Ten Dividend Paying Companies Working Tirelessly For Their Owners

As a dividend growth investor, my goal is to generate a stream of income, which grows above the rate of inflation.

For the past decade that I have been doing that, my annual organic dividend growth has easily outpaced the historical rates inflation by a factor of 2 or more. In fact, the dividend increases by my portfolio have always been higher than the annual raises I receive at work.

I do not have to spend 40 - 60 hours per week placing cover sheets on TPS reports, nor do I need to waste time in pointless meetings that could have been resolved with a single email. Having a dividend portfolio is like having a tireless employee, who works 24 hours/day, seven days/week, 365 days/year, who shares all of their income with me. Their raises are much higher than what I could get for working extremely hard.

It is not wonder that I have fully embraced the power of dividend investing - I love getting paid and receiving regular raises, even if I do not work hard. Most of the work in building a dividend machine is done upfront. If I did my job of security selection well, I could afford to do nothing for years, and simply enjoy a rising stream of income from my diversified list of dividend paying companies. I would be paid for decades, for an investment decision made a long time ago.

As part of my monitoring process, I review the list of dividend increases every single week. I use this exercise to monitor existing holdings, and also to monitor companies I may be interested in down the road.

I isolated the companies which have a ten year track record of annual dividend increases. The companies include:

Should Dividend Investors Worry About Rising Interest Rates?

If you have followed any news stories over the past year, you might have been exposed to a lot of negative information about dividend paying stocks. I have rebutted some of them, such as the story about the end of the dividend craze. Others include the notion that rising interest rates are somehow so bad for dividend paying stocks, which it would put the end to dividend investing once and for all. The problem with those statements is that while interest rates affect the relative valuation of assets, they are just one input in valuation formulas.

I keep hearing that rising interest rates will mark the end of dividend growth investing. I am actually hoping that this talk results in lower entry prices for those investors like me who are in the accumulation age. But for other long term holders who are living off portfolios, I think that they should ignore this noise, and instead focus on enjoying the fruits of their growing income stream.

There are several reasons why I ignore this non-sense:

1) First of all, few people can predict interest rates with any accuracy. Actually, few people can actually predict anything with a reasonable success rate. I still remember how everyone was expecting hyper inflation in 2008 – 2009. I actually wrote an article about it at the time, and several readers told me how wrong I am, and how they were going to stop reading my website because of that. Before that, everyone was worried about the fall of the US dollar against other currencies, and by the fact that the World were running out of oil. So naturally, while I do agree that interest rates could start increasing over time, I cannot tell you what the timing and amount of this increase is going to be. Therefore the impact of rising interest rates might not affect companies as much as expected. Even if interest rates did increase, and cost of capital was raised for all of corporate America, it could impact the speculative companies with untested products or constant need of new capital to maintain operations. This could potentially deflate the ongoing bubble in some technology stocks today.

Your future retirement income is on sale

The stock market has finally started going down. This is great news for those investors, who are in the accumulation phase. When you are able to purchase shares are lower entry prices, you end up purchasing future dividend income on sale. Investors in the accumulation phase should therefore be praying for lower prices during their work careers.

Retirees should ignore stock price fluctuations and focus on their dividend checks. This is where it pays to focus on dividend dependability for each company you bought in the first place.

Intelligent dividend investors view stocks as partial ownership shares of real businesses. They do their research in uncovering those businesses, and then try to buy existing owners out at bargain prices. They can then sit back, monitor their business interests, and collect dividends one check at a time. After all, if you owned an apartment building next to a college that is always occupied, you won’t give a damn if their quoted valued fell by 5% - 10%- 20% in one single day. As long as you can rent your building out, you should do just fine by ignoring “quoted values”.

I am starting to get giddy for a change. While I have hit my objectives, I am still saving and investing. This is why I will continue buying one or twice per month, whenever I have money to invest. Some of my money is automatically invested through my 401 (k), while the rest is invested manually in my taxable accounts.

It is important to stick to the plan of earning money, saving money and investing money on a regular basis, and staying the course through thick or thin. As you can imagine, long-term investing is a marathon, not a sprint. This is why it is important to keep investing for years, while building out that cash machine.

You then need to be able to stay invested throughout your retirement years, while living off those dividends.

For my taxable accounts, I usually screen the list of dividend champions regularly, using the following entry criteria:

1) A ten year track record of annual dividend increases (being a dividend champion is more than enough)
2) Having a forward P/E at or below 20
3) Having a dividend payout ratio below 70%
4) Having earnings per share growth over the past decade
5) Having a more than nominal dividend growth over the past decade ( at least 3%/year)

I came up with the following list of thirty dividend champions for further research:

Eight Companies Giving Raises To Their Shareholders

As part of my monitoring process, I review the list of dividend increases every week. This process helps me to monitor the performance of existing holdings, while also identifying companies for further research. I focus my attention on companies that have raised dividends for at least a decade, in order to focus on the companies that have delivered during an average boom-bust economic cycle. I try to dig further into each dividend increase, by looking at trends in earnings per share, valuation and historical dividend growth, in order to determine if a company is worth researching any further. This process is a great addition to my monthly screening using my entry criteria. It is very helpful to check the pulse of dividend increases, which could be lost when analyzing averages.

Over the past week, there were eight companies that raised dividends to shareholders, and have managed to boost dividends for at least a decade. The companies include:

Commerce Bancshares, Inc. (CBSH) operates as the holding company for Commerce Bank that provides retail, mortgage banking, corporate, investment, trust, and asset management products and services to individuals and businesses. It operates through three segments: Consumer, Commercial, and Wealth.

The company raised its quarterly dividend by 4.40% to 23.50 cents/share, bringing the new dividend yield to 1.60%. This marked the 50th consecutive annual dividend increase for this newly minted dividend king. Over the past decade, the company has managed to boost its dividends at an annual rate of 4.40%/year. Between 2007 and 2017, Commerce Bancshares managed to grow earnings from $1.73/share to $2.77. Analysts expect the company to earn $3.39/share in 2018. The stock may be worth a closer look below $50 - $51/share.

Fourteen Dividend Aristocrats For Further Research

Last week, I shared with you the 2018 Dividend Aristocrats list. This is a good starting point in the research process. However, just because a company is on the list of dividend aristocrats, that doesn’t necessarily mean that it is a good investment to make today. Inclusion in an elite list of dividend stocks is like having a great resume – it lets you get a foot in the door for further evaluation, but nothing else.

Today, I will share with you a list of attractively valued dividend aristocrats for further research. I utilized forward earnings as much as possible, in an effort to screen out any one-time items affecting earnings. Those are not without their pitfalls of course, because analyst projections are typically on the optimistic side.

In order to come up with this list, I used my entry criteria.

1) P/E ratio below 20
2) Dividend Payout Ratio below 60%
3) Earnings per share growth over the past decade
4) At least a token annual dividend growth over the past decade

As a result of this screen, I came up with the following companies for further research: