A dividend king, is a company that has managed to boost dividends to shareholders every single year for at least 50 years in a row. There are 19 dividend kings in the US, which is an increase from the end of 2015, as Tootsie Roll (TR) joined the ranks of this elite list earlier this year. There were only ten dividend kings, when I first intriduced the term in 2010. Being a dividend king is an impressive achievement, because the last 50 years were a pretty turbulent time for business. Being a dividend king is not an automatic buy signal however. I believe that each dividend king should be studied in detail by enterprising dividend investors. This is because these companies have managed to survive the calamities and destruction of the past 50 - 60 years, while growing earnings, dividends and shareholder returns.
Over the past week, there were three dividend kings, which raised dividends to their shareholders. Each of these companies has managed to grow dividends per share for at least 60 years in a row. That is an impressive track record. If these dividend streaks were individuals we were talking about, they would have been eligible for Social Security within an year or so each.
The companies include:
Emerson Electric (EMR) raised its quarterly dividend by half a cent to 48 cents/share. This marked the 60th consecutive annual dividend increase for this dividend king. The small dividend increase is not a surprise, because the company has had trouble growing earnings per share over the past decade. While it is not too expensive at 16.60 times adjusted earnings of $2.98/share, I do not like the stagnant growth in earnings. Without earnings growth, the dividend will grow only through expanding the payout ratio. At 64% adjusted EPS, it is already a little overstretched, and leaves little room for more than token annual dividend increases. I view Emerson Electric as a hold, but I would not be adding to my position there. Without earnings growth, the only return you stand to generate is the 3.90% annual dividend yield. That being said, I do believe that the current yield of 3.90% is sustainable, and the risk of a dividend cut is remote. Check my analysis of Emerson Electric for more information.
Vectren (VVC), raised its quarterly dividend by 5% to 42 cents/share. This marked the 57th consecutive annual dividend increase for this dividend king. Over the past decade, Vectren has managed to boost dividends at a rate of 2.60%/year, which barely keeps up the purchasing power of the income stream. That being said, I do like the fact that this utility has been able to grow earnings per share over the past decade. That being said, it is a little overvalued at 20.10 times earnings. The dividend yield is 3.50%, and the payout ratio is at 70.30%, which is ok for a utility.
American States Water (AWR) raised its quarterly dividend by 8% to 24.20 cents/share. This marked the 62nd consecutive annual dividend increase for this dividend king. Over the past decade, American States Water has managed to increase its dividends at a rate of 6.90%/year. I also do like the fact that the company has managed to double earnings per share over the past decade. The one thing I do not like is that the shares sell at 23.60 times earnings, which is a little high. The dividend yield is 2.50%, which is sustainable at a payout ratio of 59%.
Full Disclosure: None
- Dividend Kings for 2016
- Dividend Kings List for 2015
- The Dividend Kings List for 2014
- The Dividend Kings List Keeps Expanding
- Eleven Dividend Kings, Raising dividends for 50+ years
- Ten Dividend Kings raising dividends for over 50 years
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