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

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

Relevant Articles:

How to read my weekly dividend increase reports
Twenty Dividend Stocks I Recently Purchased for my IRA
Sixteen Great Dividend Champions on Sale
Five Things to Look For in a Real Estate Investment Trust
The work required to have an opinion

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

Relevant Articles:

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
Strong Brands Grow Dividends

Popular Posts