Monday, March 1, 2010

Six Significant Dividend Increases

Any company could afford to boost distributions in a single year. Any type of business could also have a high yield, especially if it distributes all of its cash flows to shareholders. It takes a special kind of a business model to afford a proper balance between investing back into the business and distributing excess profits to shareholders. It is even more exciting when those distributions have been increased regularly for over ten consecutive years. I have highlighted six dividend stocks each of which has consistently raised distributions for over two decades.

Altria Group, Inc. (MO), through its subsidiaries, engages in the manufacture and sale of cigarettes, wine, and other tobacco products in the United States and internationally. The company’s board of directors raised its quarterly dividend by 2.90% to 35 cents/share. This is the 43rd consecutive dividend increase for Altria Group. The only reason why the company is not on the dividend aristocrat list is because its dividend payment is lower due to the spin-off of Phillip Morris International (PM) in 2008 and Kraft Foods (KFT) in 2007. The company does have a policy to return approximately 75% of earnings to shareholders in the form of cash distributions. Stock currently yields 7%. (analysis)

Kimberly-Clark Corporation, (KMB) together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. The company’s board of directors raised distributions by 10% to 66 cents/share. This is the 38th consecutive annual dividend increase for this dividend aristocrat. The stock yields 4.40%. (analysis)

The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company raised its quarterly dividend by 5.7% to 37 cents/share. This was the 45th consecutive annual dividend increase for this dividend aristocrat. The stock currently yields 2.90%. (analysis)

CenturyTel, Inc. (CTL), together with its subsidiaries, operates as an integrated communications company. The company raised its quarterly distributions by 3.60% to 72.50 cents/share. This increase would represent the 37th consecutive year where this dividend aristocrat has boosted annual distributions to shareholders. The stock currently yields 8.50%.

Piedmont Natural Gas Company, Inc. (PNY), an energy services company, distributes natural gas to residential, commercial, industrial, and power generation customers in portions of North Carolina, South Carolina, and Tennessee. The company boosted distributions by 3.70% to 28 cent/share, marking the 32nd consecutive annual dividend increase. This high yield dividend aristocrat yields 4.30%.

Donaldson Company, Inc. (DCI), together with its subsidiaries, engages in the manufacture and sale of filtration systems and replacement parts worldwide. The company’s board of directors raised distributions by 4% to 12cents/share marking the 24th consecutive year of dividend increases. This dividend achiever currently yields 1.20%.

I view Kimberly-Clark (KMB) and Chubb (CB) as attractively valued stocks. I plan adding to my position in Chubb (CB) this month. Piedmont Natural Gas Company (PNY) looks like an interesting company for further research. Altria (MO) and CenturyLink (CTL) are two high yielding dividend growth stocks, which also spot high dividend payout ratios. I would choose tobacco over telecom however, because once you are addicted to it is difficult to stop using the product. With telecom you could easily cancel your telephone and get a cell phone or simply use Skype instead. Donaldson (DCI) does seem like a company that could be included in the dividend aristocrat list over the next one or two years. The problem is the low current yield, the anemic dividend growth rate and the high price/earnings multiple of 27.

Full Disclosure: Long CB, KMB, MO and PM

Relevant Articles:

- Altria (MO) - a recession proof high yield dividend stock
- Philip Morris International versus Altria
- Chubb (CB) Dividend Stock Analysis
- Dividend Growth beats Dividend Yield in the long run


  1. CTL held it's div constant 4th qtr 2008 until this rise. Looks like a short freeze to me. How can it be said "This increase would represent the 37th consecutive year.."
    Great Blog

  2. Yes but the annual dividend increased. In 2007 annual dividends were 0.26/share; in 2008 - $2.1675/sare; in 2009 - $2.80/share. Based off new dividend rate, annual dividends in 2010 should be $2.90/share. In CTL's case, the company could have maintained dividend flat for 3 more quarters, and then increased it in Q4 2010, and still maintained its dividend aristocrat status.

  3. IS CTL really so dumb as to base its business on dated wired telephony? I would assume they offer high speed home internet, cable services, etc? Or do they? I own a few rural based wire line companies and they all pass along a lot of cash, and continue to do well.

  4. Is MO's 1c increase (less than 3% growth) something investors should expect in future years? The current yield is nice, but if future earnings growth is slow, then future dividend growth should be just as slow. In that case, is MO still a good fit for a dividend growth portfolio? Wouldn't PM be more interesting, from a growth perspective, despite its lower current yield?

  5. CTL is trying to increase data revenues, and sign up customers for bundled service contracts. They do have a customer list, if they could sell well other products, maybe they should do fine. But the high DPR is worrysome.

    I like MO, but I have stated previously that for every shre of MO, I hold one share of PM.


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