Three Interesting Dividend Increases to Learn From

In order to identify promising dividend candidates for further research, I follow a multi-dimensional approach. At least once per month, I run my dividend entry criteria screen on the dividend champions list in order to uncover attractively valued securities. I also review my portfolio, in order to determine whether I should initiate a position in a new stock or I should add to an existing position. Another method I use is to look at the weekly list of dividend increases, in order to identify up and coming dividend achiever, and also to monitor the dividend increases for my existing positions.

I identified the following dividend increases over the past week, which I found interesting.

Lowe’s Companies, Inc. (LOW) operates as a home improvement retailer. It offers products for maintenance, repair, remodeling, and home decorating. The company managed to increase dividends by 12.50% to 18 cents/share. This dividend king has managed to boost distributions for 51 consecutive years. While earnings per share have not grown above the high set in 2007, I believe that the company’s best days are ahead in the future. Lowe’s will benefit from the long-term recovery in the US housing sector, as well as expanding its presence domestically and internationally. The stock is not cheap right now at 23 time earnings and an yield of 1.70%, but it is a very good long-term hold. Check my analysis of Lowe’s.

Helmerich & Payne, Inc. (HP) engages in the contract drilling of oil and gas wells. The company raised its quarterly distributions by 233% to 50 cents/share. This dividend champion has rewarded its shareholders with growing distributions for 41 consecutive years. The company also hiked dividends back in late 2012 from 7 to 15 cents/share.

Company Chairman and CEO, Hans Helmerich commented, "We are pleased to be in position to deliver a meaningful level of yield to our shareholders while retaining a strong ability to continue to pursue growth opportunities."

High double or triple digit dividend growth rates are more of one-time events, rather than the norm in future dividend increases for companies. I have found that companies that increase dividends at a double or triple digit rates indicate a policy shift that is friendly for investors. In addition, their willingness to distribute more to investors shows confidence in the underlying business prospects over the next three to five years. When I look at situations where companies decided to boost their payout ratio, and increased dividends significantly, shareholders were much better off going forward. This includes increases in earnings, dividends and also total returns.

For example, since V.F. Corp (VFC) increased quarterly dividends from 29 to 55 cents/share in 2006, dividends are up 58% to 87 cents/share. Earnings per share are up from $4.72 in 2006 to 49.70 in 2012, while the stock price is up by 205% to $187/share.

In the case of Helmerich & Payne, the company always had a very low dividend payout ratio, because the number of drilling units in the industry in the US and around the world fluctuates a lot. However, they still managed to build the long history of dividend hikes. This dividend champion has raised distributions for 42 years in a row. If earnings continue growing, and the company starts to meaningfully increase distributions over time in the high single digits, shareholders will be well compensated for the risks they are taking. The stock looks cheap at 11.20 times earnings and yields 3.10%. I would need to look into it, analyze further over the coming few weeks.

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 raised its quarterly distributions by 50% to 75 cents/share. This dividend achiever has raised distributions for 11 years ina row.

Ever since last year, when on April 26, 2012 Cracker Barrel increased quarterly dividends from 25 to 40 cents/share; the stock has been on a tear. The company has essentially tripled the dividend, and the stock has gone by 70%. Earnings per share have increased from $3.61 in 2011 to an expected range of $4.75 – $4.85 in 2013. Currently, the stock is fully valued at 20.80 times earnings and an yield of 3.10%.

At the end of the day, dividend growth investors need not only look at dividend yields but also the underlying earnings growth that fuels those distributions. If a company that has maintained a low payout ratio all of a sudden determines to share a greater portion of its already growing earnings stream, this unlocks a lot of value for shareholders and makes the asset even more appealing.

Full Disclosure: Long LOW

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Clorox Hikes Dividends, but is it a buy at current levels?

One aspect of dividend investing that is very appealing to me is the consistency of dividend increases for many of the dividend champions I own. I realize how I take these raises for granted, in the rare event when a stock I own freezes or cuts distributions.

Over the past week, Clorox (CLX) boosted dividends by 10.90% to 71 cents/share. This marked the 36th consecutive annual dividend increase for this dividend champion. Between 2002 and 2012, annual dividends have increased by 11.30% per year. Earnings per share increased by 11.60%/year. Check my analysis of Clorox.

The current yield increased to 3.20%, which is higher than the 2.88% which 30 year US Treasury Bonds offer right now. An investor in a company like Clorox today will likely earn much more in income over the next 30 years, compared to a 30 year US Treasury Bond.  As a result, fixed income allocation might not make sense for investors who look for current income. This would be driven by increases in profits over time, which would likely also result in much higher stock prices. If we experience an annual inflation of 3% over the next 30 years, an investment in Clorox with its rising dividends would essentially provide shareholders with a source of income that is relatively protected against inflation.

It is no surprise that investors are rushing to purchase quality dividend stocks right now, which is pushing valuations to overvalued levels.

The average estimate for 2013 earnings per share for Clorox is $4.30. The estimate for 2014 is $4.63. Based on these estimates however, I would not think it is reasonable to pay more than $86/share. For those investors who have owned Clorox for several years, such as myself however, holding on to this fine consumer goods company is a very good idea that will pay dividends for a long time. In the company’s Centennial Strategy, it targets 3 – 5% revenue growth, and profits above the rate of revenue growth. Given the company’s propensity to repurchase shares, I could easily see earnings per share growth in the high single digits for the foreseeable future. Given that the international segment is only approximately 20% of sales, I see this as a growth opportunity to expand the brand further outside the US.

One concerning factor is the high dividend payout ratio of 66% for 2013. If we use 2014 forward earnings however, the dividend payout falls to 61%, which is borderline high.

Over the past 30 years, investors in Clorox have done very well. The key to success had been investing at P/E ratios below 20, and holding on the position. Selling even after gains of 1000% would have been a mistake, as the company kept earning more income and kept raising dividends. While the next 30 years might not look the same as the past 30 years, this chart illustrates the power of selecting just a few quality stocks like Clorox for your dividend portfolio and then holding them for as long as possible. The data for 2013 assumes two payments at the new rate and two dividend payments at the old rate; it also assumes forward EPS projections for 2013 fiscal year.

Full Disclosure: Long CLX

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Four Select Dividend Increases of Note

I track the list of dividend increases every week for the stocks I own. Over the past week, there were 49 companies that raised dividends. I scanned the list and focused on the ones I own as well as another that I have been patiently waiting to purchase for the past two years. Whether the market goes up or down from here, these dependable dividend payers will continue generating the earnings streams to pay a stable and rising dividend to me. The stability of dividends from quality companies who stock I hold makes retirement planning much easier. The companies include:

International Business Machines Corporation (IBM) provides information technology products and services worldwide. The company raised quarterly distributions by 11.80% to 95 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. Currently, IBM trades at 14 times earnings and yields 1.90%.

I like the fact that IBM has been able to repurchase stock consistently since 1995, although I would prefer special dividends instead. I also like the fact that IBM has been able to transform and adapt its business model, and that it has a goal to earn $20/share in 2015. Check my analysis of IBM.

PepsiCo, Inc. (PEP) operates as a food and beverage company worldwide. The company raised quarterly distributions by 5.60% to 56.75 cents/share. This marked the 42th consecutive annual dividend increase for this dividend champion. Currently, PepsiCo trades at 21.10 times earnings and yields 2.80%. Check my analysis of PepsiCo.

The company has been slowing down dividend increases in the past two years, which shows management does not expect stellar performance over the next few years. I would probably hold on to PepsiCo for the next 20 – 30 years, but at this point it is price out of my buy range.

Royal Dutch Shell plc (RDS/B) operates as an independent oil and gas company worldwide. The company raised its quarterly dividend by 4.70% to 90 cents/share. This was the second year of dividend increases for the company. When dividends were frozen in 2010, this ended the company’s streak of 17 consecutive years of dividend increases. I purchased Royal Dutch Shell “B” shares after British Petroleum (BP) cut distributions in 2010. I like the company right now, especially as it is trading at 8.40 times earnings and yields 5%.

Costco Wholesale Corporation (COST) engages in the operation of membership warehouses. The company raised quarterly distributions by 12.70% to 31 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. Currently the stock trades at 24.40 times earnings and yields 1.10%.

I like the company’s business model, and believe that it has excellent growth opportunities ahead.
Unfortunately, I find the stock to be overvalued at present conditions, despite the fact that I like the business a lot. If Costco misses earnings projections in a given quarter, or when we get the next bear market in stocks, chances are that I would be salivating at the attractive stock prices as I initiate a position in it. I would like to obtain it at prices significantly below 20 times earnings.

I used the dip caused by IBM’s earnings release last month to initiate a small position in the company. This year I used dips in Yum! Brands (YUM) and Family Dollar (FDO) to acquire small positions on dips caused by irrational markets. If I had spare funds right now, I would have probably added to my position in ONEOK Partners (OKS) on the dips as well.

Full Disclosure: Long IBM, PEP, YUM, FDO, OKS, RDS/B

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Four Attractively Priced Dividend Stocks Boosting Distributions

With many stocks close to all-time-highs, it is getting increasingly difficult to find places where to park new cash. Luckily, the companies below not only fit the characteristics of dividend growth stocks, but they are also attractively priced. It is crucial to acquire solid companies only when they are fairly priced Putting new money to work at overvalued prices could lead to mediocre results for the first five – ten years of your investment. The companies boosting dividends include:

Johnson & Johnson (JNJ), together with its subsidiaries, engages in the research and development, manufacture, and sale of various products in the health care field worldwide. This dividend king raised quarterly distributions by 8.20% to 66 cents/share. This marked the 51st consecutive annual dividend increase for the company. Despite the recent run, the company is attractively priced at 15.70 times forward earnings and a yield of 3.10%. The dividend is adequately covered, and has been raised by 11.70%/year over the past decade. I added to my position in Johnson & Johnson in April. Check my analysis of Johnson & Johnson.

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. This dividend champion raised quarterly distributions by 11.10% to $1/share. This marked the 26th consecutive annual dividend increase for Chevron. The stock is trading at 9.70 times forward earnings, has an adequately covered dividend and yields 3.40%. The company has managed to boost annual distributions by 9.60%/year over the past decade. I recently added to my position in Chevron in April. Check my analysis of Chevron.

Exxon Mobil Corporation (XOM) engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products. This dividend champion raised quarterly distributions by 10.50% to 63 cents/share. This marked the 31st consecutive annual dividend increase for Exxon. Over the past decade, Exxon has managed to boost annual dividends by 9%/year. The stock trades at 11 times forward earnings, yields 2.90% and has a sustainable dividend coverage. Back in 2012 I replaced Exxon Mobil with ConocoPhillips (COP), because Exxon seemed stingier than its peers with dividend payments. Instead, the company has been one of the most active share repurchases in the US for several years in a row.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. The company boosted quarterly dividends by 15.60% to 52 cents/share. This was the second dividend increase over the past year, bringing the total increase to 48.605 since the second quarter of 2012. The company has only raised distributions for 7 years, and has been public since 2005. It was spun off from American Express (AXP) in 2005, and since then it has managed to boost earnings from $2.32/share to $4.70/share by 2012. Forward earnings expectations are for $6.60/share in 2013 and $7.26/share by 2014, which means that Ameriprise Financial would have no problem becoming a dividend achiever by 2015. I like the fact that the company is attractively valued at 11.10 times forward earnings, yields 2.80% and has a sustainable dividend coverage. I plan on analyzing the stock before committing any funds to it.

These four stocks are a testament that income investors can find quality companies at reasonable valuations even in this overheated market. By looking through the list of dividend increases, I was once again able to uncover a hidden dividend gem, Ameriprise Financial, which has the potential to pay dividends in my portfolio for the next 20 years.

Full Disclosure: Long JNJ, CVX, COP

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Kinder Morgan Rewards Both General and Limited Partners with Higher Income

Kinder Morgan is the largest midstream company in North America, with over 73,000 miles of pipelines and 180 terminals. The pipelines transport oil, natural gas, CO2 and other products. The terminals handle a variety of products such as gasoline, jet fuel, ethanol, coal, coke, steal and others.

As I outlined in an earlier article, there are three ways to invest in Kinder Morgan. The first and second way to invest are through purchasing the limited partnership units. With Kinder Morgan Partners (KMP), unitholders can earn distributions in cash, while for Kinder Morgan Management LLC (KMR), limited partners directly obtain i-units, instead of cash. Since there is no taxable event for holders of KMR, the i-units are a great tax efficient way to build a position in the partnership even in a taxable account. Before the IPO of Kinder Morgan Inc in 2011, my entire position in the partnership was in i-units. For example, if Kinder Morgan Partners (KMP) paid $1.30/unit in a given quarter, holders of Kinder Morgan Management LLC (KMR) would have received a partial share worth $1.30. If the price for KMR was $100, the KMR unitholder would have received 0.013 units.

Last, there are the general partnership interests in Kinder Morgan Partners, where Kinder Morgan Inc (KMI) is the vehicle to purchase. Kinder Morgan Inc also owns the general partner interest in El Paso Pipeline Partners (EPB). In addition, KMI also owns limited partnership interests in Kinder Morgan Partners, El Paso Pipeline Partners and Kinder Morgan Management LLC. I recently added to my position in Kinder Morgan Inc in my IRA.

Over the past week, Kinder Morgan approved distribution hikes for both the general and limited partners.
The limited partners of Kinder Morgan Partners (KMP) also received a distributions boost to $1.30/unit. This represented an 8% increase over the distribution paid in the corresponding quarter in 2012. This brings the current yield up to 5.70%. The partnership is projecting an increase in annual distributions to $5.28 for 2013. Since KMP is a master limited partnership, distributions are not eligible for preferential qualified dividend tax treatment. Because partnerships are pass-through entities whose income is taxed at the limited partner level and not the entity level, distributions from MLPs are slightly more complex to handle from a tax perspective. This is a big reason why many investors avoid them outright. Check my analysis of Kinder Morgan Partners.

The distributions to Kinder Morgan Management LLC (KMR) will be paid in additional KMR shares. I hold the i-shares because I am in the accumulation phase and it is an option to have less complicated and time-consuming tax returns. The i-shares usually trade at a discount to the limited partnership interests, which is why it is usually a better deal for long-term holders.

Kinder Morgan Inc (KMI) shareholders will receive a higher quarterly dividend by 2.70% to 38 cents/share. This was an increase of 19% over the distribution paid in the same quarter in 2012. This brings the current yield up to 3.90%. The company is projecting an increase in annual dividends to $1.57 for 2013. Since KMI is a corporation, the dividends are eligible for preferential qualified dividend tax treatment.

The partnership is able to grow distributions from new additions to its vast portfolio of fee-generating assets. I would strongly encourage investors to read through the press release. According to it, distributions are well covered in Q1, as DCF/unit was $1.46, for a DCF payout ratio of 89%. The partnership is a great vehicle for investors who are looking for high current income, with solid distributions growth. The K-1 forms make this investment slightly more challenging, although it leads to substantial tax deferral of distributions received for over a decade.

Kinder Morgan Inc is able to grow dividends faster, because of its incentive distribution rights (IDR). These IDR’s entitle the general partner to half of any incremental distributable cash flow above certain thresholds. This stock is perfect for investors who want high yields today, plus the possibility of high dividend growth. The stock is also perfect for investors who do not want to deal with the more complicated tax return that Kinder Morgan Partners would create.

Full Disclosure: Long KMI and KMR

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Procter & Gamble (PG) Delivers a Dividend Boost to Investors

As a dividend investor my goal is to generate a sufficient stream of sustainable dividends from my income portfolio. I focus on dividends because this method is much less volatile than relying on capital gains and also is a more sustainable method to pay for expenses when compared to selling off shares. This was evident over the past week, when stocks dropped for the first time in several weeks.

At the same time, one of my core holdings, Procter & Gamble (PG), raised quarterly dividends by 7% to 60.15 cents/share. This marked the 57 consecutive annual dividend increase for the company. To put things in perspective, when the company started raising dividends, the US president was Eisenhower. The company has managed to boost dividends during nine recessions, several wars, a few oil price shocks, and nine bear markets. There are only fifteen companies in the world which have managed to boost dividends for over 50 years in a row. Check my analysis of the stock.

Over the past decade, P&G has enjoyed an increase in earnings per share from $1.95 in 2003 to $3.82 in 2012. The ten year dividend growth is 10.80%/annually. Currently the stock is trading at 17.90 times earnings, and yields 3%. The stock is close to being fully valued at the moment, based on FY 2013 expected earnings. I would consider adding to the stock on dips, although judging by the negative sentiment in the dividend community, I am not expecting any sizeable corrections.

As a dividend investor, I am not at all worried about stock market fluctuations, as long as I keep receiving my dividend income. In fact, if the market dropped by 50% tomorrow, or it was closed for the next five years, I would be relatively unaffected as long as my companies are fundamentally sound.

Full Disclosure: Long PG

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Three Dividend Paying Stocks that Deliver Dividend Growth

As a dividend growth investor, I uncover attractively valued companies by running my monthly screen against the dividend champions and dividend achievers’ indexes. I also tend to focus on the weekly list of companies that boosted distributions, in order to monitor the dividend growth of companies I own or might consider for further analysis. I also use this list in order to uncover any emerging dividend stocks, which are in the first phase of their dividend growth journey. Over the past week, there were sixteen companies which announced increases in distributions. I narrowed the list by excluding companies which had raised dividends for less than five years in a row, and came up with the following three stocks:

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company increased the quarterly dividend on the company’s common stock by 10.90% to 71 cents per share. This marked the 31st consecutive year that Air Products has increased its dividend payment. Over the past decade, this dividend champion has raised distributions by 11.80%/year. Between 2003 and 2012, the company’s earnings rose from $1.81/share to $5.53/share. Analysts expect earnings to hit $5.78/share in 2013, and increase to $6.40/share by 2014. Currently the stock is attractively valued at 15.70 times earnings and yields 3.20%. I plan on adding to my position in the stock within the next couple of months. Check my analysis of Air Products & Chemicals for more information.

Raytheon Company (RTN) provides electronics, mission systems integration, as well as a range of mission support services in the United States and internationally. The company’s Board of Directors voted to increase the company's annual dividend payout rate by 10 percent, from $2.00 to $2.20 per share. This marked the ninth consecutive year that Raytheon Company has increased its dividend payment. Over the past decade, the company has raised distributions by 25.40%/year. Between 2003 and 2012, the company’s earnings rose from $0.88/share to $5.67/share. Analysts expect earnings to decline in 2013 to $5.33/share, and increase to $5.54/share by 2014. Currently the stock is attractively valued at 10.30 times earnings and yields 3.90%. While the dividend is sustainable and has room to grow, the focus on budget cuts in the company’s biggest customer might not bode well for long-term profitability.

Williams-Sonoma, Inc. (WSM) operates as a specialty retailer of home products. The company’s Board of Directors has authorized a 41% increase in the company’s quarterly cash dividend to $0.31 per share. This marked the eighth consecutive year that Williams-Sonoma has increased its dividend payment. Over the past five years, the company has raised distributions by 14.60%/year. Currently the stock is trading at 20.80 times trailing earnings and yields 2.50%. The trailing earnings per share over the past four quarters nets to $2.39. Analyst projections for 2013 and 2014 are for earnings growth to $2.78 /share and $3.17/share. Between 2004 and 2012, the company’s earnings rose from $1.36/share to $2.27/share. I am going to add Williams-Sonoma to my list for further analysis.

Full Disclosure: Long APD

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Three High Yielding Dividend Machines Boosting Distributions

Over the past week, eighteen companies raised dividends. Only three of them however, had managed to consistently raise distributions for at least ten consecutive years. The companies include:

General Mills, Inc. (GIS) manufactures and markets branded consumer foods worldwide. The company boosted its quarterly dividend by 15% to 38 cents/share. This marked the tenth consecutive annual dividend increase for General Mills. Annual dividend growth was 8.70%/year over the past decade. The stock is trading at 17 times earnings and yields a sustainable 3.30%.

Since Heinz (HNZ) has agreed to be acquired a few weeks ago, investors have certainly increased their appetite for brand-name, non-cyclical consumer staples in the food sector. It looks like General Mills could be a decent substitute for Heinz in an income investor’s portfolio.

The company has managed to increase earnings per share from $1.25 in 2003 to $2.42 by 2012. Analysts project earnings to grow to $2.68/share by 2013 and $2.91/share by 2014. Now that General Mills has joined the ranks of Dividend Achievers, I would consider initiating a position in the stock, after I perform a complete analysis of it. It is important to perform an analysis of a company, in order to understand how it generates its income, and whether it would be able to grow earnings in the future.

Two other notable dividend raisers over the past week include real estate investment trusts Realty Income (O) and W.P. Carey (WPC).

Realty Income Corporation (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company raised monthly distributions by 0.20% to 18.123 cents/share. Realty Income recently raised monthly dividends by 19.20%, and the mere fact that it is still committing to boosting monthly distributions is exceptional. At this point however, I doubt future dividend raises are going to beat inflation. I view the company as a hold, but would not consider adding any additional funds to my position. The stock yields 4.90%. Check my analysis of Realty Income.

W. P. Carey Inc. (WPC) is an independent equity real estate investment trust. The REIT raised quarterly distributions by 24% to 82 cents/share. W.P. Carey has raised distributions for 15 years in a row. The current yield is 4.80%. This dividend achiever has managed to significantly increase distributions since its conversion to a REIT status. I have long had this company on my list for further analysis, and would have to thoroughly look at the business before committing any funds.

Full Disclosure: Long O

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Five Dividend Paying Companies Boosting Shareholders' Distributions

For the past several years, I have monitored the weekly breadth of dividend increases. Changes in dividend rates provide a clear indication of what is happening at a business. A company can only afford to increase dividends when top management has a positive outlook for the business for the next two to five years. As a result, the firms listed below are showing that their management is bullish on their operations. In this article, I have highlighted the companies that have managed to regularly raise dividends for at least ten years in a row. Just because a company raises dividends however, that is not an automatic buy signal. Before committing any money in a stock, investors need to analyze it thoroughly, and build their position slowly and only as part of a diversified basket of securities. In the past week, the following dividend paying stocks boosted distributions to shareholders:

Family Dollar Stores, Inc. (FDO) operates a chain of self-service retail discount stores primarily for low- and middle-income consumers in the United States. The company boosted quarterly distributions by 23.80% to 26 cents/share. This dividend champion has consistently raised distributions for 38 years in a row. Over the past decade, the company has managed to boost dividends by 12.70%/year. Currently, the stock trades at 16.40 times/earnings and yields 1.80%.

The company has managed to boost earnings per share from $1.44 in 2003 to $3.61 in 2012. Analysts’ expectations favor in growth in earnings to $3.98/share in 2013 and $4.46/share by 2014. I am very bullish on this company and its long-term prospects. In addition, I find it to be trading at an attractive valuation at the moment. Unfortunately, the current yield has always been low for Family Dollar. The high dividend growth more than compensates for the low yield however. When I first bought Family Dollar in 2008 at $24.99/share, my yield was 2%. Fast forward five years and now my yield on cost is 4.16%. I recently added a half lot to my position in Family Dollar. Check my analysis of Family Dollar.

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company boosted quarterly distributions by 9.70% to 68 cents/share. This dividend champion has consistently raised distributions for 50 years in a row. Over the past decade, the company has managed to boost dividends by 13%/year. Currently, the stock trades at 22.50 times/earnings and yields 2.40%.

The company has managed to boost earnings per share from $2.33 in 2002 to $5.15 in 2012. Analysts’ expectations favor in growth in earnings to $5.73/share in 2013 and $6.34/share by 2014. I like the growth prospects for Colgate-Palmolive, but the valuation is too rich for me. I would consider adding to my position in the company on dips below $109. Check my analysis of Colgate-Palmolive.

General Dynamics Corporation (GD), an aerospace and defense company, provides business aviation; combat vehicles, weapons systems, and munitions; military and commercial shipbuilding; and communications and information technology products and services worldwide. The company boosted quarterly distributions by 9.80% to 56 cents/share. This dividend achiever has consistently raised distributions for 22 years in a row. Over the past decade, the company has managed to boost dividends by 13%/year. Currently, the stock trades at 10.20 times forward earnings and yields 3.30%.

The company has managed to boost earnings per share from $2.28 in 2002 to $6.76 in 2011. Analysts’ expectations favor in growth in earnings to $6.76/share in 2013 and $7.17/share by 2014. While the company boasts an impressive record of earnings and dividend growth, I am skeptical about future growth given the large deficits of the US government, which is a big spender on Defense. However, the low P/E and above average yield make this stock worthy of consideration at current levels, especially in comparison to other dividend paying stocks. Check my analysis of General Dynamics.

Piedmont Natural Gas Company, Inc. (PNY), an energy services company, engages in the distribution of natural gas to residential, commercial, industrial, and power generation customers in portions of North Carolina, South Carolina, and Tennessee. The company boosted quarterly distributions by 3.30% to 31 cents/share. This dividend champion has consistently raised distributions for 35 years in a row. Over the past decade, the company has managed to boost dividends by 4.10%/year. Currently, the stock trades at 20 times/earnings and yields 3.80%.

The company has managed to boost earnings per share from $1.12 in 2003 to $1.67 in 2012. Analysts’ expectations favor in growth in earnings to $1.74/share in 2013 and $1.81/share by 2014. Given the high P/E ratio and the slow dividend growth, I view Piedmont Natural Gas as a hold. Utilities are good for current income, but unfortunately the slow earnings and dividends growth over time make it imperative that investors only enter a position at advantageous prices. The current environment that is characterized by yield hungry investors does not represent such an environment.

MOCON, Inc. (MOCO) develops, manufactures, and markets measurement, analytical, monitoring, and consulting products and services worldwide. The company boosted quarterly distributions by 4.80% to 11 cents/share. This dividend champion has consistently raised distributions for 11 years in a row. Over the past decade, the company has managed to boost dividends by 5.60%/year. Currently, the stock trades at 31.80 times/earnings and yields 1.80%. Given the slow dividend growth and low yield, I do not plan on researching the firm further at this time.

Full Disclosure: Long CL and FDO

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- Six Exciting Dividend Increases for Long-term income investors

Six Exciting Dividend Increases for Long-term income investors

As part of my dividend growth plan, I invest in companies which consistently raise dividends. This would hopefully result in financial independence at my dividend crossover point, where dividends exceeds expenses. Before I purchase shares in a dividend paying company, I analyze it thoroughly and try to gauge whether it has what it takes to increase future profits, which are the fuel behind future dividend growth. This is a particularly difficult endeavor, since the environment that we see today would be much more different five, ten, twenty years from now. Nevertheless, I always enjoy when a company I have purchased, continues its streak of regular dividend increases that are fueled by improved operating performance. The rising stream of cold hard cash deposited in my brokerage account validates my investment thesis.

The following dividend stalwarts rewarded their long term investors with higher distributions over the past week:

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company raised quarterly distributions by 18.20% to 47 cents/share. This marked the 39th consecutive annual increase for this dividend champion. Over the past decade, Wal-Mart Stores has managed to boost dividends by 18.10%/year. Wal-Mart is one of the stocks where I want to increase my position, since it is rarely trading at the right yield. Currently, the company is very attractively valued at 14.50 times earnings and yields 2.70%. Average analyst estimates call for EPS of $5.37 in 2013 and $5.94 in 2014. I would consider adding to my position as soon as I have available funds. Check my analysis of the stock for more information.

The Coca-Cola Company (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company raised quarterly distributions by 9.80% to 28 cents/share. This marked the 51st consecutive annual increase for this dividend king. Incidentally, Coca-Cola’s ten year average annual dividend growth rate is 9.80% as well. I recently added to my position in the stock on the weakness last week. Analysts expect EPS to reach $2.14 in 2013 and $2.33 by 2014. Earnings per share increased from 89 cents in 2003 to $1.97 in 2012. Unfortunately, the stock is fully valued at the moment at 19.50 times earnings, although the yield is 2.90%. Check my analysis of the stock for more information.

Kimberly-Clark Corporation (KMB), together with its subsidiaries, engages in manufacturing and marketing health care products worldwide. The company raised quarterly distributions by 9.50% to 81 cents/share. This marked the 41st consecutive annual increase for this dividend champion. Over the past decade, Kimberly-Clark has managed to boost dividends by 9.50%/year. I like the fact that the company has managed to increase earnings from $3.22/share in 2002 to $4.74/share in 2012. I also like forward earnings of $5.59/share in 2014 and $5.98 by 2014. Unfortunately, despite the good current yield of 3.40%, the stock is fully valued at 19.90 times earnings. Check my analysis of the stock for more information.

NextEra Energy, Inc. (NEE), through its subsidiaries, engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. The company raised quarterly distributions by10% to 66 cents/share. This marked the 19th consecutive annual increase for this dividend achiever. The stock is trading at 16 times earnings, and yields 3.60%. I like the ten year dividend growth rate of 7.50%/year. I also like the fact that the company has managed to boost earnings from $2/share in 2002 to $4.56 in 2012. I would initiate a position in the stock in the next few months, subject to availability of funds. Check my analysis of the stock for more details.

Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada, and Mexico. This dividend king extended its long streak of distribution hikes to 57, as it raised quarterly payments by 8.60% to 53.75 cents/share. I have looked at Genuine Parts for a couple of years, but always had other opportunities take priority over this one. The stock is attractive at 17.50 times earnings and yields a sustainable 3.10%. If I have extra cash, I might actually end up initiating a position in this stock in 2013.

Analog Devices, Inc. (ADI) engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits for use in industrial, automotive, consumer, and communication markets worldwide. The company raised quarterly distributions by 13.30% to 34 cents/share. This dividend achiever has raised distributions for 11 years in a row. It is slightly overvalued at 21.30 times earnings right now, although it yields 3%. I like the fact that the company has raised earnings from 0.82/share in 2003 to $2.18/share by 2012. I am very skeptical about technology companies in general, but would give ADI the benefit of the doubt, and thus analyze it in a future article.

Full Disclosure: Long WMT, KO, KMB

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Five Dividend Champions Actively Boosting Distributions to Shareholders

Over the past week, several dividend companies raised distributions to shareholders. I narrowed down the list to five companies, each of which had raised dividends for over a quarter of a century. In order to be successful however, dividend investors need to be able to isolate those companies with a strong dividend raising record, which also have bright prospects ahead of them. Purchasing a small piece of their business should also be done only at attractive valuations, after a thorough analysis has been completed. The five dividend champions that announced dividend hikes over the past week, are reviewed below and include:

3M Company (MMM) operates as a diversified technology company worldwide. The company raised its dividends by 7.60% to 63.50 cents/share. This marked the 55th consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to boost distributions by 6.60%/year. Currently, 3M Company is attractively valued at 16.20 times earnings and yields 2.50%. I like the potential for earnings and dividend growth for 3M company. The company has managed to boost earnings from $2.53/share in 2002 to $6.32/share by 2012. Forward earnings/share are expected to reach $6.84 in 2013 and $7.51 in 2014. As a result, I plan on adding to my position in the stock subject to availability of funds, as long as the price is below $101.60. Check my analysis of the stock for more information.

Archer-Daniels-Midland Company (ADM) manufactures and sells protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. The company raised its dividends by 8.60% to 19 cents/share. This marked the 37th consecutive annual dividend increase for this dividend champion. The company raised distributions after 5 quarters, rather than four, which probably scared many investors off. At the previous dividend increase in 2011 however, the company maintained the new dividend rate for only 3 quarters, before raisin it again. Over the past decade, the company has managed to boost distributions by 12.30%/year. Currently, Archer-Daniels-Midland is attractively valued at 14.60 times earnings and yields 2.50%. I own a very small position in the stock, and I plan to update my research before committing more capital to it.

Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials in North America, Latin America, Europe, and the Asia Pacific. The company raised its dividends by 4% to 26 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost distributions by 6.80%/year. While the stock yields 2.70%, I find that the stock is currently overvalued at 22.10 times earnings and as such a hold.

WGL Holdings, Inc. (WGL), through its subsidiaries, sells and delivers natural gas, and provides energy-related products and services. The company raised its dividends by 5% to 42 cents/share. This marked the 37th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to boost distributions by 2.30%/year. Currently, WGL Holdings is attractively valued at 15.40 times earnings and yields 3.90%. Given the slow earnings and distributions growth over the past decade, and the projected low growth ahead, I view this stock as a hold at best.

Diebold, Incorporated (DBD) provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. The company raised its dividends by almost one percent to 28.75 cents/share. This marked the 60th consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to boost distributions by 5.60%/year. Currently, Diebold is attractively valued at 15 times forward earnings and yields 3.90%. While 60 years of consecutive dividend growth is a record for a dividend growth stock, I am not so bullish on the stock going forward. Over the past decade, earnings have been very volatile, and the near term prospects for growth are not that rosy either. Dividend investors should focus more on prospects for future total returns, rather than a super lengthy past record of dividend raises such as in this case. Check my analysis of the stock for more details.

Full Disclosure: Long MMM, ADM

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Realty Income (O) Raises Dividends by a Record 19.20%

Realty Income Corporation engages in the acquisition and ownership of commercial retail real estate properties in the United States. This dividend achiever has paid dividends every year since going public in 1994, and raised them for 19 years in a row.

The company raised its monthly dividend by 19.20% to 18.09 cents/share following the completion of the acquisition on American Realty Capital Trust. This was the highest increase in distributions done by the monthly dividend company. The new annual dividend at the current rate is at $2.171/share. The current yield is up to 5% after the increase. Check my previous analysis of the REIT for more information on Realty Income.

The REIT cites increase in revenues and profitability as a result of 2012 property purchases as well as the recently completed acquisition of American Realty Capital Trust. Realty Income expects Normalized FFO/share to range between $2.32 - $2.38/share in 2013. In comparison, Normalized FFO/share for 2012 is estimated to be between $2 - $2.04/share. The new monthly dividend brings the FFO payout ratio to a range between 91% - 93%, which is high. This might limit future distribution growth for the next few years.

As a result of the merger, Realty Income has added 515 properties, which are under a triple-net lease. This brings the total number of properties owned by Realty Income to 3,528. In addition, the acquisition is increasing the proportion of lease revenue derived by investment grade lessors from 19% to 34%. The average lease term is approximately 11 years. A triple-net lease is typically a long-term contract ranging anywhere between 15 and 20 years, which specifies the rent due, periodic increases in rents. The tenants are usually responsible for most operating expenses for these properties, including taxes and utilities, in addition to paying rent to Realty Income.

Realty Income was one of the few Real Estate Investment Trusts which didn't cut or eliminate distributions during the financial crisis of 2007 – 2009. In fact, the company kept raising them a few times per year, albeit at a very slow rate. I find the current increase to leave little to no room for dividend increases for the next few years above maybe a couple cents/share. That being said however, I like the fact that the company is looking for different ways to only pay the monthly dividend to loyal shareholders, but also to find new ways to generate cash-flow to hike it regularly.

Full Disclosure: Long O

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Fourteen Dividend Paying Machines for Further Research

Every week I review the list of dividend increases in order to feel the pulse of cash distributions by corporate America. I also use this list in order to learn about dividend increases or dividend cuts by companies I own. In addition, I use the list in order to gauge the momentum in dividend increases for companies I am considering for addition in my portfolio or to identify prominent dividend growers for further research.

Over the past week the following companies announced dividend hikes. I focused on the ones that have managed to boost distributions for at least five years in a row below:

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. The partnership boosted quarterly distributions from 65 to 66 cents/unit. This dividend achiever has regularly boosted distributions for 15 years in a row. Over the past 10 years, Enterprise Products Partners has managed to boost annual distributions by 6.70%/year. Yield: 4.90% Check my analysis of the partnership.

Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. The partnership boosted quarterly distributions from $1.26 to $1.29/unit. This dividend achiever has regularly boosted distributions for 16 years in a row. Over the past 10 years, Kinder Morgan Energy Partners has managed to boost annual distributions by 7.50%/year. Yield: 5.90%. Check my analysis of the partnership.

Kinder Morgan, Inc. (KMI) owns and operates energy transportation and storage assets in the United States and Canada. The company boosted quarterly distributions from 36 to 37 cents/share. The general partner of Kinder Morgan Partners has boosted dividends five times since going public in 2011. Yield: 4%

ONEOK, Inc. (OKE), a diversified energy company, engages in the gathering, processing, storage, and transportation of natural gas and natural gas liquids in the United States. The company boosted quarterly distributions from 33 to 36 cents/share. This dividend achiever has regularly boosted distributions for 10 years in a row. Over the past 10 years, ONEOK, Inc has managed to boost annual dividends by 15.10%/year. Yield: 3.10%. Check my analysis of the stock.

ONEOK Partners, L.P. (OKS) engages in the gathering, processing, storage, and transportation of natural gas in the United States. The partnership boosted quarterly distributions from 68.50 to 71 cents/unit. This MLP has regularly boosted distributions for 7 years in a row. Over the past 10 years, ONEOK Partners, L.P.has managed to boost annual distributions by 4.90%/year. Yield: 4.90%

Targa Resources Partners LP (NGLS) provides midstream natural gas and natural gas liquid (NGL) services in the United States. The partnership boosted quarterly distributions from 66 to 68 cents/unit. This MLP has regularly boosted distributions for 5 years in a row. Over the past 5 years, Targa Resources Partners has managed to boost annual distributions by 24.60%/year. Yield: 6.90%

Genesis Energy, L.P. (GEL) operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. The partnership boosted quarterly distributions from 47.25 to 48.50 cents/unit. This dividend achiever has regularly boosted distributions for 10 years in a row. Over the past 10 years, Genesis Energy has managed to boost annual distributions by 11.60%/year. Yield: 5.20%

The Williams Companies, Inc. (WMB) operates as an energy infrastructure company in the United States. The company boosted quarterly distributions from 32.50 to 33.875 cents/share. This dividend stock has regularly boosted distributions for 9 years in a row. Over the past 10 years, Williams Companies has managed to boost annual dividends by 11%/year. Yield: 3.90%

Omega Healthcare Investors, Inc. (OHI) operates as a real estate investment trust (REIT) in the United States. The company boosted quarterly distributions from 44 to 45 cents/share. This dividend achiever has regularly boosted distributions for 10 years in a row. Over the past 5 years, Omega Healthcare Investors has managed to boost annual dividends by 9.40%/year. Yield: 7.10%

Wisconsin Energy Corporation (WEC) generates and distributes electric energy, as well as distributes natural gas. The company boosted quarterly distributions from 30 to 34 cents/share. This dividend achiever has regularly boosted distributions for 11 years in a row. Over the past 10 years, Wisconsin Energy Corporation has managed to boost annual dividends by 11.60%/year. Yield: 3.60%

AptarGroup, Inc. (ATR) engages in the design, development, manufacture, and sale of consumer product dispensing systems in North America, Europe, Asia, and South America. The company boosted quarterly distributions from 10 to 12 cents/share. This dividend achiever has regularly boosted distributions for 19 years in a row. Over the past 10 years, AptarGroup Corporation has managed to boost annual dividends by 22%/year. Yield: 1.70%

The Finish Line, Inc. (FINL), together with its subsidiaries, operates as a mall-based specialty retailer in the United States. The company boosted quarterly distributions from 6 to 7 cents/share. This dividend stock has regularly boosted distributions for 6 years in a row. Over the past 5 years, Finish Line has managed to boost annual dividends by 36.90%/year. Yield: 1.70%

Alliant Energy Corporation (LNT), a utility holding company, provides regulated electricity and natural gas services to residential, commercial, and industrial customers in the Midwest region of the United States. The company boosted quarterly distributions from 45 to 47 cents/share. This dividend achiever has regularly boosted distributions for 11 years in a row. Over the past 5 years, Alliant Energy Corporation has managed to boost annual dividends by 7.40%/year. Yield: 4.10%

Shaw Communications Inc. (SJR) provides broadband cable television, Internet, home phone, telecommunication, and satellite direct-to-home services in Canada and the United States. The company raised its annual dividends by 5% C$1.02/share for Class “B” shares. This translates into a monthly dividend of 8.50 Canadian cents. This international dividend achiever has regularly boosted its monthly distributions for 11 years in a row. Yield: 4.30%

The list was dominated by Master Limited Partnerships, and many of their general partners. The two companies that I plan to research further include Omega Healthcare Investors (OHI) and Shaw Communications (SJR). I am considering increasing my exposure to real estate, through REITs. In addition, I am also interested in increasing my exposure to technology companies with sustainable competitive advantages. However, I am not going to diversify at all costs, as I thoroughly analyze each candidate before considering it worthy for inclusion in my portfolio.

Full Disclosure: Long KMI, EPD, KMR, OKS

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Seven Dividend Hikers in the News

I scanned the list of companies raising distributions in the past week and highlighted the stocks that have raised dividends for at least five years in a row, yielding over 2%. I then provided a brief comment behind each stock below:

Stryker Corporation (SYK), together with its subsidiaries, operates as a medical technology company. The company raised quarterly distributions by 24.70% to 26.50 cents/share. This dividend achiever has boosted dividends for 20 years in a row.

Over the past decade, the company has managed to boost distributions by 33.50%/year. Currently, it is trading at 14.60 times earnings and yields 2%. Stryker earned 3.45$/share in 2011. Estimates are for EPS to reach $4.05 in 2012 and $4.30 in 2013. I would add the stock to my list for future analysis.


Nucor Corporation (NUE), together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. The company raised quarterly distributions by 0.70% to 36.75 cents/share. This dividend champion has boosted dividends for 40 years in a row. Yield: 3.60%

The company’s business model is exposed to the cyclical swings in the economy. Between 2006 and 2008 the company’s business was booming, and it was passing on special dividends to shareholders. Since then, the company’s dividend increases have been small. Once business picks up again, dividends will grow at a higher rate. I do not plan on adding to my position in the stock however. Check my detailed analysis of the stock.


C.H. Robinson Worldwide, Inc. (CHRW), a third-party logistics company, provides freight transportation services and logistics solutions to companies in various industries worldwide. The company raised quarterly distributions by 6.10% to 35 cents/share. This dividend achiever has boosted dividends for 16 years in a row.

Over the past decade, the company has managed to boost distributions by 27.80%/year. Currently, it is trading at 22 times earnings and yields 2.30%. Although the stock is overvalued, I would add it to my list for further research.

Hubbell Incorporated (HUB-B) engages in the design, manufacture, and sale of electrical and electronic products in the United States and internationally. The company raised quarterly distributions by 9.80% to 45 cents/share. Hubbell Incorporated has boosted dividends for 6 years in a row. Yield: 2.20%

The yield is lower than my entry of 2.50%, and the streak is lower than 10 years. However, I would continue monitoring the company, and may add it to my list for further research.

First Financial Corporation (THFF), through its subsidiaries, provides financial services. The company raised semi-annual distributions by 2.10% to 48 cents/share. This dividend champion has boosted dividends for 25 years in a row. Yield: 3.20%

Over the past decade, the company has managed to boost distributions by 5.20 %/year. Currently, it is trading at 11.50 times earnings and yields 3.10%. In 2002 EPs was $2.01/share, which means that earnings have not increased much over the past decade. Given analysts’ expectations for low earnings decrease over the next two years to $2.38 in 2012 I do not expect much in future dividend growth either.

Hillenbrand, Inc. (HI) designs, manufactures, distributes, and sells funeral service products to licensed funeral directors operating licensed funeral homes. The company raised quarterly distributions by 1.30% to 19.50 cents/share. This dividend stock has boosted dividends for 5 years in a row. Yield: 3.70%

Currently, it is trading at 12.60 times earnings and yields 3.70%. The past three dividend increases have been anemic at best. The slow pace of dividend hikes is particularly interesting in comparison to the rosy outlook for EPS growth to $1.89/share in 2013 and $2.19/share in 2014. Compare this to the EPS from 2012, which was $1.68/share.

Linear Technology Corporation (LLTC), together with its subsidiaries, designs, manufactures, and markets various analog integrated circuits (ICs) worldwide. The company raised quarterly distributions by 4% to 26cents/share. This dividend achiever has boosted dividends for 21 years in a row.

Over the past decade, the company has managed to boost distributions by 20.40%/year. Currently, it is trading at 20 times earnings and yields 3.10%. Over the past five years however, dividend growth has slowed down, as the dividend payout ratio has crossed 50%. I would add the stock to my list for further research.

Full Disclosure: Long NUE

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Seven Dividend Growth Stocks to Review

Every week I scan the list of dividend increases, and focus on the consistent dividend growers in a little bit of extra detail. I define consistent dividend grower as companies which have managed to boost distributions for over five consecutive years. Over the past week and a half, the following consistent income stocks raised distributions:

Becton, Dickinson and Company (BDX), a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company raised its quarterly dividend by 10% to 49.50 cents/share. This marked the 42nd consecutive annual dividend increase for this dividend champion. Over the past decade Becton Dickinson has managed to boost distributions by 15.70%/year. Yield: 2.60%. Check my analysis of the stock for a more comprehensive view of the company.

I really like Becton Dickinson at current valuation levels of 13.70 times earnings. The company has grown earnings per share from $2.07 in 2003 to $5.30 in 2012. Analysts estimate EPS to grow to $5.63 in 2013 and $6.14 by 2014. I would consider initiating a position in the stock subject to availability of funds.

McCormick & Company (MKC), Incorporated engages in the manufacture, marketing, and distribution of spices, seasoning mixes, condiments, and other flavorful products to retail outlets, food manufacturers, and foodservice businesses. The company raised its quarterly dividend by 9.70% to 34 cents/share. This marked the 27th consecutive annual dividend increase for this dividend champion. Over the past decade McCormick & Company has managed to boost distributions by 10.80%/year. Yield: 2.10%. Check my analysis of the stock for a more comprehensive view of the company.

The company has grown earnings per share from $1.29 in 2002 to $2.82 in 2011. Analysts estimate EPS to grow to $3.07 in 2012 and $3.36 by 2013. However, find McCormick to be overvalued at 22.20 times earnings. I would consider adding to my position on dips below $55.

Hormel Foods Corporation (HRL) engages in the production and marketing of various meat and food products. The company raised its quarterly dividend by 13.33% to 17 cents/share. This marked the 48th consecutive annual dividend increase for this dividend champion. Over the past decade Hormel Foods has managed to boost distributions by 10.70%/year. Yield: 2.20%

The company is trading at 16.30 times earnings, and has managed to grow EPS from $0.67 in 2003 to $1.90 in 2012. Analysts estimate EPS to grow to $1.94 in 2013 and $2.11 by 2014. Unfortunately, the yield is lower than my 2.50% entry criteria. I would consider initiating a position in the stock on dips below $27/share.

The York Water Company (YORW) engages in impounding, purifying, and distributing drinking water in Pennsylvania. The company raised its quarterly dividend by 3.50% to 13.83 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Over the past decade York Water Company has managed to boost distributions by 4.60%/year. Yield: 3.20%

The company has managed to boost earnings from 40 cents/share in 2002 to 71 cents/share in 2011. Analysts estimate EPS to grow to $0.72 in 2012 and $0.77 by 2013. Given the high dividend payout ratio, low dividend growth and relatively low yield for a utility of 3.20%, I view this stock as more of a hold than buy.

RGC Resources, Inc. (RGCO), through its subsidiaries, engages in the distribution of natural gas in Virginia. The company raised its quarterly dividend by 2.90% to 18 cents/share. This marked the tenth consecutive annual dividend increase for the company. Over the past decade RGC Resources has managed to boost distributions by 2%/year. Yield: 3.90%

Given the low growth in distributions over the past decade, and the high payout of 72%, I would rate the stock a hold. Despite the high current yield, the slow distributions growth would be unable to compensate against inflation. In addition, the current P/E ratio of 19.30 is rather high for a slow grower.

OGE Energy Corp. (OGE), together with its subsidiaries, operates as an energy and energy services provider that offers physical delivery and related services for electricity and natural gas primarily in the south central United States. The company raised its quarterly dividend by 6.40% to 41.75 cents/share. This marked the seventh consecutive annual dividend increase for the company. Over the past decade OGE Energy has managed to boost distributions by 1.20%/year. Yield: 2.90%

I like the low P/E ratio of 16.10, but the slow growth in distributions over the past decade is troubling. Earnings per share increased from $1.16 in 2002 to $3.50 by 2011. Analysts estimate EPS to grow to $3.55 in 2012 and $3.76 by 2013. I like the company’s low dividend payout ratio of 47.70%. I believe that there is room for distributions growth that is above average that for typical utility companies. I would add the company to my list for further research.

J&J Snack Foods Corp. (JJSF) manufactures nutritional snack foods; and distributes frozen beverages to the food service and retail supermarket industries in the United States, Mexico, and Canada. The company raised its quarterly dividend by 23.10% to 16cents/share. This marked the ninth consecutive annual dividend increase for the company. Over the past five years J&J Snack Foods has managed to boost distributions by 8.90%/year. Yield: 1%

The company is currently overvalued at 22 times earnings and a low yield of 1%. However, it has managed to boost earnings from $1.10/share in 2003 to $2.87/share in 2012. Analysts estimate EPS to grow to $3.10 in 2013 and $3.30 by 2014. I would continue monitoring the stock and the company, but at this stage the price is too high to warrant further investigation.

Full Disclosure: Long MKC

Relevant Articles:

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7 dividend stocks boosting distribution to their thankful shareholders

It is thanksgiving, and it is the time of year to say what one is thankful for. Common things include being thankful for good health, family or relationships. The shareholders of the following companies are also thankful for the fact that their board of directors committees approved dividend increases over the past week. I have outlined the companies which looked interesting at first glance, and then provided my brief commentary behind each dividend hike.

While it may seem that just a few of these companies look like good candidates for further research, all was hopefully not a waste of time. By familiarizing themselves with as many companies as possible, income investors are developing a better judgment, which would allow them to spot div growers on the rise, and avoid dividend stocks on the decline. The companies include:

Automatic Data Processing, Inc. (ADP) provides business outsourcing solutions. The company operates in three segments: Employer Services, Professional Employer Organization (PEO) Services, and Dealer Services. The company raised its quarterly dividend by 10.10% to 43.50 cents/share. This marked the 38th consecutive annual dividend increase for this dividend aristocrat. Yield: 3.20% (analysis)

The stock priced at 19.30 times earnings and yields 3.20%. ADP is trading at close to the 20 times earnings mark, which is at the high range of what I am willing to pay for a quality income stock. In addition, the dividend payout ratio is at 61.50%, which is at the top of the range for me. That being said, I do like the recurring nature of the business and plan on adding to my position subject to availability of funds.

The Laclede Group, Inc. (LG), through its subsidiaries, engages in the retail distribution, sale, and marketing of natural gas. The company raised its quarterly dividend by 2.40% to 42.50 cents/share. This marked the 10th consecutive annual dividend increase for this dividend achiever. Yield: 4.50%

The company has managed to boost distributions at a rate of only 1.90%/year. The company is attractively valued at 14.20 times earnings and has a low dividend payout ratio for a utility company of only 63%. However, the slow growth in earnings and dividends makes it a hold at best.

National Bankshares, Inc. (NKSH) operates as the bank holding company for the National Bank of Blacksburg, which provides a range of retail and commercial banking services to individuals, businesses, non-profits, and local governments in Virginia. The company raised its semi-annual dividend by 2.40% to 53 cents/share. This dividend achiever has raised distributions for 11 years in a row. Yield: 3.90% (analysis)

The stock is attractively valued at 11.30 times earnings, yields 3.90% and has an adequately covered distribution. National Bankshares has managed to boost dividends by 8.80%/year over the past decade. While it is cheap, and has a very good yield plus room for future dividend growth, I do not see a lot of catalysts that would propel EPS higher over the next few years. I would consider initiating a position in the stock subject to availability of funds.

Sysco Corporation (SYY), through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily to the foodservice or food-away-from-home industry. The company raised its quarterly dividend by 3.70% to 28 cents/share. This marked the 43rd consecutive annual dividend increase for this dividend champion. Yield: 3.70% (analysis)

Over the past five years, Sysco has managed to boost distributions by 8.90%/year. Earnings per share have increased from $1.20 in 2003 to $1.91 by 2012. Analysts are expecting a moderate increase in earnings to $1.94/share in 2013 and $2.12/share by 2014. Currently, the shares at attractively priced at 15.90 times earnings, and the dividend yield of 3.70% is adequately covered from net income. Unfortunately, without a strong growth in earnings, future dividend growth will be limited as well. I would monitor the situation, but for not I would likely refrain from adding any new funds to this position.

Brown-Forman Corporation (BF-B) engages in manufacturing, bottling, importing, exporting, and marketing alcoholic beverages. The company raised its quarterly dividend by 9.30% to 25.50 cents/share. This marked the 29th consecutive annual dividend increase for this dividend champion. Yield: 1.60% (analysis)

The company has a ten year annual dividend growth rate of 9.50%. The company’s prospects to deliver future dividend growth are promising and supported by growth in earnings. Unfortunately, the company is trading at 25.90 times earnings and yields only 1.60%. I would consider adding to my position in the stock at much lower levels than todays.

MDU Resources Group, Inc. (MDU) operates as a diversified natural resource company in the United States. The company generates, transmits, and distributes electricity, as well as distributes natural gas. The company raised its quarterly dividend by 3% to 17.25 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend champion. Yield: 3.50%

The company has a ten year annual dividend growth rate of 5.10%. The stock is trading at 17.20 times forward earnings, and has a dividend payout ratio of 59.50%. Unfortunately, given the slow growth in earnings over the past decade, I do not expect dividend growth to be above the rate of inflation. As a result, the dividend yield is not sufficient to compensate for the fact that your dividend dollars will be losing purchasing power because of inflation. I would consider the stock a hold.

Union Pacific Corporation (UNP), through its subsidiary, Union Pacific Railroad Company, provides rail transportation services in North America. The company raised its quarterly dividend by 15% to 69 cents/share. This marked the 7th consecutive annual dividend increase for this dividend stock. Yield: 2.40%

The company has a ten year annual dividend growth rate of 17%. The company is attractively priced at 14.50 times earnings, and is close to yielding my minimum yield of 2.50%. I like the prospects for future earnings and dividend growth for Union Pacific.

Full disclosure: Long ADP, SYY, BF-B

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Seven Dividend Stocks Boosting Distributions

Every week I screen the list of companies that announced dividend hikes. I typically look at the strength and consistency of dividend increases either from stocks I might be interested in researching further or from dividend growth stocks that I am noticing for the first time. There were 52 companies announcing dividend increases over the past week. I have highlighted companies which have raised distributions for nine years, and yielded close to my 2.50% entry yield requirement. In addition to that, I have added my commentary behind each dividend increase.

Emerson Electric Co. (EMR) operates as a diversified technology company worldwide. The company raised its quarterly dividend by 2.50% to 41 cents/share. This dividend king has raised distributions for 56 years in a row. Yield: 3.30% (analysis)

Over the past decade, the company has managed to raise distributions by 6.40%/year. The company is attractively valued, as it is trading at 14 times 2013 earnings. I was planning on adding to my position there, but the slow rate of distribution increases over the past few years are making me to reconsider that. I would rate the company as a hold right now.

AT&T Inc. (T), together with its subsidiaries, provides telecommunications services to consumers, businesses, and other providers worldwide. The company raised its quarterly dividend by 2.30% to 45 cents/share. This dividend champion has raised distributions for 29 years in a row. Yield: 5.40% (analysis)

Over the past decade, the company has managed to raise distributions by 5.30%/year. In most recent years however, the rate of dividend growth has slowed to 2%/year. Given the slow growth in earnings and high dividend payout ratio, I do not foresee much in future dividend growth going forward. Many retired investors are holding on to AT&T due to its high yield. The stock has also been bid up in the current low interest rate environment, mostly from yield-hungry investors. I would rate the company as a hold for now.

Universal Corporation (UVV), through its subsidiaries, operates as a leaf tobacco merchant and processor worldwide. The company raised its quarterly dividend by 2% to 50 cents/share. This dividend champion has raised distributions for 42 years in a row. Yield: 4.20% (analysis)

Over the past decade, the company has managed to raise distributions by 4.10%/year. It is attractively valued at 9.10 times earnings and the dividend payout ratio is only 38%. The big concern is that company’s business is deteriorating, as I had outlined in an earlier article. Given the grim prospects for Universal’s future profitability, it is no wonder shares are trading at such a discount.

Vectren Corporation (VVC), through its subsidiaries, provides energy delivery services to residential, commercial, and industrial and other contract customers in Indiana and west central Ohio. The company raised its quarterly dividend by 1.40% to 35.50 cents/share. This dividend champion has raised distributions for 53 years in a row. Yield: 4.90%

Over the past decade, the company has managed to raise distributions by 3%/year. This is mostly due to the fact that EPS have been stuck in a range over the past decade, without much in sustainable growth. As a result, future dividend increases would likely be contained at a rate of 2%/year for the foreseeable future. While the high yield is appealing now, the wealth destroying powers of inflation would reduce purchasing power of this income stream over time. This stock is a decent hold however, and the dividend payout of 71% is in the low range for a utility.

Microchip Technology Incorporated (MCHP) engages in the development, manufacture, and sale of semiconductor products for embedded control applications. The company raised its quarterly dividend to 35.20 cents/share. This dividend achiever has raised distributions for 11 years in a row. Yield: 4.60%

Microchip is overvalued at 29 times earnings, and has a dividend payout ratio above 100%. I would stay away from this company for now.

Utah Medical Products, Inc. (UTMD) produces medical devices for the healthcare industry primarily in the United States and Europe. The company raised its quarterly dividend by 2.10% to 24.50 cents/share. This dividend stock has raised distributions for 9 years in a row. Yield: 2.80%

Over the past five years, the company has managed to raise distributions by 3.90%/year. Utah Medical Products is attractively valued at 13.20 times earnings, has a sustainable dividend payment and has managed to increase earnings over the past decade at a nice clip. I like the company’s prospects for future growth, and the only thing that puts me off the stock is the low dividend growth. I would continue monitoring the situation.

Atmos Energy Corporation (ATO), together with its subsidiaries, engages in the distribution, transmission, and storage of natural gas in the United States. The company raised its quarterly dividend by 1.40% to 35 cents/share. This dividend champion has raised distributions for 25 years in a row. Yield: 4.10%

Over the past decade, the company has managed to raise distributions by 1.60%/year. The dividend growth at Atmos Energy is not sufficient to even compensate shareowners for the effects of inflation. This is particularly interesting, given the fact that earnings per share increased from $1.45 in 2002 to $2.11 in 2012. The dividend payout ratio is at 59%, which is low for a utility. The company is attractively valued, trading at 15.10 times earnings. I would research the company further in a future stock analysis.

The list was dominated by companies which boosted dividends at a very slow pace. Nevertheless, this is an important exercise for me, as I was able to identify a company where I might end up refraining from adding to my position (EMR). In addition, I uncovered a position where I might even end up liquidating my position, as I do not foresee much growth in EPS or distributions (UVV). I also uncovered two stocks ((ATO) and (UTMD)), where companies have the ability to boost distributions, but for some reason have not done so. These require further research and monitoring on my part.

Full Disclosure: Long EMR and UVV

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