides pest and termite control services, and protection against termite damage, rodents, and insects, increased its quarterly dividend by 28.60% to 9 cents per share. Rollins, Inc. has only raised distributions since 2002. The stock currently yields 1.80%.

National Instruments (NATI), which is one of the top telecommunications companies in the US, increased its quarterly dividend by 8% to 13 cents per share. This is the 7th consecutive increase in distributions since the company initiated a dividend policy in 2002. The stock currently yields 1.70%.

Airgas (ARG), which distributes industrial, medical, and specialty gases, as well as hardgoods in the United States, increased its quarterly dividend by 22.20% to 22 cents per share. Airgas has raised dividends since 2003 The stock currently yields 2.00%.

CMS Energy (CMS), which is operates as an energy company primarily in Michigan, increased its quarterly dividend by 20% to 15 cents per share. This is the third consecutive dividend increase since CMS Energy started paying dividends again in 2007. The stock currently yields 3.95%.

Full Disclosure: Long KMB

Relevant Articles:

- Dividend Aristocrats List for 2010
- Master Limited Partnerships (MLPs) – an island of stability for dividend investors
- Dividend Investing vs Trading
- High yield stocks for current income

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