Eight stocks with positive dividend momentum

A body in motion tends to stay in motion unless acted on by an outside force. The following dividend payers kept the dividend momentum coming, by raising distributions to shareholders. What is particularly interesting is the fact that most of them have raised distributions consistently for more than one or two decades each. This is essentially what successful dividend growth investing is all about – finding a dividend grower in the early stages that keeps paying increasing amounts of dividends each and every year for years to come.

The companies which raised distributions include:

McCormick & Company (MKC), which engages in the manufacture, marketing, and distribution of flavor products and other specialty food products to the food industry worldwide, increased its quarterly dividend by 8.30% to 26 cents per share. McCormick & Company is a dividend achiever, which has increased its quarterly dividend in each of the past twenty three years. The stock currently yields 2.60%.

The York Water Company (YORW), which engages in impounding, purifying, and distributing drinking water in Pennsylvania, increased its quarterly dividend by 1.60% to 12.80 cents per share. This marked the thirteenth consecutive year that this dividend achiever has raised its distributions. The stock currently yields 3.40%.

Hormel Foods Corp. (HRL), which engages in the production and marketing of various meat and food products in the United States and internationally, increased its quarterly dividend by 15% to 21 cents per share. Hormel Foods Corp. is a dividend champion, which has increased its quarterly dividend in each of the past forty-four years. The stock currently yields 2.00%.

Becton, Dickinson and Company (BDX), a medical technology company, which develops, manufactures, and sells medical supplies, devices, laboratory equipment, and diagnostic products worldwide, increased its quarterly dividend by 12.10% to 37 cents per share. Becton, Dickinson and Company is a dividend aristocrat, which has increased its quarterly dividend in each of the past thirty-seven years. The stock currently yields 1.70%.

United Bankshares, Inc. (UBSI), which provides commercial and retail banking services and products, increased its quarterly dividend by 3.4% to 30 cents per share. This marked the 36th consecutive year of dividend increases to United shareholders. The stock currently yields 6.70%.

Roper Industries, Inc. (ROP), which engages in designing, manufacturing, and distributing energy systems and controls, scientific and industrial imaging products and software, industrial technology products, and radio frequency products and services, raised its quarterly dividend by 15% to 9.5 cents per share. This is the seventeenth consecutive year of dividend increases for this dividend achiever. The stock currently yields 0.60%.

Oritani Financial Corp. (ORIT), which provides banking services to individual and business customers in New Jersey, increased its quarterly dividend by 50% to 7.5 cents per share. The stock currently yields 2.30%.

RGC Resources, Inc. (RGCO), which operates as an energy services company, increased its quarterly dividend by 3% to 33 cents per share. RGC Resources, Inc. has increased its quarterly dividend in each of the past five years. The stock currently yields 4.70%.

This list is only a starting point in the process of weeding out companies in the pursuit of identifying promising candidates however. As the market has gone ahead of itself in recent months, a wise move might be to wait for weakness in the broad averages before initiating a position in any of the above names, after researching them thoroughly.

Full Disclosure: None

Relevant Articles:

- What Dividend Growth Investing is all about?
- Why should companies pay out dividends?
- What are your dividend investing goals?
- Dividend Grouping for Dividend Income

Twelve Recent Dividend Increasers

Twelve companies last week raised distributions. While this is positive news in comparison to the avalanche of dividend cuts that were occurring just a few months ago, it is important that investors dig deeper into the numbers before they find out the next big thing.

The initial screening criteria for investing whether recent dividend increases are worth your time should focus on fundamentals such as earnings per share growth and dividend payout ratio. Next investors should focus on number of years of consecutive dividend increases as well as adequate starting dividend yield.

The companies which rewarded investors with dividend raises include:

Sysco Corp. (SYY), which markets and distributes a range of food and related products primarily to the foodservice industry in the United States, increased its quarterly dividend by 4.2% to 25 cents per share. Sysco Corp. is a dividend champion, which has increased its quarterly dividend in each of the past 39 years. The stock currently yields 3.60%. (analysis)

Intel Corporation (INTC), which designs, manufactures, and sells integrated circuits for computing and communications industries worldwide increased its quarterly dividend by 12.5% to 15.75 cents per share. Intel Corporation has only raised dividends with some consistency since 2003. The stock currently yields 2.90%. Paul Otellini, the company’s president and CEO seemed especially bullish saying that "Intel's industry-leading product portfolio, outstanding execution and focus on the next wave of innovation and growth set the company up solidly for the future. With one of the highest dividend yields in the technology industry, the dividend increase is another sign of our confidence in business prospects going forward."

Lancaster Colony Corporation (LANC), which engages in the manufacture and marketing of consumer products in the United States, increased its quarterly dividend by 5.3% to 30 cents per share. This marked the forty seventh consecutive annual dividend increase for this dividend champion. The stock currently yields 2.30%.

Brown-Forman (BF-B), which engages in the manufacture, bottling, import, export, and marketing of alcoholic beverage brands, increased its quarterly dividend by 8% to 14 cents per share. Brown-Forman is a dividend champion which has increased its quarterly dividend in each of the past twenty six years. The stock currently yields 2.30%.

NSTAR (NST), which engages in the distribution, transmission, and sale of energy in Massachusetts, increased its quarterly dividend by 6.7% to 40 cents per share. NSTAR has increased its quarterly dividend for 11 years in a row. The stock currently yields 4.70%.

Harsco Corporation (HSC), which provides industrial services and engineered products worldwide, increased its quarterly dividend by 2.5% to 20.5 cents per share. This marked the sixteenth consecutive year of annual dividend increases for this dividend achiever. The stock currently yields 2.50%.

PennantPark Investment Corporation (PNNT), which is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies, increased its quarterly dividend by 4.2% to 25 cents per share. PennantPark Investment Corporation has only been public since 2007 and thus does not have a long history of consistent dividend increases. The stock currently yields 11.80%.

Royal Gold, Inc. (RGLD), which acquires and operates precious metals royalties, increased its quarterly dividend by 13% to 9 cents per share. Royal Gold, Inc has increased its quarterly dividend since 2004. The stock currently yields only 0.60%.

Universal Health Services, Inc. (UHS), which owns and operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers, and radiation oncology centers, increased its quarterly dividend to 10 cents per share. This is the first dividend increase for Universal Health Services, Inc. since the company started paying one in 2003. The stock currently yields 0.50%.

NIKE, Inc. (NKE), which designs, develops, and markets footwear, apparel, equipment, and accessory products worldwide, increased its quarterly dividend by 8% to 27 cents per share. NIKE, Inc. has increased its quarterly dividend in each of the past eight years. The stock currently yields 1.60%.

Bob Evans Farms, Inc. (BOBE), which owns and operates Bob Evans Restaurants and Mimi’s Cafes in the United States, increased its quarterly dividend by 12.5% to 18 cents per share. The stock currently yields 2.40%.

The Laclede Group, Inc. (LG), which natural gas service to approximately 630,000 residential, commercial, and industrial customers in metropolitan St. Louis and surrounding counties in eastern Missouri, increased its quarterly dividend from 38.5 to 39.5 cents per share. This is the sixth consecutive dividend increase for The Laclede Group, Inc. The stock currently yields 4.90%.

As dividend investors, the goal is to find the best dividend stocks available. This initial screen’s purpose is to weed out cyclical companies which could start out paying a very small dividend relative to earnings and increase it for a long period of time, while earnings are stagnant over the period.

Full Disclosure: Long SYY

Relevant Articles:

- Dividend Conspiracies
- Why do I like Dividend Achievers
- SYSCO Corporation (SYY) Dividend Stock Analysis
- The Best Trades could be the ones not entered

Consolidated Edison (ED) Dividend Stock Analysis

Consolidated Edison, Inc. (ED), through its subsidiaries, provides electric, gas, and steam utility services in the United States. It provides electric service to approximately 3.3 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County, as well as provides steam service to office buildings, apartment houses, and hospitals in parts of Manhattan.

Consolidated Edison is a dividend aristocrat as well as a component of the S&P 500 index. It has been increasing its dividends for the past 35 consecutive years. For the past decade this dividend stock has delivered an annual average total return of 6.30 % to its shareholders.

At the same time the company has managed to deliver a 0.80% average annual increase in its EPS since 1999. For the next two years analysts expect EPS to increase to $3.11 and $3.30 respectively. The main problem for utility companies is that they are very capital intensive and are highly regulated. In order for utilities companies to increase rates, they have to seek regulatory approval. In addition to that investing in such projects such as the smart grid is subsidized through federal programs, although companies like Con Ed typically put in at least a portion of the needed amount.

The return on equity has declined slightly over the past decade, although it is at 10% currently.
Annual dividend payments have increased by an average of 1.00% annually over the past 10 years, which is higher than the growth in EPS. The company has increased the amount of the stock outstanding by an average of 2.6% per year over the past decade. Despite the slow dividend growth, the company might be a good pick for investors who are seeking current retirement income.

A 1% growth in dividends translates into the dividend payment doubling almost every 72 years. If we look at historical data, going as far back as 1975, we would see that Con Edison has actually managed to double its dividend payment every eleven years on average. The current dividend payment is double what it was in 1985 however.

Over the past decade the dividend payout ratio has ranged between a low of 57% and a high of 97%. Currently the dividend payout ratio is at 69.6%. While this would be high for a company like McDonald’s (MCD) or Procter & Gamble (PG), a payout ratio of 70% is not uncommon for utilities. Utilities typically pay out a large portion of their earnings as dividends, which explains their slow dividend growth and high dividend yields. Most utilities operate as natural monopolies, which guarantee almost no competition in their specific geographic areas. It would be very costly to run two separate electrical grids, and such investment could take many decades to pay off. Thus utilities tend to generate stable earnings and revenues in any economic conditions, as people keep using water, gas and electricity in their daily lives no matter what.

I believe that Consolidated Edison is attractively valued with its low price/earnings multiple of 14, as well as an above average dividend yield at 5.60%. The high dividend payout should not be a concern because of the industry the company is in. Because of the slow dividend growth of the stock however, I would only invest in it for current income within the next decade. I do own ED mainly for diversification within the utility industry and for a current yield boost to my dividend income.

Disclosure: Long ED

Relevant Articles:

- Where are the original Dividend Aristocrats now?

- Six Dividend Stocks for current income

- Best Dividend Picks for 2009, 3Q update

- Utility dividends for current income

What are your dividend investing goals?

Great investors have goals and strategies are only the tools that help them accomplish their targets. My goal is to generate a rising stream of dividend income, which would allow me to leave the rat race and spend my time doing worthwhile things like education and charity and self-development.
By focusing on dividend growth, I am trying to pick the stocks, which have solid competitive advantages, whose revenues are relatively recession proof but could still grow earnings by innovation, acquisitions, and buybacks. Historical inflation rates have been around 3% for the US over the past one century. Thus, by focusing on companies, which have a long history of dividend increases of over 3%, I would create an inflation proof source of income.
In addition to that, if my stock picks raise dividends faster than the rate of inflation, I would be able to achieve very good yields on cost in the process. A company, which yields only 3% or 4%, might be scoffed at by yield chasing gurus, who wouldn’t even consider a stock unless it yields 8% or 10%. Those yield chasers might get the 10% yield now, but the cost of dividend cuts or no dividend increases makes chasing high yielding stocks a dangerous exercise with negative effects on wealth building.

At the same time a company that yields only 3% or 4% now, but grows its dividend payments at 12% annually, could generate a yield on cost of 6% to 8% in 6 years and yields on cost of 12% to 16% in 12 years. These companies exist in the market. It only takes an attentive dividend investor to uncover them. Examples of such companies are

Johnson & Johnson (JNJ) has regularly hiked dividends for 47 years in a row. The ten-year average dividend growth for the producer of Neutrogena, Tylenol and Remicade is an impressive 13.30% annually. (analysis)

Procter & Gamble (PG) has rewarded shareholders with dividend raises for 53 consecutive years. This consumer good juggernaut has managed to increase distributions at a rate of 10.70% annually over the past decade. (analysis)

Pepsi Co (PEP) has increased its dividends for 37 consecutive years. The producer of Pepsi Cola, Mountain Dew, Lays and Doritos has delivered a 12.80% average dividend growth annually over the past decade. (analysis)

McDonald’ s (MCD) has increased its dividends for 32 consecutive years. The worlds largest fast food chain has boosted dividends by an average of 27.30%/year over the past decade. (analysis)

I believe that even in 20 years people would still have a need to eat, drink, shower, shave and take pills. I would bet that even in 20 years people would still shop at McDonald’s – if not for their burgers then for the salads or whatever food sells the best.

Over time a portfolio of carefully selected dividend growth stocks could not only deliver a consistently increasing stream of dividend income which increases faster than inflation, but could also deliver outstanding total returns. Over the past fifteen, ten, five, three or one years, the dividend achievers index has outperformed the S&P 500. (source Mergent's)

The dividend achievers index consists of US stocks traded on NYSE, NASDAQ or AMEX, which have increased annual regular dividends for at least the past ten consecutive years. This index is a great shopping list for novice dividend investors. Even Peter Lynch, the famous manager of the Fidelity Magellan Fund, which outperformed the S&P 500 by a significant margin in the 1980’s, said : "The Dividend Achievers Handbook is one of my favorite bedside thrillers. Here's a simple way to succeed in Wall Street: Buy the stocks on Mergent's list and stick with them as long as they stay on the list"

As a dividend growth investor my primary objective is growth in dividend income without losing too much of my capital in the process. Capital appreciation is second of importance. I believe that if my portfolio generates enough dividend income for me, I would not have to rely on selling 4% of my portfolio at depressed prices in order to live off my investments.

Full disclosure: Long MCD, JNJ, PG and PEP

This post was featured on the Carnival of Personal Finance #234 – Weirdest Toy Crazes Edition

Relevant Articles:

-Don’t chase High Yielding Stocks Blindly
-Dividend Cuts - the worst nightmare for dividend investors
-Yield on Cost Matters
-The Dividend Edge

Eight Companies Rewarding investors with higher payments

Most investors believe that successful dividend investing consists of identifying the highest yielding stocks in the market and then generating double digit returns on investment each year. The problem with this strategy it that it often overlooks the fact that such dividend yields are most often unsustainable in the long run. A much better strategy that could eventually produce double digit yield on cost to investors is dividend growth investing. Using this strategy a patient investor accumulates a diversified portfolio of stocks which have a long history of consistently growing dividends. The positive factor is that any investor can implement this strategy, especially now that brokerage commissions are almost zero.

As long as an investor is willing search for the best stocks that fit their criteria and do the work, focusing on dividend growth stocks should pay off in the long run. I identified the following dividend raisers for the past week.

Automatic Data Processing, Inc. (ADP), which provides technology-based outsourcing solutions to employers, and vehicle retailers and manufacturers, increased its quarterly dividend by 3% to 34 cents per share. The increased cash dividend marks the 35th consecutive year in which this dividend aristocrat has raised its dividend. . The stock currently yields 3.10%. (analysis)

MDU Resources Group (MDU) operates in six segments: Electric, Natural Gas and Oil Production, Construction Services, Pipeline and Energy Services, Construction Materials and Contracting, and Other. The company increased its quarterly dividend by 1.60% to 15.75 cents per share. MDU Resources Group is a dividend achiever, which has raised distributions for 19 years in a row. The company also boasts 72 consecutive years of uninterrupted quarterly common stock dividend payments. The stock currently yields 2.80%.

Tennant Company (TNC), which engages in the design, manufacture, and marketing of cleaning solutions, increased its quarterly dividend by 6% to 14 cents per share. Tennant Companyis a dividend champion, which has raised distributions for 38 years in a row. The stock currently yields 1.90%.

Vodafone Group (VOD), which is engaged in providing service, such as voice, messaging, data and fixed line and others, increased its interim dividend by 3.5% to 2.66 pence per share. The final dividend for 2009 was 5.2 pence/share. Vodafone Group is an international dividend achiever, which has raised distributions for over one decade. The stock currently yields 5.80%.

DeVry Inc. (DV), which owns and operates DeVry University, Advanced Academics, Ross University, Chamberlain College of Nursing, and Becker Professional Review, increased its annual dividend by 25% to 20 cents per share. DeVry Inc. started paying dividends in 2006 and has been raising distributions consistently ever since. The stock currently yields only 0.30% however."The dividend increase and continuation of the share repurchase program reflect our strong financial position and outlook for the future," said Daniel Hamburger, DeVry’s president and chief executive officer. "We will continue to put our students first and invest in academic quality, which we believe leads to sustainable, long term growth and increased shareholder value.”

Span-America Medical Systems, Inc. (SPAN), which engages in the manufacture and distribution of various polyurethane foam products for the medical, consumer, and industrial markets in the United States and Canada, increased its quarterly dividend by 2.2% to 47 cents per share. Span-America Medical Systems doesn’t have a consistent history of raising distributions however. The stock currently yields 2.20%.

Baxter International Inc. (BAX), which develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions., increased its quarterly dividend by 12% to 29 cents per share. Baxter International Inc. has only started raising distributions since 2007. The stock currently yields 2.00%.

AmerisourceBergen Corporation (ABC), a pharmaceutical services company, offers drug distribution and related services to healthcare providers and pharmaceutical manufacturers in the United States, the United Kingdom, and Canada, increased its quarterly dividend by 33% to 8 cents per share. AmerisourceBergen Corporation has raised distributions since 2005. The stock currently yields only 1.00%.

Checking the weekly pulse of dividend growers is an important part of the dividend investor’s routine. It is generally a bullish sign when a company which has raised distributions for over 3 decades keeps raising them even through a recession. It also might help investors in identifying any future dividend growth stories, before they become mainstream holdings.

Full Disclosure: Long ADP

Relevant Articles:

- Why do I like Dividend Aristocrats?

- Dividend Conspiracies

- Why do I like Dividend Achievers

- Leveraged Investments