Wednesday, May 8, 2013
The Broad Dividend Achievers index includes 216 companies which have boosted distributions for more than ten consecutive years in a row. Since 1996, the Dividend Achievers index has managed to outperform the S&P 500 total returns.
There is an exchange traded fund that tracks the Broad Dividend Achievers index (PFM). Since 2005, the annual distributions and net asset values at year end are as follows:
The following companies have been added in 2013, arranged by sector:
AGL Resources Inc. (GAS), an energy services holding company, distributes natural gas to residential, commercial, industrial, and governmental customers in Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland. The company trades at 19 times earnings and yields 4.30%. Over the past decade, the company has managed to raise distributions by 5.50%/year.
ONEOK, Inc. (OKE) operates as a diversified energy company in the United States. The company trades at 27.60 times earnings and yields 3.10%. Over the past decade, the company has managed to raise distributions by 15.10%/year. Check my analysis of Oneok.
The York Water Company (YORW) engages in impounding, purifying, and distributing drinking water in Pennsylvania. York Water, which is the oldest investor owned utility in the nation, has paid dividends for 197 consecutive years beginning in 816. Dividends can be reinvested automatically at a 5% discount, in the company’s DRIP plan. The company trades at 25.90 times earnings and yields 3%. Over the past decade, the company has managed to raise distributions by 4.40%/year.
Avista Corporation (AVA), an energy company, engages in the generation, transmission, and distribution of energy; and other energy-related businesses primarily in the United States and Canada. The company trades at 21.90 times earnings and yields 4.40%. Over the past decade, the company has managed to raise distributions by 9.20%/year.
Cracker Barrel Old Country Store, Inc. (CBRL) develops and operates the Cracker Barrel Old Country Store restaurant and retail concept in the United States. The company trades at 17.70 times earnings and yields 2.50%. Over the past decade, the company has managed to raise distributions by 52.90%/year.
The Andersons, Inc. (ANDE) engages in the grain, ethanol, plant nutrient, railcar leasing, turf and cob products, and consumer retailing businesses. The company trades at 13 times earnings and yields 1.20%. Over the past decade, the company has managed to raise distributions by 16.50%/year.
Tiffany & Co. (TIF), through its subsidiaries, engages in the design, manufacture, and retail of fine jewelry worldwide. The company trades at 23.20 times earnings and yields 1.80%. Over the past decade, the company has managed to raise distributions by 22.50%/year.
International Flavors & Fragrances Inc. (IFF), together with its subsidiaries, creates, manufactures, and supplies flavor and fragrance products worldwide. The company used to be on the dividend aristocrats list, until cutting distributions in the year 2000. The company trades at 25.20 times earnings and yields 1.80%. Over the past decade, the company has managed to raise distributions by 7.80%/year.
Alliance Resource Partners, L.P. (ARLP) engages in the production and marketing of coal primarily to utilities and industrial users in the United States. The company trades at 11.30 times earnings and yields 6.50%. Over the past decade, the company has managed to raise distributions by 15.30%/year.
Lindsay Corporation (LNN) designs, manufactures, and sells irrigation systems that are primarily used in the agricultural industry to increase or stabilize crop production while conserving water, energy, and labor in the United States and internationally. The company trades at 16.10 times earnings and yields 0.60%. Over the past decade, the company has managed to raise distributions by 11.30%/year.
Lincoln Electric Holdings, Inc. (LECO), through its subsidiaries, engages in the design, manufacture, and sale of welding, cutting, and brazing products worldwide. The company trades at 17.30 times earnings and yields 1.50%. Over the past decade, the company has managed to raise distributions by 8.50%/year.
Lockheed Martin Corporation (LMT), a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products for defense, civil, and commercial applications in the United States and internationally. The company trades at 11.80 times earnings and yields 4.60%. Over the past decade, the company has managed to raise distributions by 24.70%/year. Check my analysis of Lockheed Martin.
Maxim Integrated Products, Inc. (MXIM) engages in designing, developing, manufacturing, and marketing various linear and mixed-signal integrated circuits worldwide. The company trades at 25.60 times earnings and yields 3.10%. Over the past decade, the company has managed to raise distributions by 46.60%%/year.
National Health Investors, Inc. (NHI), a real estate investment trust (REIT), invests in health care properties, primarily in the long-term care industry in the United States. The company yields 4.40%. Over the past decade, the company has managed to raise distributions by 5.70%/year.
Westwood Holdings Group, Inc. (WHG) manages investment assets and provides services for its clients. The company trades at 27.80 times earnings and yields 3.80%. Over the past decade, the company has managed to raise distributions by 54.10%/year.
Occidental Petroleum Corporation (OXY) engages in the exploration and production of oil and gas properties in the United States and internationally. The company trades at 16.70 times earnings and yields 2.90%. Over the past decade, the company has managed to raise distributions by 15.30%/year.
Sunoco Logistics Partners L.P. (SXL) engages in the transport, terminalling, and storage of crude oil and refined products in the United States. The MLP yields 3.60%. Over the past decade, the company has managed to raise distributions by 16.90%/year.
Rollins, Inc. (ROL), through its subsidiaries, provides pest and termite control services to residential and commercial customers worldwide. The company trades at 32.10 times earnings and yields 1.50%. Over the past decade, the company has managed to raise distributions by 23.30%/year.
There were several eye-popping ten year dividend growth rates in the new dividend achievers list. This is mostly because these companies are in the first stage of dividend growth, which is characterized by quick dividend acceleration from zero dividend levels. The rest of the companies include turnarounds which have managed to rebuild their long dividend histories, after cutting or freezing distributions. The most important catalyst behind future distributions growth however is whether companies have what it takes to grow earnings over time.
Another odd part on the dividend achievers index is that Lincoln Electric Holdings (LECO) and York Water (YORW) had raised dividends for more than 15 consecutive years. It looks as if the dividend achievers index is not as complete as the list of dividend contenders and champions, which has 304 individual companies.
- Dividend Achievers Additions for 2012
- Dividend Achievers Offer Income Growth and Capital Appreciation Potential
- The New Dividend Achievers of 2010
- 1991 Dividend Achievers additions- Where are they now?
- Why do I like Dividend Achievers
- Carnival of Wealth
Wednesday, March 21, 2012
1) Traded on NYSE, Nasdaq or AMEX
2) US companies with at least ten consecutive years of increasing regular dividends
3) Having a minimum average daily cash volume of US$500,000 per day
I typically screen the list of dividend achievers at least once a month, in order to search for attractively valued dividend stocks to accumulate. With over 200 individual dividend growth stocks comprising the index, I have plenty of companies to sift through in order to find the 20 or 30 that could ultimately find their way in my dividend portfolio. In addition, looking at the list of new dividend achievers additions, might enable me to identify the next big dividend growth story, that will pay rising dividends for the next several decades.
The companies added to the index in 2012 include:
Southern Company (SO), through its subsidiaries, operates as a utility company that provides electric service in the southeastern United States. Yield: 4.30%
Monsanto Company(MON) , together with its subsidiaries, provides agricultural products for farmers in the United States and internationally. Yield: 1.50%
NIKE, Inc. (NKE), together with its subsidiaries, engages in the design, development, marketing, and sale of footwear, apparel, equipment, and accessory products for men, women, and children worldwide. Yield: 1.30%
Norfolk Southern Corporation (NSC), through its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods primarily in the United States. Yield: 2.70% (analysis)
Magellan Midstream Partners, L.P. (MMP), together with its subsidiaries, engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. Yield: 4.60%
W. R. Berkley Corporation (WRB), an insurance holding company, operates as commercial lines writers in the property casualty insurance business primarily in the United States. Yield: 0.90%
Harris Corporation (HRS), together with its subsidiaries, operates as a communications and information technology company that serves government and commercial markets worldwide. Yield: 3%
NuStar Energy L.P. (NS) engages in the terminalling, storage, and transportation of petroleum products primarily in the United States, Canada, the Netherlands, St. Eustatius in the Caribbean, the United Kingdom, and Mexico. Yield: 7.50%
Royal Gold, Inc. (RGLD), together with its subsidiaries, engages in the acquisition and management of precious metal royalties. Yield: 0.90%
Senior Housing Properties Trust (SNH), a real estate investment trust (REIT), primarily invests in senior housing properties in the United States. Yield: 6.80%
Nu Skin Enterprises, Inc. (NUS) develops and distributes anti-aging personal care products and nutritional supplements worldwide. Yield: 1.40%
Inergy, L.P. (NRGY) engages in the retail marketing, sale, and distribution of propane to residential, commercial, industrial, and agricultural customers in the United States. Yield: 17.70%
Delphi Financial Group, Inc. (DFG), a financial services company, together with its subsidiaries, provides specialty insurance and insurance-related services in the United States. Yield: 1.10%
Valmont Industries, Inc. (VMI) produces and sells fabricated metal products, pole and tower structures, and mechanized irrigation systems in the United States and internationally. Yield: 0.60%
Watsco, Inc. (WSO), together with its subsidiaries, distributes air conditioning, heating and refrigeration equipment, and related parts and supplies in the United States. Yield: 3.30%
Sanderson Farms, Inc. (SAFM), an integrated poultry processing company, engages in the production, processing, marketing, and distribution of fresh, frozen, and prepared chicken products in the United States. Yield: 1.30%
1st Source Corporation (SRCE) operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services to individuals and businesses in the United States. Yield: 2.60%
Tompkins Financial Corporation (TMP), through its banking subsidiaries, Tompkins Trust Company, The Bank of Castile, and The Mahopac National Bank, provides banking and financial services to individuals, corporations, and other business clients in New York. Yield: 3.50%
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. Yield: 2.50%
Arrow Financial Corporation (AROW) operates as the holding company for Glens Falls National Bank and Trust Company, and Saratoga National Bank and Trust Company that offer various commercial and consumer banking, and financial products in the United States. Yield: 4.10%
Cass Information Systems, Inc. (CASS) provides payment and information processing services to large manufacturing, distribution, and retail enterprises in the United States. Yield: 1.70%
Connecticut Water Service, Inc. (CTWS), through its subsidiaries, operates as a regulated water company in Connecticut. Yield: 3.30%
The average yield of the new additions is 3.50%. There are a few companies on this list, which I have observed for several years as they have been approaching dividend achiever status. I plan on further researching these new additions by analyzing the historical performance and determining whether there are any competitive advantages that will protect future profits.
Full disclosure: None
Wednesday, January 19, 2011
"The Dividend Achievers Handbook is one of my favorite bedside thrillers. Here's a simple way to succeed in Wall Street: Buy the stocks on Mergent's list and stick with them as long as they stay on the list"
The stocks he mentions in his book, "One Up on Wall Street", is Automatic Data Processing (ADP), which incidentally has kept raising distributions 20 years after his book was published.
In fact some of the best performing stocks on Wall Street over the past decade have been the dividend achievers. Dividend achievers are companies which have increased their distributions for at least ten consecutive years. They provide a superior alternative than investing in fixed income because they provide investors with the opportunity of a rising dividend payment and they could also receiving higher total returns over time as well. The premise is that higher dividends are a direct result of rising earnings, which translates into higher stock prices. When managements boost distributions, this shows what their outlook for the business and the economy really is.
Over the past decade, the broad dividend achievers index has delivered annual total returns of 1.20%, which was better than the flat annual returns realized by the S&P 500.
Currently, there are approximately 212 stocks in the index. The ten largest holdings include:
Exxon Mobil Corporation (XOM) engages in the exploration, production, transportation, and sale of crude oil and natural gas. The company has managed to raise dividends for 28 years in a row.(analysis)
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. The company has managed to raise dividends for 54 years in a row. (analysis)
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company has managed to raise dividends for 48 years in a row. (analysis)
Chevron Corporation (CVX) operates as an integrated energy company worldwide. The company has managed to raise dividends for 23 years in a row. (analysis)
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company has managed to raise dividends for 36 years in a row. (analysis)
AT&T Inc. (T) provides telecommunication products and services to consumers, businesses, and other telecommunication service providers under the AT&T brand worldwide. The company has managed to raise dividends for 27 years in a row. (analysis)
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide.The company has managed to raise dividends for 48 years in a row. (analysis)
PepsiCo, Inc. (PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company has managed to raise dividends for 38 years in a row. (analysis)
There are several funds focusing on the dividend achievers index. One of them is the Powershares Dividend Achievers (PFM), which will normally invest at least 90% of its total assets in dividend paying common stocks that comprise Index. This ETF has an annual expense of 0.60%.
Full Disclosure: Long XOM, PG, JNJ, MCD, WMT, KO, PEP and CVX
Wednesday, September 1, 2010
The dividend achievers index consists of US stocks which have raised their dividends each year for at least a decade. Over the past 20 years, this index has managed to outperform the S&P 500 by half a percentage point annually. The dividend achievers index is a great list of dividend stocks as a start. After applying criteria specific to one’s investment strategy, a manageable list for further research could be easily generated. For busy investors who would rather not have their hands dirty, there are several dividend etfs focusing on the dividend achievers. One such option is the Powershares Dividend Achievers (PFM) ETF. Another option is the Vanguard Dividend Appreciation ETF (VIG).
The index is rebalanced every year by deleting companies which have cut or eliminated distributions as well as the ones that have been acquired. Earlier in 2010 the newest addition to the index were announced:
Altria Group, Inc. (MO), through its subsidiaries, engages in the manufacture and sale of cigarettes, wine, and other tobacco products in the United States and internationally. The stock yields 6.30% and trades at a P/E of 13.60. (analysis)
Atlantic Tele-Network, Inc. (ATNI), through its subsidiaries, provides wireless and wireline telecommunications services in North America and the Caribbean. The stock yields 1.70% and trades at a P/E of 24.
Casey’s General Stores, Inc. (CASY), together with its subsidiaries, operates convenience stores under the Casey’s General Store, HandiMart, and Just Diesel brand names in the Midwestern states. The stock yields 1.00% and trades at a P/E of 16.70.
EOG Resources, Inc.(EOG), together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas and crude oil. The stock yields 0.60% and trades at a P/E of 49.60.
FactSet Research Systems Inc. (FDS) provides financial and economic information on various companies, analytical applications, and client services to the portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers, and fixed income professionals worldwide. The stock yields 1.20% and trades at a P/E of 25.80.
Graco Inc. (GGG), together with its subsidiaries, provides fluid handling solutions to manufacturing, processing, construction, and maintenance sectors worldwide. The stock yields 2.50% and trades at a P/E of 24.30.
Hudson City Bancorp, Inc. (HCBK) operates as the bank holding company for Hudson City Savings Bank that provides a range of retail banking services. The stock yields 4.90% and trades at a P/E of 10.60.
Murphy Oil Corporation (MUR) engages in the exploration and production of oil and gas properties worldwide. The stock yields 1.70% and trades at a P/E of 13.40.
Northeast Utilities ( NU), a public utility holding company, engages in the energy delivery business for residential, commercial, and industrial customers in Connecticut, New Hampshire, and western Massachusetts. The stock yields 3.50% and trades at a P/E of 16.70.
NSTAR (NST), through its subsidiaries, engages in the distribution, transmission, and sale of energy in Massachusetts. The stock yields 4.20% and trades at a P/E of 11.20.
People’s United Financial, Inc. (PBCT) operates as the bank holding company for People’s United Bank that provides commercial banking, retail and small business banking, and wealth management services to individual, corporate, and municipal customers. The stock yields 4.50% and trades at a P/E of 58.60.
Plains All American Pipeline, L.P. (PAA), through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquefied petroleum gas and other natural gas-related petroleum products. The units of this master limited partnership yield 5.90% and trade at a P/E of 23.
PPL Corporation (PPL), through its subsidiaries, generates and markets electricity to approximately 4 million retail, commercial, and industrial customers in the northeastern and western United States and the United Kingdom. The stock yields 5.20% and trades at a P/E of 24.20.
Prosperity Bancshares, Inc. (PRSP) operates as the holding company for Prosperity Bank that provides retail and commercial banking services to small and medium-sized businesses and consumers. The stock yields 1.80% and trades at a P/E of 13.
South Jersey Industries, Inc. (SJI), through its subsidiaries, engages in the purchase, transmission, and sale of natural gas for residential, commercial, and industrial customers. The stock yields 2.70% and trades at a P/E of 24.40.
StanCorp Financial Group, Inc. (SFG), through its subsidiaries, provides group insurance products and services in the United States. The stock yields 2.10% and trades at a P/E of 9.
TC PipeLines, LP (TCLP), together with its subsidiaries, transports natural gas in the United States, eastern Canada, and Mexico. The units of this master limited partnership yield 6.70% and trades at a P/E of 17.20.
Telephone and Data Systems, Inc. (TDS), through its subsidiaries, provides wireless and wireline telecommunications services in the United States. The stock yields 1.30% and trades at a P/E of 21.10.
Before rushing to purchase those stocks however, investors should evaluate the sustainability of the distributions from each individual company first. In reality, few of the companies added to the index in 2010 would be part of it 20 years from now. When I examined the 1991 Dividend Achievers additions, I noticed an interesting trend. Of the 20 additions for 1991 only 2 remained in the index 19 years later. On average the expectation is that a company would keep raising distributions for ten years after being admitted in. Check the research and the findings here.
The new additions list is also heavy on utilities, energy companies and financials, with the exception of Altria (MO), Graco Inc. (GGG) and Casey’s General Stores, Inc. (CASY).
Full Disclosure: Long MO
This article was included in the Carnival of Personal Finance #274: I Love NY Edition
Wednesday, August 25, 2010
I was recently able to find the 1991 Dividend Achiever’s list. I checked the new additions for 1991 in order to investigate what happened to the companies after they have been added to the index. There were some limitations to the research, since companies changed their names, or were acquired, which made it difficult to track them down since current stock databases might not have freely available information on them. The companies which were added to the index in 1991 include:
First Empire State Corp later changed its name to M&T Bank (MTB). M&T Bank Corporation operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. The company stopped raising dividends in 2008 and was deleted from the index in 2009. The yield on cost today of a December 1990 investment in the stock would be 51.10%. One dollar invested in 1991 would be worth 13.30 dollars today. (analysis)
American General (AGC), which was acquired by American International Group (AIG) in 2001. The company had increased dividends up until the merger was finalized.
Rouse Co (ROUS) was acquired by General Growth Properties in 2004. The company had increased dividends up until the merger was finalized.
Bank South Corp (BKSO) was acquired by Bank of America (BAC) in 1996. The company suspended its dividends July 1991, after suffering from large losses. The dividend was reinstated in 1993.
Pall Corporation (PLL) manufactures and markets filtration, purification, and separation products and integrated systems solutions worldwide. Pall Corp (PLL) stopped raising dividends in 2002 and then cut distributions by almost 50%. The yield on cost today of an early 1991 investment in the stock would be 4%. One dollar invested in December 1990 would be worth 3.29 dollars today.
State Street Corporation (STT), through its subsidiaries, provides various products and services for the institutional investors worldwide. The company cut its dividend payment in 2009 to 1 cent/share, from 24 cents/share. The yield on cost had reached 24.70% by 2008; after the cut it went down to 1%. One dollar invested in December 1990 would be worth 12.68 dollars today. (analysis)
Crawford & Company (CRD-B) provides claims management solutions to insurance companies and self-insured entities worldwide. The company cut dividends in 2002 and eliminated the dividend payment in 2006. One dollar invested in December 1990 would be worth 64.40 cents today.
Wrigley Wm Jr (WWY) was acquired in 2008. The company had increased dividends up until the merger was finalized. Berkshire Hathaway (BRK.B) provided financing for the acquition.
Black Hills Corporation (BKH), together with its subsidiaries, operates as a diversified energy company. It operates through two groups, Utilities and Non-regulated Energy. The company is still a member of the dividend achievers index. The yield on cost today of a December 1990 investment in the stock would be 17.10%. One dollar invested in December 1990 would be worth 10.92 dollars today.
Central Fidelity Banks (CFBS) was acquired by Wachovia (WB) in 1997. The company had increased dividends up until the merger was finalized.
American Precision Industries (APR) was acquired by Danaher (DHR) in 2001. The company was deleted from the index in 1997 after it failed to increase dividends.
The Laclede Group, Inc. (LG) operates as a public utility holding company providing natural gas service to approximately 630,000 users in St. Louis. The company failed to increase its dividend in 1992, just one year after being admitted in the index. The yield on cost today of a December 1990 investment in the stock would be 10.50%. One dollar invested in December 1990 would be worth 6.48 dollars today.
KeyCorp (KEY) operates as a holding company for KeyBank National Association that provides various banking services in the United States. The company cut dividends in 2008, amidst the worst financial crisis since the Great Depression. The yield on cost had reached 27.10% by 2008; after the cut it went down to 0.70%. One dollar invested in December 1990 would be worth 3.32 dollars today.
Boatmen’s Bancshares (BOAT) was acquired in 1996 by Bank of America (BAC). The company had increased dividends up to the merger was finalized.
St. Joseph Light & Power (SAJ) was acquired by Utilicorp (UCU) in 1999. The company had increased dividends up to the merger was finalized.
CLARCOR Inc. (CLC) provides filtration products and services to customers worldwide. It operates in three segments, including Engine/Mobile Filtration, Industrial/Environmental Filtration, and Packaging. The yield on cost today of a December 1990 investment in the stock would be 10.80%. One dollar invested in December 1990 would be worth 15.70 dollars today.
OGE Energy Corp.(OGE) , together with its subsidiaries, operates as an energy and energy services provider offering physical delivery and related services for electricity and natural gas primarily in the south central United States. The company failed to increase distributions in 1992, just one year after being admitted in the dividend achievers index. The Oklahoma Gas & Electric utility didn’t start raising dividends again until 2007. The yield on cost today of a December 1990 investment in the stock would be 13.50%. One dollar invested in December 1990 would be worth 15.00 dollars today.
Source Capital, Inc. (SOR) is a close-ended equity fund launched and managed by First Pacific Advisors, LLC. The fund invests in the public equity markets of the United States. The yield on cost today of a December 1990 investment in the stock would be 6.60%. One dollar invested in December 1990 would be worth 6.50 dollars today. The company failed to increase dividends in 1991.
IE Industries was acquired in 1997 by WPL. The company had increased dividends up until the merger was finalized.
Colonial Gas was acquired in 1999. The company had increased dividends up until the merger was finalized.
The results of the 1991 additions are really stunning. Out of 20 companies that were added to the dividend achievers index only 2 are still its members - CLARCOR Inc. (CLC) and Black Hills Corporation (BKH). However, half of those additions became takeover targets. Of those ten acquired companies, only two stopped paying distributions before they were acquired. Five companies eventually cut distributions – State Street (STT), Key Corp (KEY), Source Capital, Inc. (SOR), Crawford & Company (CRD-B) and Pall Corporation (PLL). The remaining companies either maintained distributions or raised them sporadically over the next 19 years. Stay tuned for my article next week, when I will discuss how to profitably exploit the findings of this research.
Full Disclosure: Long MTB
- Dividend growth stocks are attractive buyout targets
- Where are the original Dividend Aristocrats now?
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Friday, May 28, 2010
Over the past decade this dividend stock has delivered an annual average total return of 10.30% to its shareholders.
At the same time company has managed to deliver a 3.10% average annual increase in its EPS since 2000. The increase in prices of crude oil and natural gas definitely helped with earnings. The rapid fall of energy prices in late 2008 and early 2009 and weak global demand led to a 55% decrease in earnings per share in 2009 to $5.24. For fiscal year 2010 analysts expect earnings to increase by 53% to $8/share. Analysts also expect earnings per share to rise 25% from there to $10/share by FY 2011.
Monday, May 3, 2010
United Technologies is a major component of the S&P 500 and Dow Industrials indexes. The company is also a dividend achiever, which has been consistently increasing its dividends for 16 consecutive years.
Over the past decade this dividend stock has delivered an annual average total return of 9.70% to its shareholders.
At the same time company has managed to deliver a 9.80% average annual increase in its EPS since 2000. Analysts are expecting an increase in overall earnings per share in 2010 to $4.60 and $5.30 in 2011.
The company is operating under 6 divisions, each of which provides different types of products or services. Its businesses include Carrier heating, air-conditioning and refrigeration solutions; Hamilton Sundstrand aerospace and industrial systems; Otis elevators and escalators; Pratt & Whitney engines; Sikorsky helicopters; and UTC Fire & Security systems. The company also operates a central research organization that pursues technologies for improving the performance, energy efficiency and cost of UTC products and processes.
United Technolgies is well positioned to ride any major megatrends such as emerging markets growth and demand for clean energy solutions and would also be positioned well for economic rebound due to its diverse offerings. One of its divisions, Hamilton Sundstrand, has been involved in the Boeing’s 787 Dreamliner project, by delivering nine systems that contributed to the successful first flight of the airplane.
The return on equity has remained largely between a low of 20% in 2005 and a high of 25% in 2008.
Annual dividends have increased by an average of 15.80% annually since 2000, which is much higher than the growth in EPS.A 15 % growth in dividends translates into the dividend payment doubling almost every five years. Since 1970 United Technologies has actually managed to double its dividend payment almost every eight years on average.
The dividend payout had largely remained below 30% over the past decade. In 2009 there was a spike in this ratio to 38% due to the impact of the recession on earnings per share and the 10.40% dividend increase last year. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
United Technologies is currently attractively valued. The stock trades at a P/E of 18, yields 2.30% and has an adequately covered dividend payment. I would be a buyer of UTX on dips below $68.
Full Disclosure: Long UTX
- Four notable dividend increases
- Best Dividends Stocks for the Long Run
- United Technologies (UTX) Dividend Stock Analysis
- Estimating future Dividend Growth
Monday, April 26, 2010
Over the past decade this dividend stock has delivered a total return of 16.70% per annum to its shareholders.
As a Real Estate Investment trust, the company has to distribute almost all of its net income to shareholders. An important metric for evaluating REITs is Funds from operations (FFO). Over the past decade FFO has increased by 1.10% on average. Future growth in funds from operations could come from acquisitions or increase in rents. Universal Health Realty Income Trust earns bonus rents from the subsidiaries of UHS, which are based on the excess over base amounts revenue that these facilities generate. There were no acquisitions in 2009, although the company did make a few acquisitions in 2010 and 2008.
Over the past decade distributions have increased by 2.90% per annum, which was higher than the growth in FFO. A 3% annual growth in distributions translates into dividends doubling every 24 years. In 2009 the company raised quarterly distributions by 1.70%. Dividends of $2.38 per share were declared and paid during 2009, of which $1.94 per share was ordinary income and $.44 per share was a return of capital distribution.
As a Real Estate Investment trust HCP, Inc. must make distributions to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains. The FFO payout ratio is at 85%, which was the first decrease in this indicator since 2004. Overall the FFO payout has increased from 72% in 2000 to 85%, which was due to distributions growing faster than funds from operations. A lower FFO payout is preferable, as it minimizes the effect of short term fluctuations in rental incomes on the distribution rate.
Overall I find UHT Inc an attractive company for investment, with a business model that generates stable income streams in the healthcare field. I like the low Price/FFO ratio of 13, which is in the low range when compared to the past five years. This REIT yields 6.80% and has an adequately covered dividend.
Full Disclosure: Long UHT
Wednesday, March 3, 2010
After my post when to break your rules, some readers asked me whether it is reasonable to enter into a dividend investment, which has not raised dividends for more than 10 years in row.
The truth is that dividend investing should require intense scrutinizing of companies, in order to find the best stocks for ones portfolio. Otherwise, investors could end up getting whipsawed in and out of stocks, which would increase trading costs and would make them less likely to reach their goals. The reason behind requiring at least a decade of consistent dividend growth is to weed out all companies which are inconsistent in their dividend policies. Few companies which raise distributions for less than a decade end up on the dividend achievers list. In fact of the total universe of 10,000 US publicly traded stocks, less than 300 are included in the achievers list.
The best dividend stocks are typically characterized by having a strong durable competitive advantage, which allows them to grow earnings and increase dividends on an annual basis. A company which raised dividends for only a few years could have achieved that because it simply got lucky by being at the right place at the right economic cycle. Once the economic expansion or trend which boosted the company’s profitability ends, the company’s earnings would stop growing or worse could start declining. This is another major reason to avoid dividend growers with less than a decade of distribution raises.
That being said I do have several stocks on my watch list, which I would be happy to consider for inclusion in my dividend portfolio once the following characteristics are met:
1) Raising dividends for at least 10 consecutive years
2) Trading at no more than 20 times earnings
3) Having an adequately covered dividend payout ratio (or for REITs and MLPs a distribution payout ratio which is consistent with the ratio of the past few years)
4) Yielding at least 3%
The companies which one day could become dividend achievers that I am watching include:
Kellogg Company (K), together with its subsidiaries, engages in the manufacture and marketing of ready-to-eat cereal and convenience foods. Kellogg Company is a former dividend aristocrat, which has fought back to regain its status of a dividend growth stock since 2005. The stock currently yields 3.10%
General Mills (GIS) engages in the manufacture and marketing of branded consumer foods worldwide. General Mills has increased its quarterly dividend in each of the past six consecutive years. The stock currently yields 2.80%.
Microsoft (MSFT) provides software and hardware products and solutions worldwide. Although the company has raised its annual dividend since 2003, over the past quarters the dividend has been flat.
Kraft Foods Inc. (KFT), together with its subsidiaries, manufactures and markets packaged food products and grocery products worldwide. The company has consistently raised dividends since it went public in 2001. In early September 2009 the company announced that it has would leave its current dividend payment of $0.29/share unchanged for the fifth consecutive quarter.
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Full Disclosure: None
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- Kraft Foods freezes dividends
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Wednesday, May 27, 2009
An investor who diversified their holdings across several sectors, shouldn’t have gotten as many dividend cuts in 2008 and 2009, in comparison to an investor whose portfolio was concentrated in certain high-yielding sectors such as financials, Canadian income trusts or business development corporations. In that case diversification mattered.
One troubling fact however is that most of the successful dividend growth stocks that I tend to focus on such as Coca Cola (KO), Johnson & Johnson (JNJ) and Abbott Labs (ABT) are large cap stocks. This could be both good and bad for my portfolio. Most dividend growth stocks have solid competitive advantages as well as large economies of scale, against which few competitors could compete. In addition to that the entry in those markets might be too costly for a smaller producer to challenge the “big guys”. However if I added small or mid cap stocks to my portfolio, my dividend income could be diversified even further.
According to Investopedia, Large Cap stocks are those whose market capitalization is above $10 billions dollars; Mid Cap stocks are those whose market capitalization is between $2 billion and $10 billion dollars while companies whose market capitalization is between $200 million and $2 billion typically represent Small Cap Stocks.
Most large cap companies are the ones, which are mature and stable cash flow generators, which throw off enough cash to expand, reward shareholders and maintain liquidity. It would be difficult for a company with $100 billion in sales to expand at the rate that a company with $1 billion in sales could. Because of this fact stable dividend growth stocks tend to enjoy a lower price earnings multiple. In comparison, most small and mid cap stocks could spend most of their earnings to reinvest back into the business, thus paying little or no dividends to shareholders in the process.
A potential negative for holding the large cap market leader in any industry however is that if the activity in the whole sector declines significantly, chances are that the leader would feel the pinch as well. Despite the fact that the market leader could likely gain market share if competitors go bankrupt or by acquiring weaker rivals, a broad slowdown could hurt it badly.
At the same time a smaller competitor could be flexible enough to gain market share by utilizing some sort of a competitive advantage and actually achieve superior earnings growth and reward dividend investors with higher distributions as its sales skyrocket. Smaller dividend growth companies could have a higher price earnings multiple as the market prices in solid future growth. On the other hand, if earnings growth slows down, the price earnings multiple could shrink, leaving investors with large unrealized losses.
Even if you pick a promising small or mid cap dividend growth stock, chances are it could get acquired by one of the leaders in the industry. Thus, investors won’t be able to fully realize the full growth potential of the small dividend stock. Although shareholders could generate a large capital gain in the process, they would have to find a new promising candidate for their money instead of patiently reinvesting their dividends.
According to Mergent’s, 80% of the constituents of the Broad US Dividend Achievers index are large cap companies, while 14.10% and 5.90% are mid cap and small cap stocks respectively. The Dividend Achievers are corporations, which have increased annual dividends for at least the past 10 consecutive years.
The Dividend Aristocrats, which are S&P 500 constituent stocks with history of increased dividends of more than 25 consecutive years, must have a minimum capitalization of $3 billion dollars before they are eligible to join the elite dividend index. Of the 43 companies presently in the index (after omitting the dividend cutters year-to-date and Rohm & Haas, acquired by Dow Chemical), 21 or almost half have market capitalizations of less than $10 billion dollars.
You could find a list of mid cap Dividend Aristocrats below:
Link to the table
Just remember that not all of the stocks presented below are investment recommendations. At this moment only Stanley works (SWK),Cincinnati Financial (CINF), Dover (DOV), VF Corp(VFC), Sherwin Williams (SHW), Clorox (CLX), Consolidated Edison (ED) and McGraw Hill (MHP) fit my entry criteria to initiate positions or re-invest dividends.
For a full list of the current dividend aristocrats ranked by market capitalization (minus any acquired companies and minus any dividend cutters in 2009), check the chart below:
Link to the table
Full Disclosure: Long CINF, FDO, MTB, GWW, SHW, CLX, ED, MHP, APD, AFL, ADM, ADP, KMB, EMR, MMM, MCD, PEP, KO, JNJ, PG, WMT
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This post was featured on The 208th Carnival of Personal Finance: Lobster Roll Edition
- My Dividend Growth Plan - Diversification
- Why do I like Dividend Achievers
- Why do I like Dividend Aristocrats?
- My Dividend Growth Plan - Stock Selection
Monday, May 19, 2008
U.S. publicly traded of dividend paying companies that meet the "Dividend Achievers" requirements. To become eligible for inclusion in the Index, a company must be incorporated
in the United States or its territories, trade on the NYSE, NASDAQ or AMEX, and have increased its annual regular dividend payments for the last ten or more consecutive years. In addition, Mergent requires that a stock's average daily cash volume exceed $500,000 per day in Nov. and Dec. prior to reconsitution."
- Dividend Champions Watchlist
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