The goal of every dividend investor is to generate a rising stream of sustainable dividend income. The growth in dividends protects the purchasing power of the income, and further turbochargers the compounding process in the accumulation phase. Not all dividend increases are created equal however, as they vary depending on size and sustainability. It is important to focus on growing income, but it is also important to focus on those companies that can sustainably pay distributions out of their growing earnings. Without growth in earnings, future dividend growth would eventually hit a ceiling. In addition, dividend investors should also refuse to purchase the rights to the future stream of dividends at any price.
If the investor manages to purchase quality dividend growth companies at fair prices after analyzing them individually, and puts them in a diversified income portfolio that is monitored regularly, they would greatly increase their odds of achieving their goals. Dividend stocks would therefore be the gift that keeps on giving for this investor, showering him with cash for years to come.
Over the past week, several dividend payers approved higher distributions for shareholders:
AT&T Inc. (T) provides telecommunications services to consumers, businesses, and other providers in the United States and internationally. The company raised dividends by 2.20% to 46 cents/share. This marked the 30th consecutive dividend increase for this dividend champion. Over the past decade, AT&T has raised dividends by 5.20%/year. Currently the stock trades at 13.90 times expected 2013 earnings and yields 5.40%. Given the deceleration of the dividend growth rate, and the increasing competition in the telecom markets, I am going to stay away from this one. This is not different than my stance on the company for the past five years. Check my analysis of AT&T.
Archer-Daniels-Midland Company (ADM) manufactures and sells protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients; and processes oilseeds, corn, wheat, cocoa, and other agricultural commodities. The company raised dividends by 26.30% to 24 cents/share. This marked the 39th consecutive dividend increase for this dividend champion. Over the past decade, Archer-Daniels-Midland has raised dividends by 9.10%/year. Currently the stock trades at 19.40 times earnings and yields 2.30%. I like the company, and would like to add to my position on dips below $38.50/share. Check my analysis of ADM.
3M Company (MMM) operates as a diversified technology company worldwide. The company raised dividends by 34.60% to 85.50 cents/share. This marked the 56th consecutive dividend increase for this dividend king. Over the past decade, 3M has raised dividends by 6.60%/year. Currently the stock trades at 20 times estimated 2013 earnings and yields 2.50%. It is nice to see another company that becomes a better dividend value in this otherwise overheated environment. Check my analysis of 3M.
Realty Income Corporation (O) is a publicly traded real estate investment trust that invests in commercial real estate markets of the United States. The company raised dividends to 18.217 cents/share. This dividend achiever has raised distributions since 1994. Over the past decade, the REIT has raised dividends by 4.20%/year. Currently the stock trades at 15.70 times FFO and yields 5.50%. The increase in interest rates in a few years might lead to further declines in stock prices for REITs. As a long-term investor, I see some growth in distributions from Realty Income in the future fueled by acquisitions and rent increases. This makes this REIT a buy in my book. I recently sold some January 2015 at-the-money puts on the stock. Check my analysis of Realty Income.
CVS Caremark Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services in the United States. The company raised dividends by 22.20% to 27.50 cents/share. This marked the 11th consecutive dividend increase for this dividend achiever. Over the past decade, CVS has raised dividends by 18.80%/year. Currently the stock trades at 17.70 times estimated 2013 earnings and yields 1.60%. While the stock is below my minimum entry yield requirement, I would continue monitoring future developments at CVS.
General Electric Company (GE) operates as an infrastructure and financial services company worldwide.
The company raised dividends by 15.80% to 22 cents/share. This marked the 4th consecutive annual dividend increase for General Electric. The new dividend is still below the levels of 31 cents/share for shareholders, that was last seen in early 2009. Currently the stock trades at 16.70 times estimated 2013 earnings and yields 3.30%. I plan on reviewing GE in more detail in the coming weeks, in order to determine if it is worthy of my investment dollars.
Urstadt Biddle Properties, Inc. (UBA), a real estate investment trust (REIT), engages in the acquisition, ownership, and management of commercial real estate properties in the United States.
The company raised dividends by 1% to 25.25 cents/share. This marked the 20th consecutive dividend increase for this dividend achiever. Over the past decade, Urstadt Biddle Properties has raised dividends by 2%/year. Currently the REIT trades at 20 times FFO and yields 5.50%. I am generally not a fan of dividend growth companies that raise dividends simply to maintain a streak, but the nominal raises are below the rate of inflation. Despite the high current yield, I do not find the company worthy of further research.
Full Disclosure: Long O, MMM and ADM
- Check the Complete Article Archive
- The Dividend Kings List Keeps Expanding
- My Dividend Retirement Plan
- Dividend Investing Goals for 2013
- Margin of Safety in Dividends
The goal of every dividend investor is to generate dividend income that is larger than their annual expenses. This coveted goal is called th...
Dividend growth stocks are the gift that keeps on giving . I like the fact that most of the work in selecting good dividend growth stocks is...
I have been a dividend growth investor for over 7-8 years now. The reason why I have somewhere between 85% - 90% of my networth in dividend ...
I love it when the stock market goes on sale, like it has been so far in the past two - three weeks. For aspiring dividend growth investors,...
I have received quite a few emails recently, asking me how I manage my dividend portfolio . In general, I focus on several things that I b...
How do you define success? To me, success is the freedom to do my own thing, and the ability to reach my goals. Given the fact that I am a f...
One of the biggest sins in investing, is investing money without a clear plan or strategy to accomplish specific goals . This investing sin...
I am a fan of diversification as a tool to reduce risk. I diversify by buying at least 30 – 40 securities, representative of as many sectors...
Before I begin my message, I wanted to wish all my readers a Happy 4th of July. And I wanted to thank all of those military members for keep...
There are many risks to investing . One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are p...