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

Monday, January 28, 2013

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

Relevant Articles:

Realty Income (O) – The Monthly Dividend Company
Nine Income Stocks Delivering Dividend Increases to shareholders
Dividend Achievers Offer Income Growth and Capital Appreciation
Four High Yield REITs for current income

Tuesday, January 22, 2013

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

Relevant Articles:

Enterprise Products Partners (EPD): A Pipeline Cash Machine
Kinder Morgan Partners (KMP) for High Yield and Solid Distributions Growth
Kinder Morgan Partners – One Company three ways to invest in it
General vs Limited Partners in MLP's
Master Limited Partnerships (MLPs)

Monday, December 10, 2012

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

Relevant Articles:

Dividend Champions - The Best List for Dividend Investors
Dividend Achievers Offer Income Growth and Capital Appreciation
Market Declines: An Opportunity to Acquire Quality Dividend Stocks
Nucor Corporation (NUE) Dividend Stock Analysis

Monday, December 3, 2012

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:

Becton, Dickinson and Company (BDX) Dividend Stock Analysis
McCormick & Company (MKC) Dividend Stock Analysis 
Dividend Champions - The Best List for Dividend Investors
How to select dividend stocks?

Sunday, November 18, 2012

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

Relevant Articles:

National Bankshares (NKSH) Dividend Stock Analysis
Automatic Data Processing (ADP) Dividend Stock Analysis
Sysco (SYY) Dividend Stock Analysis
Dividend Champions - The Best List for Dividend Investors

Monday, November 12, 2012

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

Relevant Articles:

-  AT&T and Coca-Cola are more expensive than you think
-  Investors Get Paid for Holding Dividend Stocks
-  Should income investors worry about higher dividend taxes?
-  Dividend Paying Stocks for Retirement Income

Monday, November 5, 2012

Dividend Stocks Deliver Returns Whether Market is Open or Not

As a dividend investor I purchase quality dividend stocks with the intention to hold them for the long run. Some of the most successful dividend investors have managed to accumulate sizeable fortunes simply by sitting and reinvesting dividends into more income producing assets. Warren Buffett is one of the most successful income investors that I outlined in an earlier article, who has managed to reinvest his money for long periods of time while achieving market beating returns.

One of my favorite quote from Warren Buffett deals with investing for the long –term:
"I never attempt to make money on the stock market. I buy on assumption they could close the market the next day and not re-open it for five years."

Last week, the US market was closed for two whole days due to Hurricane Sandy. Dividend Investors however, kept receiving their dividend checks. In fact, most income investors could care less if the market is open or not, since they are investing for the long run. For these individuals, the consistent stream of rising dividend income provides them with the positive reinforcement to stick to their investments for the long run.

Over the past week, the following consistent dividend increases boosted their distributions:


Cardinal Health, Inc. (CAH), a healthcare services company, provides pharmaceutical and medical products and services in the United States and internationally. The company raised its quarterly dividend by 15.80% to 27.50 cents/share. This was the second dividend increase for Cardinal Health over the past year. This dividend achiever has raised distributions for 16 years in a row. Yield: 2.70% (analysis)

The company has managed to boost annual dividends by 28.90%/year over the past decade. In addition, the company trades at 13 times earnings and has an adequately covered distribution. While this is impressive, the company has been unable to increase earnings per share over the past decade. As a result, the rapid growth in dividends was possible due to the expansion in the dividend payout ratio. Analysts are expecting an increase in EPs by 10%/year over the next two years however. I would take another look at the company before committing any money however.


Alliance Resource Partners, L.P. (ARLP) engages in the production and marketing of coal primarily to utilities and industrial users in the United States. This master limited partnership (MLP) raised its quarterly distributions to $1.085/unit. This dividend achiever has raised distributions for ten years in a row. Yield: 6.70%

The partnership has managed to boost annual dividends by 13.80%/year over the past decade. Alliance Resource Partners has managed to boost profitability over the past decade, as well. I would consider this MLP on my list for further research.




Arrow Financial Corporation (AROW) provides various commercial and consumer banking, and financial products in the United States. The company raised its quarterly dividend by 2% to 25 cents/share. This marked the 19th consecutive annual dividend increase for this dividend achiever. Yield: 4.10%

The company has managed to boost annual dividends by 6.50%/year over the past decade. At the same time earnings per share have increased by 20% in total since 2002. Because of the slow earnings growth, future dividend increases will be limited. I would view the stock as a hold.

Mercury General Corporation (MCY), together with its subsidiaries, engages in writing personal automobile insurance products. The company raised its quarterly dividend by 0.50% to 61.25 cents/share. This dividend champion has raised distributions for 26 years in a row. Yield: 6%

While over the past decade, Mercury General has managed to boost dividends by 8.70%/year, the rate of increases has fallen dramatically since 2008. Given the high dividend payout ratio and the decline in earnings per share over the past three years, it is no surprise that the dividend growth has been anemic. I would rate the stock as a hold at best.

Full Disclosure: None

Relevant Articles:

Cardinal Health (CAH) Dividend Stock Analysis
The Most Successful Dividend Investors of all time
- Master Limited Partnerships (MLPs) 
A Record Week for Dividend Increases

Monday, October 29, 2012

A Record Week for Dividend Increases

There were a record 73 dividend increases over the past week. This was the busiest week for dividend increases I have witnessed since starting this site five years ago. I review dividend increases each week in an effort to uncover hidden dividend gems as well as to keep close tabs on the pulse of dividends paid by companies I own or am in the process of researching.

Below, I have highlighted companies that boosted distributions over the past week and have been raising dividends for at least ten consecutive years. I added a brief commentary behind each company of interest. The companies include:

Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance. The company raised its quarterly distributions by 6.10% to 35 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. Yield: 2.80% (analysis)

I recently added to my position in Aflac, given the company’s P/E ratio of 8.20. The company has managed to raise dividends by 20.40%/year over the past decade. Most of the fears behind Aflac stem from fears that its portfolio holds a large portion of European debt. Aflac has been decreasing its position in European debt and owns no toxic Greek debt. Another fear could be the Fukushima disaster, which might increase cancer rates in Japan. At the same time the company is growing operations in Japan and US. Check my analysis of the stock.

V.F. Corporation (VFC) designs and manufactures, or sources from independent contractors various apparel and footwear products primarily in the United States and Europe. The company raised its quarterly distributions by 20.80% to 87 cents/share. This marked the 40th consecutive annual dividend increase for this dividend champion. Yield: 2.20%

The company has managed to more than double earnings since 2003.The company has managed to raise dividends by 10.90%/year over the past decade. I analyzed the company in 2011, but just like today the dividend was quite low. I would consider initiating a position in VF Corp on dips below $140.

Magellan Midstream Partners, L.P. (MMP) engages in the transportation, storage, and distribution of petroleum products in the United States. The MLP raised its quarterly distributions to 48.50 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Yield: 4.40%

Magellan has managed to boost distributions by 15.80%/year over the past decade. I am adding this MLP to my list of companies to analyze in a future post in order to understand if there is any potential for future distributions hikes.

Tompkins Financial Corporation (TMP) operates as a community-based financial services company in New York. The company raised its quarterly distributions by 5.60% to 36 cents/share. This marked the 26th consecutive annual dividend increase for this dividend champion. Yield: 3.70%

The company has managed to boost distributions by 6.40%/year over the past decade. This was driven by an increase in EPS from $2.11 in 2002 to $2.79 in 2011. I like the company’s predictable dividend growth coupled with an above average dividend yield and sustainable dividend payout based on 2012 earnings. I would add the stock to my list for further research.

The following companies that boosted distributions either do not have a yield above 2.50% or are growing distributions at a very slow pace. In order to live off dividends in retirement, investors need stocks that pay decent current yields, which also boost distributions at or above the rate of inflation. That being said, if any of these companies manage to yield more than 2.50% while growing dividends by more than 6% per year, I would consider them for further analysis.

Brown & Brown, Inc. (BRO), a diversified insurance agency, engages in the marketing and sale of insurance products and services in the United States. The company raised its quarterly distributions by 5.90% to 9 cents/share. This marked the 19th consecutive annual dividend increase for this dividend champion. Yield: 1.40%

Met-Pro Corporation (MPR) manufactures and sells product recovery and pollution control equipment for the purification of air and liquids, fluid handling equipment, and filtration and purification products. The company raised its quarterly distributions by 2.10% to 7.25 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Yield: 3.30%

Middlesex Water Company (MSEX) owns and operates regulated water utility and wastewater systems in New Jersey, Delaware, and Pennsylvania. The company raised its quarterly distributions by 1.40% to 18.75 cents/share. This marked the 40th consecutive annual dividend increase for this dividend achiever. Yield: 4%

UMB Financial Corporation (UMBF), a multi-bank holding company, provides banking and other financial services to commercial, retail, government, and correspondent bank customers. The company raised its quarterly distributions by 4.90% to 21.50 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever. Yield: 1.90%

MSC Industrial Direct Co., Inc. (MSM), together with its subsidiaries, operates as a direct marketer and distributor of metalworking and maintenance, repair, and operations (MRO) products to industrial customers in the United States. The company raised its quarterly distributions by 20% to 30 cents/share. This marked the 10th consecutive annual dividend increase for this dividend achiever. Yield: 1.70%

Prosperity Bancshares, Inc. (PB) operates as the holding company for Prosperity Bank that provides a range of financial products and services to small and medium-sized businesses, and consumers in Texas. The company raised its quarterly distributions by 10.30% to 21.50 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Yield: 2.10%

Stepan Company (SCL), together with its subsidiaries, engages in the production and sale of specialty and intermediate chemicals to manufacturers in various industries worldwide. The company raised its quarterly distributions by 14.30% to 16 cents/share. This marked the 45th consecutive annual dividend increase for this dividend champion. Yield: 1.20%

Tennant Company (TNC) engages in designing, manufacturing, and marketing cleaning solutions worldwide. The company raised its quarterly distributions by 5.90% to 18 cents/share. This marked the 40th consecutive annual dividend increase for this dividend champion. Yield: 1.90%

Full Disclosure: Long AFL

Relevant Articles:

Aflac (AFL) Dividend Stock Analysis
Dividend Champions - The Best List for Dividend Investors
V.F. Corporation (VFC) Dividend Stock Analysis 2011
Dividend Achievers Offer Income Growth and Capital Appreciation Potential

Monday, October 15, 2012

Six Dividend Winners Boosting Investor's Distributions

In this article, I have highlighted several companies whose Boards of Directors approved increases in distributions over the past week. In order to reduce the list to a more manageable level, I only highlighted companies which have managed to boost dividends for at least five years in a row. I use five years as an initial screen, because it is roughly equal to the average economic cycle. By only including companies which have raised dividends for at least five years in row, I am only including companies which have demonstrated the ability to hike distributions for longer than one economic cycle.

The consistent dividend raisers of the past week include:

Northwest Natural Gas Company (NWN) stores and distributes natural gas primarily in Oregon, Washington, and California. The company raised quarterly distributions by 2.20% to 45.50 cents/share. This dividend king has boosted distributions for 57 years in a row. Yield: 3.60%

This utility has managed to boost earnings from $1.63/share in 2002 to $2.39 in 2011. The ten year dividend growth is 3.50%/year, which is not bad for a utility. In addition, its current payout ratio of 76.50% is not too bad for a utility either. After I sold the majority of my Con Edison (ED) position, I have been on the lookout for utility companies to add to my portfolio. I would consider analyzing the stock in more detail in the coming weeks.

Fastenal Company (FAST), together with its subsidiaries, operates as a wholesaler and retailer of industrial and construction supplies in the United States and internationally. This dividend achiever raised quarterly distributions by 10.50% to 21 cents/share. Fastenal has boosted distributions for 14 years in a row. Yield: 1.80%

I like the fundamentals behind Fastenal, as well as the strong earnings growth over the past decade. In addition, I also like the strong potential for future earnings growth. One drawback behind Fastenal is the high valuation. The stock trades at over 33 times earnings and yields only 1.80%. I would consider initiating a position in the stock on dips to my buy zone between $27 - $30/share.

Targa Resources Partners LP (NGLS) provides midstream natural gas and natural gas liquid (NGL) services in the United States. This master limited partnership raised quarterly distributions to 66.25 cents/unit. Targa Resources Partners has boosted distributions for 6 years in a row. Yield: 6%

The partnership has been able to cover distributions from distributable cash flow at 1.15 times in Q2 2012, 1.5 times in Q1 2012, 1.6 times in Q4 2011 and 1.10 times DCF in Q3 2011. In addition, the partnership has also been able to boost distributable cash flow in order to be able to pay rising distributions over the past six years. I would like to see at least ten years of dividend hikes before I invest in a stock however. As a result I would add the stock on my watch list in order to see how the business evolves over the next few years

Western Gas Partners, LP (WES) owns, operates, acquires, and develops midstream energy assets in east, west, and south Texas; the Rocky Mountains; and the Mid-Continent. The MLP raised quarterly distributions to 50 cents/unit. Western Gas Partners has boosted distributions for 5 years in a row. Yield: 3.80%

Western Gas Partners has one of the lowest yields for Master Limited Partnerships. However, its ratio of distributions paid to the distributable cash flow has been 1.59 in 2011 and 1.64 in 2010, which is very high for the sector. In addition, it is targeting double digit distribution growth over the next year, due to expansion. I would add this MLP to my list for further research.

Healthcare Services Group, Inc. (HCSG), together with its subsidiaries, provides housekeeping, laundry, linen, facility maintenance, and dietary services to nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States. This dividend achiever raised quarterly distributions to 16.50 cents/share. Healthcare Services Group has boosted distributions for 10 years in a row. Yield: 2.90%

I like the fact that the company has managed to boost distributions every single quarter since initiating a dividend in 2003. However, I think that the company went too far in raising distributions to an unsustainably high amount. I currently find the dividend payout to be extremely high. As a result, I do not find the current payment to be sustainable. As a result, I would not be able to commit funds to initiate a position in the stock.

Senior Housing Properties Trust (SNH), a real estate investment trust (REIT), primarily invests in senior housing properties in the United States. The company raised quarterly distributions by 2.60% to 39 cents/share. Senior Housing Properties Trust has boosted distributions for 8 years in a row. Yield: 7.10%

A common metric for evaluating REITs is Funds From Operations, which includes earnings and other non-cash offsets such as depreciation. For the past four quarters FFO/share is $1.75, while the forward dividend payment at the new rate is $1.56year. This makes for a FFO payout ratio of 89%, which is slightly high for my liking. I typically prefer an FFO payout in the mid 80’s %. This metric has stood around 84% – 86% between 2009 and 2011, which is why I think that the company might not have a lot of room to grow distributions going forward. FFO/share increased from $1.70/share in 2009 to $1.75/share for the past four quarters through Q2 2012.

Full Disclosure: None

Relevant Articles:

Eleven Dividend Kings, Raising dividends for 50+ years
Dividend Achievers Offer Income Growth and Capital Appreciation
Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors
Three High Dividend Stocks Raising Distributions

Monday, October 1, 2012

Five Income Stocks Boosting Investors’ Distributions

Over the past week, the boards of directors for several income stocks approved plans to boost investors’ dividends. Only five of these companies had boosted distributions for over five consecutive years. In this article I have presented only the companies that passed the first screen, along with a brief analysis of each company. The companies include:

Lockheed Martin Corporation (LMT), a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, homeland security, information technology, and cyber security in the United States and internationally. The company raised its quarterly distributions by 15% to $1.15 /share. This marked the tenth consecutive annual dividend increase for Lockheed Martin. Yield: 4.90%

The stock looks attractively valued at the moment, trading at 11 times earnings and yielding 4.90%. The dividend is well covered. In my previous analysis of the stock, I outlined that future growth in earnings might be limited due to tightening of US Government budgets on military spending. I would take another look at the company, and evaluate long-term prospects, before I initiate a position in the stock. Overall however, it is very rare to find a company that is attractively valued in this environment and offer such a high dividend which is also growing.

Bowl America Incorporated (BWL-A), together with its subsidiaries, operates bowling centers in the United States. The company raised its quarterly distributions by 3.10% to 16.50 cents/share. This dividend champion has boosted distributions for 41 years in a row. Yield: 5.10%

Currently, the dividend payout ratio is unsustainably high for the dividend to be safe. The company has been unable to cover the dividend out of earnings since 2009. As a result, future dividend growth is very limited. I would consider the stock a hold at best.

CLARCOR Inc. (CLC) provides filtration products, filtration systems and services, and consumer and industrial packaging products worldwide. The company raised its quarterly distributions by 12.50% to 13.50 cents/share. This dividend champion has boosted distributions for 48 years in a row. Yield: 1.20%

The company has managed to significantly increase earnings and dividends over the past decade. The stock currently trades at 18.40 times earnings, but unfortunately yields only 1.20%. I would consider researching Clarcor, and potentially initiating a position in it on weakness.

Pall Corporation (PLL), together with its subsidiaries, manufactures and markets filtration, purification, and separation products and integrated systems solutions worldwide. The company raised its quarterly distributions by 19% to 25 cents /share. This marked the ninth consecutive annual dividend increase for Pall Corporation. Yield: 1.60%

Currently the stock is overvalued at 23 times earnings and yields only 1.60%. The company has managed to boost earnings per share from$ 0.84 in 2003 to $2.75 in 2012. The ten year dividend growth is only 0.30%/year since Pall cut distributions in 2002. I would pass on the stock for now, but may consider it once a dividend achiever status is reached and it trades at better valuations.

Artesian Resources Corporation (ARTNA), through its subsidiaries, provides water, wastewater, and engineering services on the Delmarva Peninsula. The company raised its quarterly distributions by 2.50% to 20.27 cents/share. This dividend achiever has boosted distributions for 16 years in a row. Yield: 3.50%

Artesian Resources has boosted distributions by 4.40%/year over the past decade. The company has managed to increase earnings per share from $0.78 in 2002 to $1.07 for the past four quarters. Given the slow increase in earnings, and the high dividend payout ratio, I do not expect much in future dividend growth. In addition, the stock is trading at 21.70 times earnings, which makes it a hold. Utility stocks are difficult to justify in the accumulation phase of dividend growth portfolios in general because of slow growth and high payout ratios.

Full Disclosure: None

Relevant Articles:

Lockheed Martin Corporation (LMT) Dividend Stock Analysis
Dividend Achievers Offer Income Growth and Capital Appreciation
Dividend Champions - The Best List for Dividend Investors
Dividend Aristocrats List for 2012

Monday, September 24, 2012

Nine Income Stocks Delivering Dividend Increases to Shareholders

There were more than twenty companies which announced dividend hikes over the past week. In this article, I have outlined the companies which have managed to boost distributions for at least five years in a row.  I have excluded companies which pay fluctuating dividends as well as companies which might have raised dividends for a few years in a row simply by accident. Past dividend growth is no guarantee of future success however. As a result I added a brief analysis after each consistent dividend stock.

The nine consistent dividend raisers from the past week include:

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. This master limited partnership announced its plans to increase unitholder distributions to 65 cents/unit in the third quarter and 65 cents/unit in the fourth quarter of 2012. Enterprise Products Partners has raised distributions for 16 years in a row and yields a healthy 4.90%.

Few income stocks commit to boosting distributions for several quarters in a advance. Only a business with dependable cashflows could afford to accomplish this. The increase in distributions is supported by fee-based projects in Eagle Ford Shale in South Texas, which recently went online. In addition, the company also announced that a few other fee-generating assets are on schedule to start delivering revenues by the end of 2012. Check my analysis of this MLP.

McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. The company raised its quarterly dividend by 10% to 77 cents/share. This marked the 36th consecutive annual dividend increase for this dividend aristocrat. Yield: 3.30%

In general, the most recent dividend increase has been very similar to what I forecasted the company’s future annual dividend growth rate to be over the next few years. Analysts expect the Golden Arches to boost EPS by 7%/year for the next two years, from $5.27/share in 2011 to $6.03/share in 2013. As a result, future dividend increases in the 10% range could be easily supported by growth in business, reduction in share count and slight expansion in the dividend payout ratio. Check my analysis of McDonald’s.

Realty Income Corporation (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. This REIT announced a slight distribution increase in its monthly dividends to $0.1514375 per share. This is an increase of 4.30% over the distribution paid this time last year. Realty Income has boosted distributions for 18 consecutive years, and was one of the few real estate investment trusts that didn’t cut dividends during the Financial Crisis. However, given the low yield of 4.40%, I view the stock as a hold. The weak distribution growth over the past five years, coupled with investor’s hunger for dividend yield, has pushed the stock above my buy point. However, I do like the intent to acquire American Realty Capital Trust (ARCT), which would generate additional FFO/share to increase distributions to $1.94/share after deal is closed. I would consider adding to my position at yields around 5%, but until then the stock is a hold for my income portfolio.

Microsoft Corporation (MSFT) develops, licenses, and supports software products and services; and designs and sells hardware worldwide. The company raised its quarterly distributions by 15% to 23 cents/share. This marked the eighth consecutive annual dividend increase for Microsoft. Yield: 3%

I like the fact that Microsoft is a virtual monopoly in the PC market with its Windows Operating system. When I previously analyzed the stock, I liked the valuation, potential for dividend growth and the company’s moat at present levels. However, I am still unsure of whether Microsoft will be able to maintain strong competitive position with software going forward, as an increasing number of users are switching from PC’s to Notebooks to Tablets. Moats are very difficult to maintain in the technology world, which is probably why I have been hesitant to add tech companies such as Microsoft (MSFT) and Intel (INTC) to my portfolio.

YUM! Brands, Inc. (YUM), together with its subsidiaries, operates as a quick service restaurant company in the United States and internationally. The company raised its quarterly distributions by 17.50% to 33.50 cents/share. This marked the ninth consecutive annual dividend increase for Yum! Brands. Yield: 2%

The company is expected to grow earnings from $2.74/share in 2011 to $3.73/share by 2013. Strong earnings growth will fuel double digit dividend increases at least by the end of the decade. Unfortunately, the stock is trading at more than 21 times earnings and only yields 2%. I was able to scoop some shares of this fast growing company a few years ago and would likely add to my position on any large dips in the stock price. I would add to my position if price falls to $54/share, or if the dividend goes up by 25% next year and price is unchanged from today’s levels I would likely be a buyer.

Texas Instruments Incorporated (TXN) engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. The company raised its quarterly distributions by 23.50% to 21 cents/share. This marked the ninth consecutive annual dividend increase for Texas Instruments. Yield: 2.90%

On the surface, Texas Instruments seems like a company with strong dividend growth, sustainable dividend payout and above average yield. In addition, the company would likely join the list of Dividend Achievers in 2013. However, investors who look closely at the numbers would realize that much of the dividend growth has been mostly due to expansion of the dividend payout ratio. Earnings have tended to be volatile, which means that future dividend growth above $1/share in annual dividends would be very difficult to achieve organically. In addition, it currently is trading at 21 times earnings. I find the stock to be a hold at current levels.

ConAgra Foods, Inc. (CAG) operates as a food company primarily in North America. The company operates through two segments, Consumer Foods and Commercial Foods. The company raised its quarterly dividend by 4.20% to 25 cents/share. This marked the 6th consecutive annual dividend increase for ConAgra. Yield: 3.60%

The company cut distributions in 2006, and has been increasing them very slowly since then. The trend in earnings per share has been erratic over the past decade, which led to the cut in 2006. I would continue monitoring the situation at ConAgra, but without any sustainable earnings growth over the next decade, the company might be unable to even achieve a dividend achiever status in four years.

Cracker Barrel Old Country Store, Inc. (CBRL), through its subsidiaries, engages in the development and operation of the Cracker Barrel Old Country Store restaurant and retail concept in the United States. The company raised its quarterly dividend by 25% to 50 cents/share. The new rate also represents a 100% increase over last year’s distribution of 25 cents/share. Cracker Barrel has raised dividends for 10 years in a row. The company looks attractively valued, and seems to have an adequately covered dividend. I would consider adding it to my list for further research. Yield: 3%

The First of Long Island Corporation (FLIC) operates as a bank holding company for The First National Bank of Long Island that provides financial services. The company raised its quarterly dividend by 8.70% to 25 cents/share. This marked the 17th consecutive annual dividend increase for First of Long Island Corporation. This bank has managed to quietly double EPS over the past decade, while raising distribuions by 13.40%/year on average over the same time period. I would consider adding it to my list for further research. Yield: 3.20%

Full Disclosure: Long EPD, MCD, YUM, O

Relevant Articles:

Enterprise Products Partners (EPD): A Pipeline Cash Machine
McDonald’s (MCD) Dividend Stock Analysis 2012
Dividend Aristocrats List for 2012
Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors

Monday, September 17, 2012

Phillip Morris International Delivers a Fifth Consecutive Dividend Hike

The past week was characterized by very slow dividend increase activity. However, it was not slow if you were a shareholder of Phillip Morris International, which manufactures and sells cigarettes and other tobacco products. The company raised its quarterly dividend by 10.40% to 85 cents/share. This marked the fifth consecutive annual dividend increase for this global tobacco conglomerate. Check my recent analysis of the stock.

The average annual dividend increase over the past five years has been 13.20%. In addition, the company spends aggressively on stock buybacks. The number of outstanding shares has been reduced from 2.062 billion in 2008 to 1.701 billion in 2012.Back in June 2012 the company announced a 3 year stock buyback program, worth $18 billion.

Based on expected 2012 earnings of $5.18/share, the forward dividend payout ratio stands at 65%, which is sustainable. The company is also estimated to earn 11% more per share in 2013, which would likely translate into a quarterly dividend payment of 94 cents/share by the end of 2013. The expected EPS in 2013 is double what the EPS was in 2007 of $2.87/share. I find the stock attractively valued at 17.30 times earnings, yielding 3.80% and having a sustainable dividend payout ratio. Since Phillip Morris International is my largest position, I would likely not have the opportunity to add to it for several months. However, I like the long term economics of PMI’s business, and the prospects for earnings growth of around 10%-12%/year for the foreseeable future.

There are a few risks that investors in Phillip Morris International face. The largest challenge includes stricter regulatory environment in most developed countries that PMI operates in. The recent introduction of plain packaging for cigarettes sold in Australia would likely hurt competition, as companies like PMI would have a hard time differentiating their products based on strong brands and quality of products. Luckily, there aren’t any countries that seem likely to embrace a similar approach to Australia at least in the next five years or so. In addition, since PMI operates in so many countries worldwide, chances are that set-backs in one country would be more than offset against gains in other places.

Atlantic Tele-Network, Inc. (ATNI), through its subsidiaries, provides wireless and wire line telecommunications services in North America, Bermuda, and the Caribbean. The company raised its quarterly dividend by 8.70% to 25 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Atlantic Tele-Network looks attractively valued at 18 times earnings, yields 2.50% and has an adequately covered distribution. I like the fact that the company has managed to boost earnings and distributions over the past decade. I would add the stock to my list for further analysis.

The other company raising distributions included The Kroger Co. (KR), which operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the United States. The company raised its quarterly dividend by 30.40% to 15 cents/share. This marked the seventh consecutive annual dividend increase for the company. Yield: 2.50%

Kroger boasts a five year dividend growth rate of 17%/year. After a nearly 18 year hiatus, Kroger started paying dividends in 2006. The company had been a consistent dividend raiser until 1988, when it took out a large loan and issued a large cash dividend to investors in order to fend off potential acquirers. Over the past decade, Kroger has been unable to grow earnings per share, despite repurchasing over a quarter of outstanding shares during the period. Without earnings growth, future dividend growth is limited.

Full Disclosure: Long PM

Relevant Articles:

Philip Morris International (PM) Dividend Stock Analysis
My Entry Criteria for Dividend Stocks
Dividends versus Share Buybacks/Stock repurchases
Three Companies expecting high dividend growth and returns

Monday, September 10, 2012

High Dividend Growth Stocks in 2012

This year has been characterized as a record year for dividend distributions paid to shareholders by cash rich companies. The sentiment is even more bullish amongst the elite dividend aristocrats list, which includes large-cap corporations each of which have managed to boost distributions for at least 25 consecutive years in a row. Out of 51 members of the index at 12/31/2011, 35 have increased distributions in 2012, while the remaining companies have not had the chance to announce changes in dividends so far this year. I went through the list of dividend increases, and decided to focus on the companies with the fastest dividend growth rates.

In general, companies that raise distributions at a fast rate will be able to generate a high yield on cost for their investors. This of course will happen only if the high dividend growth rates can be sustained out of rapid growth in earnings or if the companies start out with a low dividend payout ratio. I analyzed each of the high dividend growth aristocrats for 2012 below, in order to determine whether the high dividend growth is a one-time deal or not. If companies have the characteristic to boost distributions rapidly for a sustained period of time, and if investors are able to get on board at attractive valuations, high yields on cost could be achieved in a relatively short periods of time. The companies on the list include:

Walgreen Co. (WAG), together with its subsidiaries, operates a chain of drugstores in the United States. In June, the company raised annual distributions by 22.20% to $1.10/share. The ten year dividend growth rate has been 18.90%/year. This dividend aristocrat has raised distributions for 37 years in a row. The stock is attractively valued at 12 times earnings, yields 3.10% and has an adequately covered distribution. I like the high dividend growth rate at the firm and the attractive valuation and as a result I recently added to my position in the stock. (analysis)

Exxon Mobil Corporation (XOM) engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. In April, the company raised annual distributions by 21.30% to $2.28/share. The ten year dividend growth rate has been 7.40%/year. This dividend aristocrat has raised distributions for 30 years in a row. The stock is attractively valued at 9.50 times earnings, yields 2.60% and has an adequately covered distribution. While I like the recent strong increase in distributions, I think the yield is lower in comparison to Chevron (CVX). (analysis)

W.W. Grainger, Inc. (GWW) engages in the distribution of maintenance, repair, and operating supplies, as well as other related products and services for businesses and institutions primarily in the United States and Canada. In April, the company raised annual distributions by 21.20% to $3.20/share. The ten year dividend growth rate has been 13.70%/year. This dividend aristocrat has raised distributions for 41 years in a row. The stock is slightly overvalued at 20.90 times earnings, yields 1.60% and has an adequately covered distribution. While I own the stock, I consider it a hold at current valuations, which means I would not add money to this position and would reinvest dividends elsewhere.

Target Corporation (TGT) operates general merchandise stores in the United States. In June, the company raised annual distributions by 20% to $1.44/share. The ten year dividend growth rate has been 17.50%/year. This dividend aristocrat has raised distributions for 45 years in a row. The stock is attractively valued at 14.70 times earnings and has an adequately covered distribution but yields only 2.30%. In my analysis of the stock, I outlined that I would much rather play retail sector by owning Wal-Mart Stores (WMT), which is the heavyweight champion in the sector.

Stanley Black & Decker, Inc. (SWK) provides power and hand tools, mechanical access solutions, and electronic security and monitoring systems primarily in the United States, Europe, Latin America, and Canada. In July, the company raised annual distributions by 19.50% to $1.96/share. The ten year dividend growth rate has been 5.70%/year. This dividend aristocrat has raised distributions for 45 years in a row. The stock is slightly overvalued at 20.40 times earnings, although it yields 2.70% and has an adequately covered distribution. I would consider analyzing the stock further in order to determine if it has what it takes to sustain future dividend increases.

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. In January, the company raised annual distributions by 16.70% to $0.84/share. The ten year dividend growth rate has been 11.80%/year. This dividend aristocrat has raised distributions for 36 years in a row. The stock is valued at 17.80 times earnings, yields 1.30% and has an adequately covered distribution. Because of the low current yield, it is outside of my buy range. As a result I do not plan on adding to my position in the stock, and I would consider re-investing dividends received in other attractively priced dividend paying companies. (analysis)

Lowe’s Companies, Inc. (LOW), together with its subsidiaries, operates as a home improvement retailer. In June, the company raised annual distributions by 14.30% to $0.64/share. The ten year dividend growth rate has been 29.60%/year. This dividend aristocrat has raised distributions for 50 years in a row. The stock is valued at 19 times earnings, yields 2.30% and has an adequately covered distribution. I would consider addin to my position in the stock on dips below $25.60. (analysis)

Sigma-Aldrich Corporation (SIAL), a life science and high technology company, develops, manufactures, purchases, and distributes various chemicals, biochemicals, and equipment worldwide. In February, the company raised annual distributions by 11.10% to $0.80/share. The ten year dividend growth rate has been 15.90%/year. This dividend aristocrat has raised distributions for 36 years in a row. The stock is valued at 19.60 times earnings, yields 1.10% and has an adequately covered distribution. While the company has maintained a double digit dividend growth rate, I find the current yield to be low. As a result I would pass on the stock for now, but would continue monitoring if stock trades at lower valuations.

Dover Corporation (DOV) manufactures and sells a range of specialized products and components, and provides related services and consumables. In August, the company raised annual distributions by 11.10% to $1.40/share. The ten year dividend growth rate has been 8.50%/year. This dividend aristocrat has raised distributions for 57 years in a row. The stock is attractively valued at 12.80 times earnings, yields 2.40% and has an adequately covered distribution. I would add the company to my list for further analysis.

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. In March, the company raised annual distributions by 10.30% to $2.56/share. The ten year dividend growth rate has been 11.10%/year. This dividend aristocrat has raised distributions for 30 years in a row. The stock is attractively valued at 13.30 times earnings, yields 3.10% and has an adequately covered distribution. I like the fact that APD had managed to consistently boost dividends at a double-digit rate, and I also find the stock to be a bargain at this time. I recently added to my position in the stock. (analysis)

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. In February, the company raised annual distributions by 10% to $1.98/share. The ten year dividend growth rate has been 4.80%/year. This dividend aristocrat has raised distributions for 56 years in a row. The stock is attractively valued at 16.30 times earnings, yields 3.20% and has an adequately covered distribution. However, the dividend growth rate over the past decade makes me want to wait for higher yields before I consider initiating a position in the stock. (analysis)

Full Disclosure: Long WAG, XOM, GWW,FDO, LOW, APD

Relevant Articles:

Dividend Aristocrats List for 2012
Yield on Cost Matters
Three High Dividend Stocks Raising Distributions
How to Look Beyond Dividend Increases

Tuesday, September 4, 2012

Three High Dividend Stocks Raising Distributions

The decrease in interest rates over the past four years has placed a strain on retirees who traditionally relied on bonds for income in retirement. With 30 year bonds yielding 2.80% and fears of rampant inflation many of these individuals are increasingly investing their assets in dividend paying stocks. Dividend paying stocks provide a tax efficient stream of income as well as the possibility for dividend increases over time, which will provide a hedge against inflation.

Over the past week, several dividend growers announced their plans to boost distributions to shareholders. I have listed companies which have boosted distributions for over five years in a row, along with my brief comment behind each. The companies include:

Altria Group, Inc. (MO), through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. The company raised its quarterly distributions by 7.30% to 44 cents/share. Altria is a dividend champion, which has raised distributions for 44 years in a row. Yield: 5.10% (analysis)

Altria’s new annual dividend comes out to $1.88/share. Looking at projected earnings per share of $2.20 for 2012 and $2.37 in 2013, this represents a forward dividend payout ratio of 85% and 79% respectively. While I tend to avoid stocks with high dividend payout ratios, I typically make exceptions on a case by case basis after analyzing the specific situation. In Altria’s case, the company does not need to invest a lot in in order to grow the business, because of the regulatory environment. Tobacco companies cannot advertise, and cigarette usage has been flat or declining slightly in the US. As a result, the company does not need to invest in new factories. However, it does invest in efforts to contain costs and continuously improve and streamline operations in order to lower expenses. In addition, a large part of the sale price for cigarettes is actually excise taxes, whereas the portion that tobacco companies get to collect is relatively small. Given the high margins that cigarette manufacturers enjoy, and the fact that they can keep raising prices to more than offset against declines in consumption, companies like Altria are almost guaranteed increased profits for years to come. So essentially, Altria generates a lot of cash every year, with not a lot of options to spend it. It typically spends cash on share buybacks and dividends.

As a result, I would consider adding to my position in Altria subject to availability of funds.

Harris Corporation (HRS), together with its subsidiaries, operates as a communications and information technology company that serves government and commercial markets worldwide. The company raised its quarterly distributions by 12.10% to 37 cents/share. This is the second dividend increase in a year. Harris Corporation is a dividend achiever, which has raised distributions for 11 years in a row. Yield: 3.10%

Over the past decade, Harris has been able to boost dividends at 26.60%/year. It is currently attractively priced at 9.80 times earnings and has adequately covered dividends. I have included the $3.62 non-cash charge recorded in Q2 2012 into EPS, since it represents a one-time event that does not affect EPS from continuing operations. Analysts are also expecting EPS to rise to $5.17 in 2013 and $5.29 by 2014. I would add the company to my list for further research.

BancFirst Corporation (BANF) operates as the holding company for BancFirst that provides commercial banking services to retail customers and small to medium-sized businesses in Oklahoma. The company raised its quarterly distributions by 7.40% to 29 cents/share. BancFirst Corporation is a dividend achiever, which has raised distributions for 19 years in a row. Yield: 2.80%

The company is attractively valued at 12.80 times earnings and has an adequately covered dividend. In addition, BancFirst has managed to boost distributions by 11%/year over the past decade. The company has also managed to increase profitability over the past decade. Analysts are also expecting EPS to rise to $3.18 in 2012 and $3.20 by 2013. I would add it to my list for further research.

Full Disclosure: Long MO

Relevant Articles:

Altria (MO) Dividend Stock Analysis
Dividend Champions - The Best List for Dividend Investors
Dividend Achievers Additions for 2012
Dividend Stocks Offering Positive Feedback to Investors
Margin of Safety in Dividends

Monday, August 27, 2012

How to Look Beyond Dividend Increases

As a dividend investor, I get rewarded any time that a stock I own pays me a dividend. I get particularly excited, when a stock I also regularly raises distributions. That being said, I thoroughly analyze financial statements, earnings estimates, major press releases, and try to gain a general feel of how a particular business is doing. In general, the story that makes me happy and willing to hold to my position, is when a company has managed to boost profitability over the past ten years and also has the potential to grow earnings into the next decade. For dividend investors, another important thing to look for is if the company has a culture where it shares higher profitability with investors in the form of higher dividends. If all of these are present, and the company also is attractively valued at the moment, I tend to analyze it and if I like the story, I might even initiate or add to my position in it.

Over the past week, several companies announced that they are increasing distributions for shareholders. The other common characteristic behind these companies is the fact that each one has raised distributions for over five consecutive years. I reviewed the list of consistent dividend raisers for the week, and included my brief commentary behind each stock or group of stocks. The companies included:


Realty Income Corporation (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. This REIT raised its quarterly dividends by 3.40% to 15.11 cents/share. This dividend achiever has raised distributions for 18 years in a row. Yield: 4.20% (analysis)

The company has been one of the few Real Estate Investment Trusts which managed to maintain distributions during the financial crisis, and even to increase them slightly. Over the past 5 years, dividend increases have been rather slow. This current dividend increase is pretty high, and hopefully signals management’s bullish outlook on future Funds from Operations (FFO) growth. I consider the current yield to be low, however I like the fact that management has continued diversifying operations and taking advantage of low interest rates to acquire income generating properties. That being said, I would like a current yield of at least 5%, before I add to my position in the company.


Cincinnati Financial Corporation (CINF) engages in the property casualty insurance business in the United States. The company raised its quarterly dividends by 1.20% to 40.75 cents/share. This dividend champion has raised distributions for 52 years in a row. Yield: 4.10%

While I admire the company’s long streak of consecutive dividend increases, I am not so sure about the future. In the past year, Cincinnati Financial has barely been able to cover its dividend payments. In addition, over the past four years, its distributions growth has been very low. As a result, I am still holding on to my position in the stock, but would consider selling if yields drop below 4%.

Community Bank System, Inc. (CBU) operates as the bank holding company for Community Bank, N.A. that provides various banking and financial services to retail, commercial, and municipal customers. The company raised its quarterly dividends by 3.80% to 27 cents/share. This dividend champion has raised distributions for 20 years in a row. Yield: 3.90%

While I like the long history of dividend increases, as well as the above average yield, I am a little hesitant about the latest slow rate of dividend increases. Low dividend increases typically signal that management does not have a very bullish outlook on near term business prospects. That being said, I do like the ten year dividend growth rate of 6.40%/year, as well as the fact that dividend is adequately covered from earnings. I would add the company to my list for further research.

MGE Energy, Inc. (MGEE), through its subsidiaries, operates as a public utility holding company in Wisconsin. The company raised its quarterly dividends by 3.30% to 39.51 cents/share. This dividend champion has raised distributions for 36 years in a row. Yield: 3%

This is another company which has a long streak of consecutive dividend increases, but offers a low yield, low dividend growth that would hardly cover inflation and has a high dividend payout ratio. I would consider it to be a hold at best.

Brinker International, Inc. (EAT) owns, develops, operates, and franchises various restaurant brands primarily in the United States. The company raised its quarterly dividends by 25% to 20 cents/share. This dividend paying company has raised distributions for 8 years in a row. Yield: 2.30%

Delta Natural Gas Company, Inc. (DGAS) distributes or transports natural gas in central and southeastern Kentucky. The company raised its quarterly dividends by 2.90% to 18 cents/share. This dividend paying company has raised distributions for 8 years in a row. Yield: 3.60%

Atrion Corporation (ATRI) , together with its subsidiaries, develops and manufactures fluid delivery devices, and ophthalmic and cardiovascular products primarily for medical applications in the United States, Canada, and internationally. The company raised its quarterly dividends by 14.30% to 56 cents/share. This dividend paying company has raised distributions for 10 years in a row. Yield: 1%

HCC Insurance Holdings, Inc. (HCC) underwrites non-correlated specialty insurance products worldwide. The company raised its quarterly dividends by 6.50% to 16.50 cents/share. This dividend achiever has raised distributions for 16 years in a row. Yield: 2%

Westlake Chemical Corporation (WLK) manufactures and markets basic chemicals, vinyls, polymers, and fabricated building products. The company raised its quarterly dividends by 154.20% to 18.75 cents/share. This dividend paying company has raised distributions for 9 years in a row. Yield: 1.10%

For the above five companies, I would keep an eye but would pass for now, due to the fact that they offer low yields and do not have long histories of dividend increases. That being said, I would add Brinker International to my list for further research.

Full Disclosure: Long CINF and O

Relevant Articles:

Realty Income (O) – The Monthly Dividend Company
Four High Yield REITs for current income
Dividend Champions - The Best List for Dividend Investors
Dividend Achievers Offer Income Growth and Capital Appreciation

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