Why do I like Dividend Achievers

So far I have concentrated my attention primarily on the Dividend Aristocrats and the High-Yield Dividend aristocrats, both published by the S&P. Those lists include companies which are members of the S&P 1500 and which have raised their dividends for more than 25 consecutive years.

That wasn't enough for me, however. I have noticed that there are a lot of great dividend paying companies which are not as established as the Dividend Aristocrat family of indexes. The only reason why they didn't come under my radar screen was simply because they had raised their annual payment for less than 25 years. These stocks do have the possibility of becoming the next dividend aristocrats.

My previous research showed that companies stay about 6.5 years on average in the dividend aristocrats index. The current aging of the aristocrats was about 36 years. Thus, in order to take full advantage of increasing dividend payment for a maximum amount of time, I believe that it pays to buy stocks, which could become the next aristocrats, before they join the list.

The list that caught my attention was the US Broad Dividend Achievers list, prepared by Mergent Inc. It is broader than the S&P 1500 dividend achievers list that I have previously written about. To quote from the company's website:

"The Broad Dividend Achievers™ Index is designed to track the performance of
U.S. publicly traded of dividend paying companies that meet the "Dividend Achievers" requirements. To become eligible for inclusion in the Index, a company must be incorporated
in the United States or its territories, trade on the NYSE, NASDAQ or AMEX, and have increased its annual regular dividend payments for the last ten or more consecutive years. In addition, Mergent requires that a stock's average daily cash volume exceed $500,000 per day in Nov. and Dec. prior to reconsitution."

This index has managed to outperform the S&P 500 over the past 10 years by 1% annually on average by performing better than average in 4 of the past 10 years.

According to Mergent Inc, a $10,000 investment at the end of 1997, would be worth about $16,148 by the end of 2007.There's an ETF, which tracks the index. The Ticker is PFM.

Relevant Articles:
- Dividend Champions Watchlist

- Current Aging of the Dividend Aristocrats

- Historical changes of the S&P Dividend Aristocrats

- Why do I like Dividend Aristocrats?

American Capital Strategies (ACAS) Dividend Analysis

American Capital Strategies, Ltd. is a principal investment firm specializing in management and employee private equity buyouts, acquisitions, recapitalizations, mergers and acquisition, add-on acquisitions, securitizations, special situations, growth capital investments in middle market companies, early stage in mature private and public companies, corporate divestitures, acquisitions of portfolio companies of private equity firms, acquisitions of family-owned or closely held businesses, change of control, or the exit of minority shareholders, going private transactions, and ownership transitions.

American Capital Strategies is not a dividend aristocrat but is a component in S&P 500 index. It has been increasing its dividends for the past 10 consecutive years however, while delivering an impressive average total return of 19.50 % annually to its loyal shareholders.

At the same time the company has managed to deliver a notable 11.60 % average annual increase in its EPS since 1998. If we look at the earnings chart though, it looks as if the EPS has been range bound, never been able to exceed $7.

The trend in ROE has followed the trend in EPS closely over the past decade, rising as high as 31% in 1999 and falling as low as a negative 1% in 2000. The average return on equity has remained at 11.30%. Annual dividend payments have increased over the past 10 years by an average of 9.80% annually, which is slightly below the growth in EPS. A 10% growth in dividends translates into the dividend payment doubling every 7 years. If we look at historical data, going as far back as 1998, ACAS has indeed managed to double its quarterly dividend payments every four and a half years on average. If we invested $100,000 in ACAS on December 31, 1997 we would have bought 6906 shares. Your first quarterly check would have been $1,726.50 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend payment would have risen to $17,095 by December 2007. For a period of 10 years, the quarterly dividend has increased by 300 %. If you reinvested it though, your quarterly dividend income would have increased by 890%.
The dividend payout has fluctuated greatly, along with the EPS and ROE. The current ratio of 94% does look a little high. When put into the perspective of the past 5 year’s average of 88% though, it looks pretty normal for the company. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. I think that ACAS is attractively valued with its low price/earnings multiple and above average dividend yield. ACAS is every dividend investors dream stock with its above average dividend yield and dividend growth rate. It should be part of every dividend investor’s portfolio.

Disclosure: I own shares of ACAS

Relevant Articles:

- Gannett Co (GCI) Dividend Analysis

- Valspar Corporation (VAL) Dividend Analysis
- Dover Corp (DOV) Dividend Analysis

- RPM Dividend Analysis

Dividend Champions Watchlist

In my previous post Dividend Conspiracies I posted a larger list of companies that have increased their dividends for more than 25 years, which for some reason or another, was more thorough than the S&P dividend aristocrats lists.

I used the same screening criteria for identifying stocks worthy of my watchlist as described in this post.

Relevant Articles:

- Dividend Conspiracies

- Historical changes of the S&P Dividend Aristocrats

- Current Aging of the Dividend Aristocrats

- Diversification Matters

Dividend Conspiracies

I have recently stumbled upon some intriguing dividend information that broadened my investment horizon. Some fellow dividend bloggers mentioned HSY and CL in their dividend analyses. Being too focused on the dividend aristocrats and the high-yield aristocrats I ignored those picks as ones that are “not good for me”.

After reading through both companies financial statements though, it seems to me that both have increased their dividend payments for over 25 years. In fact Colgate Palmolive has increased its annual dividend payments for over 45 years, while Hershey’s has increased its dividends only for 33 years. I had a brief conversation under my posting on “Historical changes of the S&P Dividend Aristocrats”, where yielder posted some S&P data, showing that both companies have cut their dividends. Yet, according to my trusted data source (Yahoo Finance) and both companies’ annual reports, these stocks should be included in the dividend aristocrats lists. I think that the S&P sometimes eliminates stocks from the lists due to factors such as spin-offs ( Altria, Hillenbrand Industries), or special dividends (CL). In addition, the dividend aristocrat lists exclude all companies which are not part of the S&P 1500 universe. What about a company with a market cap of less than 2 billion dollars, which trades 200,000 shares a day and has increased its dividends for 40 years? It appears that one of my local banks, Commerce Bancshares is indeed a company worth investigating.

I found a more thorough list of US companies that have continuously increased their dividend payments to shareholders for over 25 years on http://www.dripinvesting.org/ website. There are more than 130 companies in the US that fit this criterion. The person who prepared the list is Dave Fish, Exec. Editor of The Moneypaper, Direct Investing, The Moneypaper Guide to Direct Investment Plans as well as a Co-manager of The MP 63 Fund (DRIPX).

For future references I would call this list Dividend Champions. You could find the complete list here.
Tomorrow, I would present to you the results of my screen on the US Dividend Champions.

Relevant Articles:

- Historical changes of the S&P Dividend Aristocrats
- Current Aging of the Dividend Aristocrats
- Diversification Matters
- Dividend Achievers Watchlist

PEP looks attractive

In a previous analysis of PEP Cola Wars - Coke versus Pepsi, i concluded that PEP is a buy on dips below $68.

"Overall Pepsi has shown a much bigger progress than Coke over the past 10 years. In addition, it’s trading at a bargain multiple relative to its biggest competitor. And last but not least, its dividend growth is much higher than Coke. I would consider adding to Pepsi on dips below $68. I might also consider adding to Coca-Cola below $51."

Over the past several weeks the company has traded below 68 on a couple of occasions. I am considering buying some PEP this week, as long as the price is below $68.

In addition to that PEP recently announced an increase in its annual dividend from $1.50 to $1.70, which is a healthy 13.33% raise. The quarterly dividend of $0.425 is payable June 30, 2008, to shareholders of record on June 6, 2008.The ex-dividend date is June 4.

Disclosure: I do not own PEP or KO at the moment. This analysis is not a recommendation to buy or sell securities. Always consult a financial professional before investing.

Relevant Articles:

- Cola Wars - Coke versus Pepsi

- Diversification Matters

- Dividend Growth Stocks Watchlist

- My Strategy