Showing posts with label dividend increase. Show all posts
Showing posts with label dividend increase. Show all posts

Monday, July 21, 2014

Five Dividend Machines With Growing Distributions

As part of my process of monitoring my proprietary list of dividend growth stocks, I monitor dividend increases regularly. This allows me to document any dividend increases for companies I own, by focusing on amount and frequency of the hike relative to past history and my expectations. This exercise also allows me to take note of any companies which have above average dividend growth potential. It is much easier to isolate companies that have certain behaviors such as high dividend growth, when they actually exemplify those behaviors, in comparison to a process where companies are screened for. Once a company with a certain set of characteristics is identified through the list of dividend increases, it is placed on the list for further research.

A few companies that raised dividends in the past week include:

Omega Healthcare Investors, Inc. (OHI) is a real estate investment firm. Omega Healthcare Investors increased quarterly dividend to 51 cents/share for an 8.50% increase over the distribution in the same time last year. This marked the 12th consecutive annual dividend increase for this dividend achiever. Omega Healthcare Investors has a five year dividend growth rate of 9.30%/year. This real estate investment trust (REIT) currently yields 5.40%. Check my analysis of Omega Healthcare Investors.

Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. Kinder Morgan Energy Partners increased quarterly distributions to $1.39/unit, for a 5.30% increase over the distribution in the same time last year. This master limited partnership has increased distributions to unitholders for 18 years in a row. Kinder Morgan Energy Partners has a ten year distribution growth rate of 7.40%/year. This MLP currently yields 6.70%.Check my analysis of Kinder Morgan.

Kinder Morgan, Inc. (KMI) operates as a midstream and energy company in North America, and is the general partner behind Kinder Morgan Energy Partners and El Paso Pipeline Partners. Kinder Morgan increased quarterly dividend to 43 cents/share. Kinder Morgan has managed to boost quarterly payouts by 43%, since going public in 2011. In comparison, the limited partnership has raised distributions by 20.90% over the same time period. I really like the fact that the owner of Kinder Morgan has almost all of his net worth in the company's stock, and limited partnership units. I enjoy being a part owner in enterprises, where management has skin in the game. The company currently yields 4.70%.

The J. M. Smucker Company (SJM) manufactures and markets branded food products worldwide. J. M. Smucker increased quarterly dividend by 10.30% to 64 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Over the past decade, J.M. Smicker has managed to increase annual dividends by 9.50%/year. The company sells at 17.50 times forward earnings and yields 2.40%. I would consider initiating a position in the stock on dips below $102. Check my analysis of J.M. Smucker.

National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust. National Retail Properties increased quarterly dividend by 3.70% to 42 cents/share. This marked the 25th consecutive annual dividend increase for this dividend champion. National Retail Properties has a ten year dividend growth rate of only 2.30%/year. This REIT currently yields 4.50%.

Full Disclosure: Long OHI, KMR, KMI

Relevant Articles:

How to read my weekly dividend increase reports
Richard Kinder: The Warren Buffett of Energy
I admire Investors with Skin in the Game
Types of dividend growth stocks
Why am I obsessed with dividend growth stocks?

Monday, July 14, 2014

ConocoPhillips Rewards Long-Term Investors with consistent dividend increases

ConocoPhillips (COP) explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. Over the past week, the company’s board of directors approved a 5.80% increase in the quarterly dividend to 73 cents/share. After this increase, this dividend achiever has managed to boost cash payouts to its patient long-term investors for a cool 14 years in a row. This was the second dividend increase after the spin-off of Phillips66. The first increase was by 4.50%  to 69 cents/share in 2013.

When I last analyzed ConocoPhillips, I really liked what I saw. I have been adding to the stock for the past two years. I really like the fact that the company trying to deliver value to shareholders by focusing on projects with the best potential for return on capital, in order to deliver an annual growth in production between 3 – 5 % per year. As a result of the company’s ongoing portfolio optimization and effort to increase returns on capital, the company has been able to deliver results to shareholders. One of the company’s stated objectives of delivering a return to shareholders has been through regular dividend increases.

In fact, after the dividend increase was announced, the company’s CEO was quoted in the press release, stating that “A compelling dividend remains a top priority for our company and reflects our commitment to deliver competitive shareholder returns”.

One of the biggest misconceptions about ConocoPhillips is that the company didn't increase dividends in 2012. To the inexperienced investor, who doesn't dig deeper into the data, it looks like the company maintained the dividend at 66 cents/share between 2011 and 2013. The reality is that the dividend investor from early 2012 owned one share of COP that paid them 66 cents/share. This dividend investor received half a share of Phillips 66 (PSX) in the middle of 2012, after the company was spun off, that paid them 20 cents/share initially. In addition, they still held on to their original share of ConocoPhillips, which paid 66 cents/share. So as a result, the investor was left with a share of the new ConocoPhillips (COP), and the half share in Phillips 66 (PSX). The new ConocoPhillips company owned only the exploration and production portion of the old ConocoPhillips, but it still paid the same dividend amount as if it was the larger predecessor company. The first quarter after the spin-off, the shareholder received 66 cents from ConocoPhillips shares and 10 cents from their half share of Phillips 66. Subsequently, Phillips 66 dividend has been increased to 50 cents/share. Phillips 66 ended up with the Refining and Marketing assets from the original ConocoPhillips company from pre-2012. Those include Refineries in the US, as well as pipelines and terminals across the US. Contrary to popular opinion, the gas stations that you see in the US, that have the name ConocoPhillips or Phillips 66 are not owned by either company. Those have been sold out almost a decade ago, in an effort for the legacy ConocoPhillips to focus on its core competencies.

This is why you need to hold on to your spin-offs, and not sell them. Investors who fixate on having a certain number of companies in their portfolios might end up selling companies like Phillips 66, because they are arguing that they have too many companies in their portfolios to monitor. In my experience, selling a spin-off is usually a mistake. My experience includes Phillip Morris separating into Altria (MO), Phillip Morris International (PM) and Kraft, and the subsequent split of Kraft into Mondelez (MDLZ) and Kraft (KRFT). It also includes the split of Abbott into Abbott (ABT) and Abbvie (ABBV). I hold on to those positions, because the research I have read indicates that this has been the smart thing to do in the past. I initiated a position in ConocoPhillips after the spin-off however, which is why I don't own any Phillips 66.

I believe that this is a great company to buy and then hold on for many decades, while receiving higher dividends over time, that eventually surpass the cost basis of the stock.Unfortunately, I believe that shares have gone up quicker than I anticipated. Depending on other opportunities available for my capital, I would not be opposed to further building out my position in ConocoPhillips. It would be nice if I can add to my position at a starter yield of 4% or forward P/E of around 11.

What is your opinion on the company and the shares?

Full disclosure: Long COP, MO, PM, KRFT, MDLZ, ABBV, ABT

Relevant Articles:

Four Practical Dividend Ideas for my SEP IRA
ConocoPhillips (COP) Dividend Stock Analysis 2014
Why Investors Should Look Beyond Typical Dividend Growth Screens
How to Generate Energy Dividends Despite the Peak Oil Nonsense
Six Slow & Steady Dividend Achievers Boosting Distributions

Monday, June 16, 2014

Ten Dividend Increases For Further Review

As a dividend growth investor, I spend several hours per week screening for attractive candidates for my portfolio and then researching them in detail. I believe in fundamental analysis first and foremost. I look for stability and stimulants for growth in earnings that can deliver strong dividend growth and stock price gains in the future. I also believe in regular monitoring of dividend growth stocks, in order to check how companies I own are doing. One aspect of monitoring involves checking for any recent dividend increases for every company in the US. That way I can not only monitor my holdings, but also find out about prospective dividend growth stocks at the start of their potential long journeys to stardom.

Over the past week, there were several dividend growth stocks that announced their intent to increase distributions to shareholders. I only included those that have managed to increase dividends for at least one
decade. The companies include:

Target Corporation (TGT) operates general merchandise stores in the United States and Canada. The company raised its quarterly dividends by 20.90% to 52 cents/share. This dividend champion has increased dividends for 47 years in a row. In the past decade, the company has managed to increase dividends by 19.80%/year. The stock is attractively valued at 15.50 times forward earnings and a current yield of 3.60%. Despite headwinds that the company has faced in the past year, I find the stock to be attractively valued, and I have been adding to my exposure several times so far this year. Check my analysis of Target.

Casey’s General Stores, Inc. (CASY), operates convenience stores in 14 Midwestern states, primarily Iowa, Missouri, and Illinois. The company raised its quarterly dividends by 11.10% to 20 cents/share. This dividend achiever has increased dividends for 15 years in a row. In the past decade, the company has managed to increase dividends by 19.10%/year. The stock is attractively valued at 20.10 times forward earnings and a current yield of 1.10%. Check my analysis of Casey’s General Stores.

Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company raised its quarterly dividends by 16.70% to 70 cents/share. This dividend achiever has increased dividends for 21 years in a row. In the past decade, the company has managed to increase dividends by 12.70%/year. The stock is attractively valued at 17.20 times earnings and a current yield of 2.60%. Check my analysis of Caterpillar.

Universal Health Realty Income Trust (UHT) is a real estate investment trust, that invests in healthcare and human service related facilities. The company raised its quarterly dividends by 0.80% to 63 cents/share. This dividend champion has increased dividends for 28 years in a row. In the past decade, the company has managed to increase dividends by 2.40%/year. This REIT currently yields 5.85%. I sold my stake in the company last year, given the anemic dividend growth of the past and do not plan on initiating a position again.

C. R. Bard, Inc. (BCR) designs, manufactures, packages, distributes, and sells medical, surgical, diagnostic, and patient care devices worldwide. The company raised its quarterly dividends by 4.80% to 22 cents/share. This dividend champion has increased dividends for 43 years in a row. The stock is attractively valued at 16.60 times earnings and a current yield of 0.60%. In the past decade, the company has managed to increase dividends by 6.20%/year. Ordinarily given the low yield and low dividend growth, I will take a pass at this time. However, there is something about C.R. Bard’s relentless increase in earnings per share that makes me really want to add the stock to my list for further research.

National Fuel Gas Company (NFG) operates as a diversified energy company in the United States. The company raised its quarterly dividends by 2.70% to 38.50 cents/share. This dividend champion has increased dividends for 44 years in a row. In the past decade, the company has managed to increase dividends by 3.40%/year. The stock is overvalued at 21.50 times forward earnings and a current yield of 2.10%. Given the low growth, I would take a pass on it for the time being.

Oil-Dri Corporation of America (ODC) mines, develops, manufactures, and markets sorbent products in the United States and internationally. The company raised its quarterly dividends by 5.30% to 20 cents/share. This dividend achiever has increased dividends for 12 years in a row. In the past decade, the company has managed to increase dividends by 9.60%/year. The stock is attractively valued at 16.40 times forward earnings and a current yield of 2.70%. I would add it to my list for further research.

Essex Property Trust, Inc. (ESS) is a real estate investment trust in the United States that engages in the ownership, operation, management, acquisition, development, and redevelopment of apartment communities, as well as commercial properties. The company raised its quarterly dividends by 7.40% to $1.30/share. This dividend achiever has increased dividends for 20 years in a row. In the past decade, the company has managed to increase dividends by 4.30%/year. This REIT yields 2.90% today, which I believe to be low for a pass-through entity these days.

Best Buy Co., Inc. (BBY) operates as a multi-national, multi-channel retailer of technology products in the United States, Canada, China, and Mexico. The company raised its quarterly dividends by 11.80% to 19 cents/share. This dividend achiever has increased dividends for 12 years in a row. In the past decade, the company has managed to increase dividends by 13%/year. The stock is attractively valued at 12.60 times forward earnings and a current yield of 2.60%. I need to add Best Buy on my list for further research.

FedEx Corporation (FDX) provides transportation, e-commerce, and business services in the United States and internationally. The company raised its quarterly dividends by 33.30% to 20 cents/share. This dividend achiever has increased dividends for 12 years in a row. In the past decade, the company has managed to increase dividends by 10.70%/year. The stock is overvalued at 21 times forward earnings and a current yield of 0.60%. I would add it on my list for further research.

Full Disclosure: Long TGT, CASY

Relevant Articles:

How long does it take to manage a dividend portfolio?
Buy and Hold means Buy and Monitor
Dividend Champions - The Best List for Dividend Investors
Dividend Achievers Offer Income Growth and Capital Appreciation Potential
How to read my weekly dividend increase reports

Monday, May 19, 2014

Clorox (CLX) Delivers a Disappointing Dividend Increase

The Clorox Company (CLX) manufactures and markets consumer and professional products worldwide. Last week, the company increased quarterly dividends by 4.20% to 74 cents/share. This marked the 37 consecutive annual dividend increase for this dividend champion. It was a disappointing increase however, which is much lower than what I am expecting. This is also the slowest dividend increase since 2006, when dividends were raised by 3.60% to 29 cents/share.

I still like the company, and would continue holding onto the stock I own, based on my original analysis of Clorox. However, I would not be adding to the company in the near future, because the annual dividend growth is lower than my 6% annual dividend growth target. In addition, the stock is trading at the top of my acceptable valuation range of 20 times earnings, although the yield at 3.20% is pretty decent, and sustainable for the time being. The company earned $4.32/share in 2013, and is expected to earn $4.33/share in 2014 and $4.50/share in 2015.

I also do not like the fact that revenues have increased from $4.324 billion in 2004 to $5.623 billion in 2013, but total net income went from 549 million to 572 million. Earnings per share went from $2.56 in 2004 to $4.30 in 2013, mainly due to massive share buybacks in 2005 and 2006. Those share buybacks resulted in negative book values per share, which are scaring novice investors. Many investors are thrown off from the supposed high debt levels for Clorox, but I am not seeing any reason for worry. The company could easily pay off all of its long-term debt within less than 3 – 4 years based off its free cash flow. Of course, in the current low yield environment, the incentive is to lock in those ridiculously low rates, not repay debt with cash that can deliver higher value to shareholders or by reinvesting in the business.

The chart below teaches one important lesson for dividend growth investors. The lesson is that dividend growth rates can fluctuate over time, and are not going to be consistent every single year. It is important to understand this, in order to avoid having unreasonable expectations. It is also important to note that one should not panic and sell, because of one or two years where the dividend is not increased fast enough. Year over year dividend growth can be lumpy, yet the ten year average growth could turn out to positively surprise investors. There were nine quarters between 2000 and 2002 and six quarters between 2003 and 2004, where dividend payments were unchanged. Despite this, annual dividend payments still increased every year during that period. However, investors who panicked and sold because they didn’t like the freeze missed out on a dividend that almost tripled.

Decl Date
Qtrly Dividends
Increase %
05/12/14
0.74
4.23%
05/12/13
0.71
10.94%
05/14/12
0.64
6.67%
05/18/11
0.6
9.09%
05/19/10
0.55
10.00%
06/11/09
0.5
8.70%
05/14/08
0.46
15.00%
05/24/07
0.4
29.03%
11/15/06
0.31
6.90%
11/16/05
0.29
3.57%
11/17/04
0.28
3.70%
07/16/03
0.27
22.73%
07/16/02
0.22
4.76%
07/19/00
0.21
5.00%
07/20/99
0.2
11.11%
07/14/98
0.18
12.50%
07/16/97
0.16
10.34%
07/17/96
0.145
9.43%
07/19/95
0.1325
10.42%
07/19/94
0.12
6.67%
03/19/93
0.1125
7.14%
04/16/92
0.105
7.69%
04/19/91
0.0975
8.33%
04/20/90
0.09
16.13%
04/21/89
0.0775
19.23%
03/18/88
0.065
18.18%
04/21/87
0.055
15.79%
04/18/86
0.0475
11.76%
04/29/85
0.0425
13.33%
04/30/84
0.0375
15.38%


Full Disclosure: Long CLX

Relevant Articles:

Clorox Company (CLX) Dividend Stock Analysis
Dividend Champions - The Best List for Dividend Investors
Should you sell after a dividend freeze?
When to sell your dividend stocks?
How to read my weekly dividend increase reports

Monday, May 5, 2014

Twelve Predictable Dividend Growth Stocks Raising Dividends

As part of my dividend monitoring process, I review the list of dividend increases every single week. This helps me check if any of my dividend payers have hiked distributions, and also the see other potential dividend growers for further research. This definitely helps me in my quest to find companies that have predictable earnings, which translate into a predictable rising stream of dividend payments over time. By taking a long-term approach to investing, I am only focusing my attention on those companies that have above average chances of delivering dividend growth for the next 15 – 20 years.

I tried to narrow list by excluding companies that yielded less than 2%, and which have managed to grow dividends by less than 3%/year.

Chevron Corporation (CVX), through its subsidiaries, is engaged in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company raised its quarterly distributions by 7% to $1.07 /share. This dividend champion has raised distributions for 27 years in a row, and has a ten year distribution growth rate of 10.60%/year. Currently, Chevron sells for 11.20 times earnings and yields 3.40%. While I find the company attractively valued right now, I am overweight there, which is why any additions by me would be unlikely. Check my analysis of Chevron.

Exxon Mobil Corporation (XOM) explores and produces for crude oil and natural gas. The company raised its quarterly distributions by 9.50% to 63 cents/share. This dividend champion has raised distributions for 32 years in a row, and has a ten year distribution growth rate of 9.60%/year. Currently, Exxon Mobil sells for 13.80 times earnings and yields 2.70%. While I find Exxon-Mobil to be attractively valued today, I believe that other oil majors like Chevron are better values right now. Check my analysis of Exxon-Mobil.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. The company raised its quarterly distributions by 11.50% to 58 cents /share. This dividend achiever has raised distributions for 10 years in a row, and has a five year distribution growth rate of 24.90%/year. Currently, Ameriprise Financial sells for 17.40 times earnings and yields 2.10%. I would consider adding to the stock on dips below $93. Check my analysis of Ameriprise Financial.

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. The company raised its quarterly distributions by 15.80% to $1.10 /share. This dividend achiever has raised distributions for 19 years in a row, and has a ten year distribution growth rate of 19.40%/year. Currently, IBM sells for 13.10 times earnings and yields 2.20%. I would consider adding to the stock on dips below $176. Check my analysis of IBM.

Alliance Holdings GP, L.P. (AHGP), through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. This MLP raised distributions to 84.75 cents/unit, which is an 11.20% raise over the same rate from this time last year. This general partner has raised distributions for 9 years in a row, and has a five year distribution growth rate of 18.60%/year. Currently, Alliance Holdings GP yields 5.20%. I would add it to my list for further research.

Alliance Resource Partners, L.P. (ARLP) is engaged in the production and marketing of coal primarily to utilities and industrial users in the United States. This master limited partnership raised quarterly distributions to $1.2225/unit, which is an 8.20% raise over the same rate from this time last year. This dividend achiever has raised distributions for 12 years in a row, and has a ten year distribution growth rate of 15.80%/year. Currently, Alliance Resource Partners yields 5.30%. I would add it to my list for further research.

DCP Midstream Partners, LP (DPM), together with its subsidiaries, owns, operates, acquires, and develops a diversified portfolio of midstream energy assets in the United States. This MLP raised distributions to 75.50 cents/unit, which is a 7.80% raise over the same rate from this time last year. This master limited partnership has raised distributions for 8 years in a row, and has a five year distribution growth rate of 3.60%/year. Currently, DCP Midstream Partners yields 5.60%. I would add it to my list for further research.

Energy Transfer Equity, L.P. (ETE), through its subsidiaries, provides diversified energy-related services in the Unites States. This MLP raised distributions to 35.875 cents/unit, which is an 11.20% raise over the same rate from this time last year. This general partner has raised distributions for 9 years in a row, and has a five year distribution growth rate of 6%/year. Currently, Energy Transfer Equity yields just 3.10%, which is rather low for a master limited partnership. I would add it to my list for further research.

AmeriGas Partners, L.P. (APU) operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. This MLP raised distributions by 4.80% 88 cents/unit. This master limited partnership has raised distributions for 10 years in a row, and has a ten year distribution growth rate of 4.20%/year. Currently, AmeriGas Partners yields 7.60%. I would add it to my list for further research.

American Water Works Company, Inc. (AWK), through its subsidiaries, provides water and wastewater services in the United States and Canada. The company raised its quarterly distributions by 10.70% to 31 cents /share. This dividend payers has raised distributions for 7 years in a row, and has a five year distribution growth rate of 22.20%/year. Currently, American Water Works sells for 19.20 times forward earnings and yields 2.70%. I would consider adding the company to my list for further research.

UGI Corporation (UGI), through its subsidiaries, distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company raised its quarterly distributions by 4.40% to 29.50 cents /share. This dividend champion has raised distributions for 27 years in a row, and has a ten year distribution growth rate of 6.70%/year. Currently, UGI Corporation sells for 18.50 times forward earnings and yields 2.50%. I would consider adding the company to my list for further research.

Cracker Barrel Old Country Store, Inc. (CBRL) develops and operates the Cracker Barrel Old Country Store concept in the United States. The company raised its quarterly distributions by 33.30% to $1/share. This dividend achiever has raised distributions for 12 years in a row, and has a ten year distribution growth rate of 36.70%/year. Currently, Cracker Barrel Old Country Store sells for 17 times forward earnings and yields 4.20%. I would consider adding the company to my list for further research.

I ended up excluding companies like Costco (COST), which raised dividends from 31 to 35.50, which marked 11th consecutive annual dividend increase, because they yielded 1.20%.

Again, this list is not a recommendation to buy or sell, but a group of companies for further research. Running a screen on a list of securities is just the first step in your quest of identifying promising dividend companies. The next step is researching each promising idea and deciding if it has a sustainable business model that can withstand various competitive pressures over the next 20 years. After that , one only has to wait for the right price, and select those investments that provide the most bang for their investment buck at the time. The last part is the most difficult one after buying, and it is to pretty much sit on your investments and do nothing.

Full Disclosure: Long XOM,CVX, AMP, IBM

Relevant Articles:

Long Term Dividend Growth Investing
How to read my weekly dividend increase reports
Dividend Champions - The Best List for Dividend Investors
Dividend Macro trends: The Baby Boomer Retirement Investment
The importance of yield on cost

Monday, April 28, 2014

Two Dividend Kings Extending Their Dividend Growth Streaks in April

My strategy for financial independence is called dividend growth investing. I constantly monitor the group of dividend champions and dividend achievers for companies which are attractively priced. I then analyze them in detail, in order to determine if the business can continue earning more, in order to pay me rising dividend checks in the future. I have managed to build my dividend freedom portfolio one stock at a time over the past six years. I am incredibly patient, which is why I hold on to any quality company I bought, as long as the dividend is not cut or eliminated.

One part of my monitoring process is regularly checking the list of companies that have recently announced increases in their dividend rates. Company management only approves increasing dividends if they expect earnings to improve over the next several years. That is why dividend increases are typically a bullish sign for investors who hold dividend growth investments. Over the past month, there were a couple dividend kings, which extended their streak of regular dividend increases.

The Procter & Gamble Company (PG), together with its subsidiaries, manufactures and sells branded consumer packaged goods. The company’s board of Directors approved a 7% hike in quarterly dividends to 64.36 cents/share. This marked the 58th consecutive dividend increase for this dividend king. Over the past decade, Procter & Gamble has managed to increase dividends by 10.60%/year. This was fueled by a 7.60% increase in annual earnings per share over the same period. Analysts expect the company to earn $4.21/share in 2014 and $4.54/share in 2015. In comparison, Procter & Gamble earned $3.86/share in 2013. Currently, the stock is fairly valued at 19.30 times forward earnings and yields a very sustainable 3.10%. I would plan on adding to my position in the company, unless of course there are other more attractive investments available. Check my analysis of Procter & Gamble.

Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company’s board of Directors approved a 6.10% hike in quarterly dividends to 70 cents/share. This marked the 52nd consecutive dividend increase for this dividend king. Over the past decade, Johnson & Johnson has managed to increase dividends by 10.80%/year. This was fueled by a 7.20% increase in annual earnings per share over the same period. Analysts expect the company to earn $5.88/share in 2014 and $6.33/share in 2015. In comparison, Johnson & Johnson earned $4.81/share in 2013. Currently, the stock is attractively valued at 17 times forward earnings and yields a very sustainable 2.80%. I plan on adding to the company this year, subject to availability of funds. Check my analysis of Johnson & Johnson.

Those companies have managed to accomplish their dividend streaks, because they had strong business models, and diversified streams of earnings that kept growing through good and bad years. This is the type of quality income security that every dividend investor worth their salt should study.

Full Disclosure: Long JNJ and PG

Relevant Articles:

How to read my weekly dividend increase reports
Procter & Gamble (PG) - A dividend stock to hold forever
Johnson & Johnson (JNJ) - A must own dividend stock
The Dividend Kings List Keeps Expanding
My dividend crossover point

Monday, March 24, 2014

Three Attractive Dividend Paying Companies to Consider

I review dividend increases every week. I review all of them, but focus on those that have raised at least for a decade, and have at least a minimum yield, before I take the time to research them any further.

The following companies that managed to raise dividends in the past week met the minimum yield and length of consecutive increases:

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company operates through four segments: Merchant Gases, Tonnage Gases, Electronics and Performance Materials, and Equipment and Energy. Last week, the Board of directors raised quarterly dividends by 8.50% to 77 cents/share. This marked the 32nd consecutive annual dividend increase for this dividend champion. Over the past decade, Air Products and Chemicals has managed to increase dividends by 12.20%/year.

The company has managed to increase earnings per share from $2.64 in 2004 to $4.73 by 2013. The company is expected to earn $5.78/share in 2014 and $6.41/share in 2015.

The time to buy this company was in early 2013. Currently, this dividend champion is overvalued at 25.80 times earnings, and yields 2.50%. I would be more interested in the company when it sells below 20 times earnings, provided I don’t find even better values in comparison. Check my analysis of Air Products and Chemicals.

W. P. Carey Inc (WPC) invests in the real estate markets across the globe. This real estate investment trust (REIT) also provides long-term sale-leaseback and build-to-suit financing for companies. Last week, the REIT approved a hike in the quarterly dividend to 89.50 cents/share. The current payment is 9.10% higher than the one paid in the same time last year. W.P. Carey has managed to increase dividends for 16 years in a row. In the past decade, W.P. Carey has managed to increase dividends by 6.30%/year.

The REIT has adjusted Funds from Operations (AFFO) of $4.22/share in 2013, and expects $4.40 to $4.65 per diluted share for the 2014 full year. The REIT generated $2.81/share in 2004.

This dividend achiever currently yields 5.80%. I need to add it to my list for further research, in order to decide if it’s worthy of my investment dollars.

Raytheon Company (RTN) develops integrated products, services, and solutions in the areas of sensing; effects; command, control, communications, and intelligence; mission support; and cyber and information security worldwide. It operates in four segments: Integrated Defense Systems; Intelligence, Information, and Services; Missile Systems; and Space and Airborne Systems. Last week, the Board of directors raised quarterly dividends by 9.10% to 60 cents/share. This marked the 10th consecutive annual dividend increase for the company. Over the past decade, Raytheon has managed to increase dividends by 10.40%/year.

The company has managed to increase earnings per share from $0.99 in 2004 to $5.84 by 2013. The company is expected to earn $6.94/share in 2014 and $7.82/share in 2015.

Currently, this dividend achiever is attractively valued at 16.20 times earnings, and yields 2.50%. I need to add Raytheon to my list of companies for further research.

These are not buy recommendations, but ideas for further research. Investors should start their research by focusing on quantitative factors like earnings per share, revenues, and dividends per share trends. In addition, investors should also pay attention to qualitative factors that would ensure that the business model stays intact, and the business would generate more profits over time to pay for the future dividend increases. Finally, investors should also make sure that they are not overpaying for the companies they want to purchase, in order to allocate their capital to the most promising future streams of income.

Full Disclosure: Long APD

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Monday, March 17, 2014

Colgate Palmolive Delivers a Disappointing Dividend Increase

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company operates in two segments: Oral, Personal and Home Care; and Pet Nutrition. In the past week, the company approved a 5.90% increase in its quarterly dividends to 36 cents/share. This marked the 51st consecutive annual dividend increase for this dividend champion.

When I last analyzed the company several weeks ago, I found it to be overvalued. At this stage, I would be reluctant to add to my position in the stock, unless of course it declines from here. It is selling for 26.80 times earnings, and yields 2.30% based on the new dividend.

The latest dividend increase is the slowest since 1980, when the company increased distributions by a mere 3.67%. The company also raised distributions by a mere 6.90% in 2012, but this was followed by a 9.70% increase in the following year.

Year
Quarterly Dividend
Raise
2014
 $       0.3600
5.88%
2013
 $       0.3400
9.68%
2012
 $       0.3100
6.90%
2011
 $       0.2900
9.43%
2010
 $       0.2650
20.45%
2009
 $       0.2200
10.00%
2008
 $       0.2000
11.11%
2007
 $       0.1800
12.50%
2006
 $       0.1600
10.34%
2005
 $       0.1450
20.83%
2003
 $       0.1200
33.33%
2001
 $       0.0900
13.92%
1999
 $       0.0790
14.91%
1997
 $     0.06875
17.02%
1995
 $     0.05875
14.63%
1994
 $     0.05125
13.89%
1993
 $     0.04500
16.13%
1992
 $     0.03875
16.96%
1991
 $     0.03313
17.77%
1989
 $     0.02813
21.67%
1987
 $     0.02312
8.80%
1985
 $     0.02125
6.25%
1983
 $     0.02000
6.67%
1981
 $     0.01875
7.14%
1980
 $     0.01750
3.67%
1979
 $     0.01688
8.07%
1977
 $     0.01562
13.60%

I obtained the data for the table below from Yahoo! Finance. It shows dividend payments in the year they were increased, and the percentage increase from the previous payment.

On a completely unrelated note, did you know that an investment in 1985 would be generating an yield on cost of 99% today? I used Yahoo! Finance data again, but double checked the yields against my manuals from the time, because the 1985 current yields seemed a little high. However, it seems like Colgate was yielding a lot at the time, but you also need to remember that long-term Treasuries yielded close to 10%  as well. That definitely shows that picking a company with a high current yield that can grow distributions over time at a double digit rate can result in some tremendous compounding of income and invested capital.

Year
DPS
Price
Yield
YOC
2014
 $    1.420
 $  63.380
2.24%
99.17%
2013
 $    1.330
 $  65.210
2.04%
92.89%
2012
 $    1.220
 $  52.270
2.33%
85.20%
2011
 $    1.135
 $  46.195
2.46%
79.27%
2010
 $    1.015
 $  40.185
2.53%
70.89%
2009
 $    0.860
 $  41.075
2.09%
60.06%
2008
 $    0.780
 $  34.270
2.28%
54.47%
2007
 $    0.700
 $  38.980
1.80%
48.89%
2006
 $    0.625
 $  32.620
1.92%
43.65%
2005
 $    0.555
 $  27.425
2.02%
38.76%
2004
 $    0.480
 $  25.580
1.88%
33.52%
2003
 $    0.450
 $  25.025
1.80%
31.43%
2002
 $    0.360
 $  26.215
1.37%
25.14%
2001
 $    0.338
 $  28.875
1.17%
23.61%
2000
 $    0.316
 $  32.275
0.98%
22.07%
1999
 $    0.296
 $  32.415
0.91%
20.64%
1998
 $    0.275
 $  22.878
1.20%
19.21%
1997
 $    0.265
 $  17.870
1.48%
18.51%
1996
 $    0.235
 $  11.021
2.13%
16.41%
1995
 $    0.220
 $    8.196
2.68%
15.36%
1994
 $  0.1925
 $    7.199
2.67%
13.44%
1993
 $  0.1675
 $    6.898
2.43%
11.70%
1992
 $  0.1438
 $    6.019
2.39%
10.04%
1991
 $  0.1275
 $    5.160
2.47%
8.91%
1990
 $  0.1125
 $    3.794
2.97%
7.86%
1989
 $  0.0975
 $    3.176
3.07%
6.81%
1988
 $  0.0925
 $    2.282
4.05%
6.46%
1987
 $  0.0869
 $  1.8400
4.72%
6.07%
1986
 $  0.0850
 $  1.8550
4.58%
5.94%
1985
 $  0.0813
 $  1.4319
5.67%
5.67%

The company earned $2.38/share in 2013, and is expected to earn $3.01 in 2014 and $3.32 in 2015. However, I believe that dividend increases are decisions by the Board of Directors, which show their expectations for profit growth in the next 1 – 2 years. The decrease in dividend growth shows that management does not expect double digit earnings increases in the near term. I do think that this is a temporary situation however, and the Board will increase distributions by close to 8-9%/year over the next 5 – 10 years. The company still has strong competitive advantages, pricing power and a portfolio of branded products, which consumers buy regularly for decades.

That being said, I would hold on to my existing Colgate – Palmolive shares but would probably allocate my dividends elsewhere, where I can find better values for my money.

Full Disclosure: Long CL

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How to read my weekly dividend increase reports
Colgate-Palmolive (CL) Dividend Stock Analysis
Seven wide-moat dividends stocks to consider
Dividend Champions - The Best List for Dividend Investors
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