Monday, May 24, 2010

Why Dividend Growth Stocks Rock?

According to Ned Davis Research, $100 invested in all dividend payers of the S&P 500 index in 1972, would have grown to $2,266 by the end of 2009. The same $100 invested in non-dividend paying stocks in the S&P 500 returned a negative 39% over the same period. The performance of dividend payers and initiators was even better, returning $2,945 on the initial investment in 1972. Dividend investors should utilize every edge they could find in order to deliver above average total returns. As a result, the findings of the Ned Davis study should not be ignored. The reason why dividend growers outperform is that they represent an elite group of companies which grow earnings, reinvest some of it in the business, and distribute the rest to stockholders. Rising profits equal rising stock prices over the long run, and rising dividends as well.

Some of the companies which raised distributions over the past week include:

The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company raised dividends by 10% to 55 cents/share. This was the thirty-third consecutive year of dividend increases for this dividend aristocrat. The stock yields 3.40%. (analysis)

First Financial Corporation,(THFF) through its subsidiaries, provides various financial services in Indiana and Illinois. The company raised its semi-annual dividend by 2.20% to 46 cents/share. This dividend achiever has managed to increase dividends to shareholders for 22 consecutive years. The stock yields 3.20%.

Bunge Limited (BG) engages in the agriculture and food businesses worldwide. The company approved a 9.5% increase in the company's regular quarterly cash dividend, from $0.21 to $0.23 per share. The company, which is a member of the international dividend achievers, has consistently raised dividends since 2003. The stock yields 1.90%.

Transatlantic Holdings, Inc. (TRH), through its subsidiaries, offers reinsurance capacity for a range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in domestic and international markets. The dividend was raised by 5% to 21 cents/share. The Board of Directors has raised the quarterly distributions of this dividend achiever every year since TRH became a public company in 1990. The stock yields 1.80%.

Canadian Pacific Railway Limited (CP), through its subsidiaries, provides rail and intermodal freight transportation services. The company increased its next quarterly dividend to 27 Cents/share from 24.75 cents per share. This international dividend achiever has consistently raised distributions since 2004. The stock yields 1.90%.

Republic Bancorp, Inc. (RBCAA) operates as the holding company for Republic Bank & Trust Company and Republic Bank, which provides banking, tax refund solutions, and mortgage banking services to individuals and businesses in the United States. The company announced an 8% increase in the Company’s second quarter cash dividends to $0.143 per share. This dividend achiever has consistently raised dividends since 1999. The stock yields 2.30%

Dr Pepper Snapple Group, Inc. (DPS) operates as a brand owner, manufacturer, and distributor of non-alcoholic beverages in the United States, Canada, Mexico, and the Caribbean. The company raised its quarterly dividend by 67% to 25 cents/share. This was the first dividend increase since the company initiated a dividend payment policy in 2009. The stock yields 2.60%.

Nordstrom, Inc., (JWN) is a fashion specialty retailer, which offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. The company announced that its board of directors declared a quarterly dividend of $0.20 per share, an increase of 4 cents or 25% over the previous quarter’s dividend. This was the first dividend increase since 2008.The stock yields 2.10%.

W.R. Berkley Corporation (WRB), operates in the property casualty insurance business in the United States and internationally. The company increased its cash dividend to an annual rate of 28 cents per share, representing a 17% increase from the present rate. The company’s annual dividends have increased for 5 years in a row. The stock yields 4.20%.

Knight Transportation, Inc. (KNX), together with its subsidiaries, operates as a short to medium-haul truckload carrier of general commodities in the United States. The company raised distributions by 20% to 6 cents/share. The company has consistently raised dividends since 2004. The stock yields 1.20%.

Analog Devices, Inc. engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits used in industrial, communication, computer, and consumer applications. The company’s Board of Directors increased quarterly dividend by 10% to $0.22 per share. The company’s annual dividends have increased every year since 2004. The stock yields 3.10%.

Tiffany & Co.(TIF), through its subsidiaries, engages in the design, manufacture, and retail of fine jewelry. Its jewelry products include gemstone jewelry, gemstone band rings, diamond rings, wedding bands for brides and grooms, non-gemstone, gold or platinum jewelry, and sterling silver jewelry. The company announced a 25% increase in its quarterly dividend from $0.20 to $0.25/share. This is the second announced increase in the quarterly dividend payment policy since the start of the calendar year. The company’s annual dividend has increased every year since 2003. The stock yields 2.30%.

Ship Finance International Limited (SFL) , through its subsidiaries, owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, the United States, Singapore, the United Kingdom, and the Marshall Islands. The company raised distributions by 10% to 33 cents/share. Before you get too excited about the current yield of 7.30%, please bear in mind that the current dividend is half what it were in Q3 2008.

Unum Group (UNM), together with its subsidiaries, provides group and individual disability insurance products primarily in the United States and the United Kingdom. The company announced that its Board of Directors authorized an increase of 12.1% in the quarterly dividend to 9.25 cents/share. The stock yields 1.60%.

Ashland Inc. (ASH)operates as a specialty chemicals company internationally. The company raised annual distribution by 100% to 60 cents/share. The stock yields 1.10%.

Safeway Inc.(SWY), together with its subsidiaries, operates as a food and drug retailer in North America. The company approved a 20% increase in its quarterly dividend from $0.10 per share to $0.12 per share. This is the sixth consecutive annual dividend increase for the company. The stock yields 2%.

Xcel Energy Inc.,(XEL) through its subsidiaries, engages in the generation, purchase, transmission, distribution, and sale of electricity to residential, commercial, industrial, and public authorities in the United States. The board of directors raised the quarterly dividend on the company’s common stock from $0.245 per share to $0.2525 per share. The company has raised distributions for 7 consecutive years. The stock yields 4.80%.

Northrop Grumman Corporation (NOC) provides products, services, and integrated solutions in the aerospace, electronics, information and services, and shipbuilding sectors. The company raised distributions by 9.30% to 47 cents/share for a seventh consecutive year. The stock yields 3%.

Full Disclosure: Long CLX

This article was featured on Carnival of Personal Finance #259: Memorial Day Edition

Relevant Articles:

- What Dividend Growth Investing is all about?
- Clorox (CLX) Dividend Stock Analysis
- How to Uncover Hidden Dividend Gems
- Are Dividend Investors Stock Pickers?


  1. Sorry this is a little off topic, but I'd love some commentary about dividend stocks with respect to anticipated dividend tax rate increases in 2011, back to the pre-Bush levels.

  2. Another good, thought-provoking article. Using your criteria, I have already bought several Dividend Aristocrat stocks. I agree with you that such dividend stocks have many advantages. However, I am leery of statistics like these from the past 30-40 years. Why? Because that was one of the greatest secular bull markets of all times. Just as a rising tide raises all ships, an investor could have bought almost anything during that time period & made money. Now we are in an economic & investing climate that appears to be a secular bear market--one quite different from the past 30-40 years. Therefore, statistics like these are not necessarily relevant. What I would like to see is statistics from a more relevant period, such as 2000-2010.

  3. Annualgain,

    When there's more visibility about the tax rates on dividends I would write an article. I won't write an article simply for speculation purposes. That being said dividend investing is valid, even if dividends were taxed at the ordinary tax rates.


    The rising tide did not lift the boats of non-dividend payers.

  4. David (nicknamed twobear)June 3, 2010 at 7:10 AM

    First off, I am a senior portfolio manager with a national firm. Secondly, I am close to retirement and have over the years built a dividend portfolio, but one that is not static. During the last market decline, many stocks, especially in the financial sector cut their dividend rates, many to zero or barely above. Some of these were great long term dividend stocks, such as Wilmington Trust, Pfizer and GE. My point in what I guess is limited space, is to not marry most of these stocks unless one can withstand the punishing effect of cuts or the severe decline in the prices of many stocks. I've seen too many fall to the fear of the markets only to sell at the bottom as fear overcomes a sound investment strategy.

    I believe that perhaps a better way is to manage a more "active" portfolio, with a long term view, around dividend equities, emphasis on "long term". As stocks rallied offvlows over the past year, yields have declined to levels, which may not be supportive of current price levels, and could easily be purchased at lower levels and therefore higher yields. Over the years I've had the pleasure of selling stocks whose yield dropped to low levels only to be able to repurchase them at much lower prices. Often a sell in one sector only to put funds into another where better opportunities might exist, perhaps oil stocks today. A long term study of yield levels on individual stocks find that many of them are contained within a range, best purchases are at the upper end of the yield range, and sold at the bottom, or perhaps a portion of one's position.

    Though there is ample evidence of the merits of buy & hold on many of these so called dividend aristocrats, there is also reason to be wary of them as pure blind faith of the past. Therefore, I now manage around a universe of good solid dividend stocks, not letting anyone of them become a permanent part of my investments.....they might, but not for lack of oversight.

    1. David,

      I appreciate your approach. Do you know of a source whereby one may obtain the historical yields of these companies. The Dividend Channel gives 20 years of dividends, but not by yield, which is the variable I would like to use to indicate overbought or oversold status in these stocks.


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