John D Rockefeller, the founder of Standard Oil is famous for saying that the only thing bringing him joy in life was the sound of his dividends being deposited in his account. The heirs of the Standard Oil tycoon have been living off these oil dividends for several generations now. Dividend payments give these investors the opportunity to generate income without having to sell shares, and are typically a less volatile source of total returns than capital gains alone. In this article, I have highlighted several consistent dividend increasers, and provided a brief comment on each stock.
The shareholders of the following consistent income payers are not only getting paid to hold their income stocks, but also received a dividend hike over the past week:
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. The partnership increased quarterly distributions to $1.26/unit. This dividend achiever has consistently boosted distributions for 16 years in a row. Yield: 5.90%
Kinder Morgan does have the distributable cash flows from its vast portfolio of fee generating assets to pay for its generous partner distributions. In addition, the partnership is raising distributable cash flow per unit by investing in new assets and making strategic acquisitions. Check my recent analysis of Kinder Morgan Partnership.
Eaton Vance Corp. (EV), through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. The company raised its quarterly distributions by 5.30% to 20 cents/share. This marked the 32nd consecutive annual dividend increase for this dividend champion. Yield: 2.80%
The latest dividend increase is much lower than the ten year average annual dividend hike of 19.20%. Overall I am bullish on asset managers, and find the sector to be the best bet on the long term secular trends such as increasing need for investment in products such as mutual funds by Baby Boomers. The company is attractively valued at 17.30 times earnings. I plan on adding to my position in the stock subject to availability of funds. Check my analysis of the stock.
Aqua America, Inc. (WTR), through its subsidiaries, operates regulated utilities that provide water or wastewater services in the United States. The company raised its quarterly distributions by 6.10% to 17.50 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever. Yield: 2.80%
Over the past decade, Aqua America has managed to boost dividends at an annual rate of 7.60%. In addition, the company has managed to double earnings per share since 2002. The company however is overvalued at 23 times earnings right now. I would consider researching the company in more detail in the future, and potentially initiating a position on dips below $22/share.
Westwood Holdings Group, Inc. (WHG) manages investment assets and provides services for its clients. The company raised its quarterly distributions by 8.10% to 40 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Yield: 4.20%
Asset managers are destined to have a bright future as a group, as millions of investors in the US are saving for an uncertain future with limited or no pensions from governments or employers. I like the history of dividend growth for Westwood as well as the increase in earnings over the past decade from 97 cent/share in 2002 to $2.11/share in 2011. The company also tends to distribute special dividends every now and then to shareholders, although the last such distribution has been made in 2010. Unfortunately, the stock is overvalued at 21 times earnings and has a dividend payout ratio of over 80%. I would consider reviewing the stock in more detail if it manages to lower dividend payout ratio to 60% or less.
Omega Healthcare Investors, Inc. (OHI) operates as a real estate investment trust (REIT) in the United States. The REIT raised quarterly distributions to 44 cents/share. Omega Healthcare Investors has boosted distributions for 10 years in a row. Yield: 7.30%
If you dig into the historical distributions in this REIT, one would notice how dividends went from $2.80/share in 1999 to nothing in 2001 and 2002. Omega Healthcare Investors then initiated dividends again in 2003 and has been raising them ever since. I would consider researching this REIT in a future article, in order to uncover what caused it to cut dividends in 2000, and what is the likelihood of this occurring again.
A. Schulman, Inc. (SHLM) supplies plastic compounds and resins for packaging, consumer products, industrial, and automotive applications. The company raised its quarterly distributions by 2.60% to 19.50 cents/share. This marked the sixth consecutive annual dividend increase for this dividend stock. Yield: 3.20%
The company has delivered a very anemic 1.60% in annual dividend hikes over the past decade. In addition, its earnings are a little too volatile to support consistent dividend increases in the future. Despite the high yields at 3.20% and attractive valuation at 15.70 times earnings, the low earnings and dividend growth is a red flag. The high volatility in earnings over the past decade, and the short history of dividend increases makes this stock a hold. Since 1986 the company has never cut distributions, but it tends to raise them for a few years, and then freeze them, until it resumes a slow action of dividend hikes.
Cass Information Systems, Inc. (CASS) provides payment and information processing services to manufacturing, distribution, and retail enterprises in the United States. The company raised its quarterly distributions by 16.50% to 18 cents/share. This marked the eleventh consecutive annual dividend increase for this dividend achiever. Yield: 1.70%
The ten year average annual dividend growth rate for Cass Information Systems is 9.10%. I like the the fact that the company has managed to triple earnings per share over the past decade to $2.23/share in 2011. Unfortunately, the current yield of 1.70% is a little too low for me. Nevertheless, the company exhibits the characteristics that merit future analysis on this site.
Cintas Corporation (CTAS) provides corporate identity uniforms and related business services for approximately 900,000 businesses in North America, Latin America, Europe, and Asia. The company raised its annual distribution by 18.50% to 64 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. Yield: 1.50%
Cintas has managed to boost dividends by 9.10%/year over the past decade. In addition, earnings per share have increased from $1.46 in 2003 to $2.37 in 2011. Analysts expect Cintas to grow EPS to $2.55 in 2012 and $2.81 by 2014. The company is also attractively valued at 17.80 times earnings, but unfortunately yields only 1.50%. With my entry criteria of 2.50%, the stock needs to drop significantly from current levels before it reaches buy territory. Nevertheless, I would consider adding the stock to my list for further analysis.
Full Disclosure: Long KMR, KMI and EV
- Kinder Morgan Partners (KMP) for High Yield and Solid Distributions Growth
- Eaton Vance (EV) Dividend Stock Analysis 2011
- Dividend Macro trends: The Baby Boomer Retirement Investment
- Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors
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