Wednesday, April 22, 2020

Target and Illinois Tool Works Are Not Dividend Kings (yet)

I came up with the term Dividend King in 2010. I used the term dividend king to describe a company, which has increased dividends for 50 years in a row.

As part of my annual reviews, I updated the list of dividend kings annually. It is a lot of fun to check corporate histories and update the list. There were 28 dividend kings in 2020.

However, it looks like other websites and articles show versions of the dividend kings list with more companies. Many of these articles show a larger number of dividend kings. Notably, they include two companies as dividend kings, which are not dividend kings yet.

This bothered me, because I thought I had missed these two companies initially. I tried to determine how I missed them. So I dug a little deeper than usual. 

The companies included incorrectly in the dividend kings list by other websites include Target and Illinois Tool Works. It is relatively easy to determine that Target has increased dividends for less than 50 years in a row by going to its corporate website, and reviewing the dividend history going back to 1967.

Target kept dividends unchanged in 1970 and 1971. Target didn’t start growing dividends until 1972. As of the time of this writing in 2020, Target would have a 49-year streak of consecutive annual dividend increases. Target would be eligible to become a dividend king in 2021. 

For Illinois Tool Works, the research goes a little further. Unfortunately, the company does not list its dividend history going as far back as the 1960s like Target does. We only see data going back to 1990, and we have to manually adjust it for the stock splits during that era too. The dividend history on the ITW website is lacking historical data. Therefore, we would have to rely on other information, in order to check its track record of annual dividend increases.

The company does list in its 2019 annual report that ITW’s annual dividend payment has increased for more than 56 consecutive years, except during a period of government controls in 1971. Source: 2019 ITW Annual Report 

This sentence has confused a lot of folks, because they take the company’s word that it is a dividend king, and has increased dividends for 56 years in a row. That is impossible, because the company also admits that it didn’t increase dividends in 1971 “due to government controls”. Since we are in 2020, that would mean that the company has not increased dividends for more than 49 years in a row, assuming it raised dividends without interruption since 1972. Perhaps Illinois Tool Works could be a dividend king in 2021, assuming it doesn’t blame any further government interruption for its lack of ability to build a record of annual dividend increases to qualify as a dividend king.

I found their annual report statement to be odd due to the above. I also found the reference to government controls to be odd, after reviewing the text of the order ( Source: Internal Revenue Bulletin found and shared by

Per the text, it looks like companies were unable to grow dividends by more than 4% from the highest dividend paid in 1969, or 1970 or 1971. This was all voluntary of course, but we know from evaluating the history of dividend kings that there were at least 28 companies that raised dividends even during those tumultuous “government controls”. Plus, we should also include the companies like Winn Dixie, AON, Ohio Casualty and the others that used to be part of the list ofdividend kings, but fell off for one reason or another.

I went ahead and dug further to my old stocks manuals. I found out the 2005 Moody’s Manual, which does show that Illinois Tool Works kept dividends unchanged in 1970 and 1972. However, it does show that the company managed to grow the annual dividend beginning in 1972. The data since 2005 is widely available, and it could easily be confirmed that the company has raised dividends since 2005 every single year.

So the verdict is final - Target and Illinois Tool Works are not dividend kings yet. They are still great companies that may be good to consider at the right price.

As an investor, I believe it is important to do your own research. You may have to dig in, and look for information from the original source, rather than rely exclusively on third-parties. This is a good skill that would help develop your independent thinking, and potentially set you apart from the crowd. It is good to have the attitude to trust, but verify as well.

An equally important, if not more important skill is being able to communicate with smart investors, who you can learn from and hopefully reciprocate back. 

In my case, I have managed to accumulate by accident a readership of smart readers, who tend to provide very good feedback, and ask great questions. I get to learn from them, and they hopefully from me. I find that by interacting with other investors, you can learn more together, than on your own. 

Relevant Articles:

- Dividend Kings ListEvolution of the dividend kings list over the yearsIllinois Tool Works (ITW) Dividend Stock AnalysisTarget: An Attractively Valued Dividend Champion on Sale

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