Monday, May 16, 2011

Dividend Stocks Increasing Retirement Incomes for Investors

Investors who plan to live off dividends in retirement should follow several guidelines that would ensure they could do so. First, they should select companies which have raised distributions each year, in order to ensure that they will generate a sufficient income stream that rises over time, which protect purchasing power of their dollars. Second, they should invest only in companies which meet certain quantitative or qualitative criteria, such as the ones described in this article. Last but not least, investors should be properly diversified in order to minimize exposure in the event of dividend cuts, company failures etc.


Carefully selected companies raising dividends could ensure a rising income stream in retirement, which maintains and even increases its purchasing power over time. Companies that announced dividend raises last week include:

Intel Corporation (INTC) engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Intel Corporation today announced that its board of directors has approved a 16 percent increase in the quarterly cash dividend to 21 cents per share. This the second dividend increase in the past 6 months. Intel previously raised the dividend 15 percent in November 2010. The company has raised distributions for 8 years in a row. Yield: 3.60% (analysis)

Mine Safety Appliances Company (MSA) develops, manufactures, and supplies health and safety products used by workers in the fire service, homeland security, construction, and other industries, as well as the military. The company raised its quarterly dividend by 4% to 26 cents/share. This dividend champion has raised distributions for 40 years in a row. Yield: 2.70%

Buckeye Partners, L.P. (BPL) primarily operates refined petroleum products pipeline systems in the United States. The company raised its quarterly distributions by 1% to $1/unit. This dividend achiever has raised distributions for 16 years in a row. Yield: 6.30%

NACCO Industries, Inc. (NC), through its subsidiaries, engages in lift trucks, small appliances, specialty retail, and mining businesses primarily in the Americas, Europe, and the Asia-Pacific. The company raised its quarterly dividend by 1.90% to 53.25 cents/share. This dividend champion has raised distributions for 26 years in a row. Yield: 2.10%

Republic Bancorp, Inc. (RBCAA) operates as the holding company for Republic Bank & Trust Company and Republic Bank, which provides banking, tax refund solutions, and mortgage banking services to individuals and businesses in the United States. The company raised its quarterly dividend by 7.70% to 15.40 cents/share. This marked the 13rh consecutive annual dividend increase for this dividend achiever. Yield: 3%

FactSet Research Systems Inc. (FDS) provides financial and economic information to investment community worldwide. The company raised its quarterly dividend by 17.40% to 27 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. Yield: 1.00%

National Bankshares, Inc. (NKSH) operates as the bank holding company for the National Bank of Blacksburg that provides a range of retail and commercial banking services to individuals, businesses, non profits, and local governments in Virginia. The company raised its semi-annual dividend by 2.1% to 48 cents/share. This dividend achiever has raised distributions for 12 years in a row. Yield: 3.70%

Delphi Financial Group, Inc. (DFG), together with its subsidiaries, provides integrated employee benefit services. The company operates in two segments, Group Employee Benefit Products and Asset Accumulation Products. The company raised its quarterly dividend by 9.10% to 12 cents/share. This marked the eleventh consecutive annual dividend increase for this dividend achiever. Yield: 1.60%

Chesapeake Utilities Corporation (CPK), through its subsidiaries, operates as a diversified utility company that primarily engages in regulated energy and unregulated energy businesses. The company raised its quarterly dividend by 4.5% to 34.50 cents/share. This marked the eighth consecutive annual dividend increase for the company. Yield: 3.30%

Franklin Electric Co., Inc. (FELE), together with its subsidiaries, engages in the design, manufacture, and distribution of groundwater and fuel pumping systems. It operates in two segments, Water Systems and Fueling Systems. The company raised its quarterly dividend by 3.80% to 13.50 cents/share. This marked the 19th consecutive annual dividend increase for the company. Yield: 1.20%

AmerisourceBergen Corporation (ABC), a pharmaceutical services company, provides drug distribution and related services to healthcare providers and pharmaceutical manufacturers in the United States, the United Kingdom, and Canada. The company raised its quarterly dividend by 15% to 11.50 cents/share. This marked the seventh consecutive annual dividend increase for the company. Yield: 1.10%

Assurant, Inc. (AIZ), through its subsidiaries, provides specialized insurance products and related services in North America and internationally. The company operates in four segments: Assurant Solutions, Assurant Specialty Property, Assurant Health, and Assurant Employee Benefits. The company raised its quarterly dividend by 12.50% to 18 cents/share. This marked the eighth consecutive annual dividend increase for the company. Yield: 1.90%

Portland General Electric Company (POR) operates as an integrated electric utility in Oregon. The company raised its quarterly dividend by 1.90% to 26.50 cents/share. This marked the sixth consecutive annual dividend increase for the company. Yield: 4.10%

National HealthCare Corporation (NHC), together with its subsidiaries, operates and manages long-term health care centers and associated assisted living centers, retirement centers, home health care programs in the United States. The company raised its quarterly dividend by 7.10% to 30 cents/share. This marked the eight consecutive annual dividend increase for the company. Yield: 2.50%

Not all of these stocks will be buys right now. However, by studying their characteristics, investors will be able to learn what made these companies able to generate a rising dividend stream over time. For others, this list could provide a starting point for further research.

In my analysis of Intel (INTC) I rated it as a hold. While there has been some strength in numbers over the past few years, the fluctuations in earnings for the preceding decade were concerning to say the least. That being said, Intel is the worldwide leader in microprocessors and has the scale to generate efficiencies in production that would aid in profitability. However tech spending is highly cyclical, which leads to EPS volatility. This could provide a ceiling to consistent dividend increases, and could also increases the risks of a dividend cut. In addition, the company needs to keep pouring billions annually in R&D in order to continuously churn out faster and better chips. Otherwise its customers would turn a blind eye to the company’s products. Right now the near term future for Intel makes it a buy. Investors need to decide if the company would be able to generate higher earnings in the future to support dividend growth before the purchase. That being said the stock fits my entry criteria and could be a decent addition in dividend portfolios, as it provides exposure to technology.

Full Disclosure: None

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3 comments:

  1. I also like BIP - Brookfield Infrastructure Partners as an infrastructure play.

    ReplyDelete
  2. Great posts. What are your thoughts on berkshire hathaway?

    ReplyDelete
  3. Is the tablet craze for real...if we see consumers thinking the need to upgrade their old pc, update to win7, then intc is worth double. The downside seems limited. Ppl have to upgrade as they still attach their tablet to their pc

    ReplyDelete

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