Monday, January 10, 2011

Eight Dividend Stocks Expected to Raise Dividends in 2011

With the low number of quality companies raising distributions in the last week of the year, I decided to focus on the companies which have a high chance of growing distributions in 2011. The companies that manage to grow distributions for a long period of time have a very high chance of continuing their streak of consecutive dividend increases, until something unexpected happens. In order for a company to be able to grow dividends for over one decade it has to have recorded earnings growth. Consistent earnings growth is only possible if the company has a wide moat or a strong competitive advantages based on price, quality or a combination of both. Most dividend growth stocks also boast high returns on equity and generate so much in excess cash, that prudent managers allocate a portion of it back to shareholders in the form of dividends. The companies which I expect to boost dividends to shareholders in 2011 and beyond include:

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. Wal-Mart Stores last raised its quarterly dividend by 11% to 30.25 cents/share in March 2010. Wal-Mart has increased its dividend for 36 years in a row. This dividend aristocrat company boasts a ten year dividend growth rate of 18.10% annually. Yield: 2.20% (analysis)

Walgreen Co. (WAG) , together with its subsidiaries, engages in the operation of a chain of drugstores in the United States. The company’s drugstores sell prescription and non-prescription drugs, and general merchandise. Walgreen last raised its quarterly dividend by 27.30% to 17.50 cents/share in July 2010. Walgreen has raised its dividend for 35 consecutive years This dividend aristocrat boasts a ten year dividend growth rate of 14.30% annually. Yield: 1.90% (analysis)

Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. Medtronic last raised its quarterly dividend by 9.80% to 22.50 cents/share in June 2010. Medtronic has raised its dividend for 33 years in a row. This dividend champion has a ten year dividend growth rate of 18.40% annually. Yield: 2.40% (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a worldwide foodservice retailer. McDonald’s last raised its quarterly dividend by 10.90% to 61 cents/share in September 2010. McDonald’s has raised its dividend for 34 consecutive years. This dividend aristocrat boasts a ten year dividend growth rate of 26.50% annually. Yield: 3.20% (analysis)

Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets in North America. Kinder Morgan Energy Partners last raised its quarterly distributions by 1.80% to $1.11 per unit in October 2010. Kinder Morgan has raised its distributions for 14 consecutive years. This dividend achiever boasts a ten year dividend growth rate of 11.70% annually. Yield: 6.40% (analysis)

Kimberly-Clark Corporation (KMB) , together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. Kimberly-Clark last raised its quarterly dividend by 10% to 66 cents/share in March 2010. Kimberly-Clark has raised its dividend for 38 consecutive years. This dividend aristocrat boasts a ten year dividend growth rate of 8.70% annually. Yield: 4.20% (analysis)

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. Coca-Cola last raised its quarterly dividend by 7.30% to 44 cents/share in February 2010. Coca-Cola has raised its dividend for 48 consecutive years. This dividend aristocrat boasts a ten year dividend growth rate of 9.90% annually. Yield: 2.70% (analysis)

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. Colgate-Palmolive last raised its quarterly dividend by 20.40% to 53 cents/share in February 2010. Colgate-Palmolive has raised its dividend for 47 consecutive years. This dividend champion boasts a ten year dividend growth rate of 11.30% annually. Yield: 2.60 % (analysis)

In dividend investing, it is important to keep a close look at the long term picture behind each company you are investing in. As a result, the stocks mentioned above should purchased only after investors analyze them and assess that the probability for future dividend growth of over one year is high. I would not purchase a stock just because it would raise a dividend for one year. I would purchase a quality dividend stock only if I see it fit to generate higher yield on cost in the future for me.

Full disclosure: Long all stocks mentioned above

Relevant Articles:

- What Dividend Growth Investing is all about?
- Ten Dividend Stocks with High Returns on Equity
- Strong Brands Grow Dividends
- 14 Dividend Stocks with Dividend Growth Potential

2 comments:

  1. Hey DGI,

    Thanks for another great post. You've been writing this blog for 3 years and you're halfway through the time you set to reach your goal of $8000 in annual dividend income. Would you be willing to do an update on your progress toward you goal?

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  2. I do not know if this is an article request or if you would mind sharing this via just the comments but I have been reading your articles for about a year I think and am curious what tools and data sources you use for your analysis. It is obvious to me from the graphs that you use MS Excel. How about data sources. I see in your graphs that you have 10 years of data. The most common sites now only provide 5 years, do you pay for access to this data? Im just curious since I am looking to start doing the same or similar analysis as you prior to buying/selling stocks and have been researching tools & Data Sources. Thanks in Advance!
    David

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