A large number of dividend growth companies announced plans to boost distributions over the past week. I define consistent dividend paying companies as ones that have managed to reward shareholders with higher distributions for at least five consecutive years in a row. This list typically helps me in observing the rate of change in distributions in companies I own or would like to own at some price point. It is also helpful in getting acquainted with other companies for further research. Because of the long list of companies boosting distributions over the past week, I have separated the list of announced dividend hikes from the past week in several groups:
Mater Limited Partnerships
Many master limited partnerships have been able to boost distributions to unitholders through the recession, extreme oil and gas fluctuations and slow recovery. What is amazing about these companies is that typically they pay most of their distributable cash flows out to untiholders. As a result, their performance is closely tracked by distributions growth. In an MLP, I typically look for good coverage from DCF relative to peers, as well as potential for future distributions growth.
ONEOK Partners, L.P. (OKS) engages in the gathering, processing, storage, and transportation of natural gas in the United States. This master limited partnership raised quarterly distributions to 66 cents/unit. It has regularly boosted distributions for 7 years in a row. In a previous article I outlined the reasons why I choose to invest in this partnership. Yield: 4.60%
Western Gas Partners, LP (WES) owns, operates, acquires, and develops midstream energy assets in east, west, and south Texas; the Rocky Mountains; and the Mid-Continent. This master limited partnership raised quarterly distributions to 48 cents/unit. It has regularly boosted distributions for 5 years in a row. Yield: 4.20%
El Paso Pipeline Partners, L.P. (EPB) engages in the interstate storage and transportation of natural gas in the United States. This master limited partnership raised quarterly distributions to 55 cents/unit. It has regularly boosted distributions for 5 years in a row. Yield: 6.20%
Williams Partners L.P. (WPZ), an energy infrastructure company, focuses on connecting North America’s hydrocarbon resource plays to growing markets for natural gas and natural gas liquids. It operates in two segments, Gas Pipeline and Midstream Gas & Liquids. This master limited partnership raised quarterly distributions to 79.25 cents/unit. It has regularly boosted distributions for 8 years in a row. Yield: 5.90%
Holly Energy Partners, L.P. (HEP) operates a system of petroleum product and crude pipelines, storage tanks, distribution terminals, and loading rack facilities. This master limited partnership raised quarterly distributions to 91 cents/unit. It has regularly boosted distributions for 8 years in a row. Yield: 5.80%
Magellan Midstream Partners, L.P. (MMP) engages in the transportation, storage, and distribution of petroleum products in the United States. This master limited partnership raised quarterly distributions to 94.25 cents/unit. It has regularly boosted distributions for 12 years in a row. Yield: 4.80%
TC PipeLines, LP (TCP) transports natural gas to market hubs and consuming markets primarily in the western and midwestern United States, and central Canada. This master limited partnership raised quarterly distributions to 78 cents/unit. It has regularly boosted distributions for 12 years in a row. Yield: 7%
EV Energy Partners, L.P. (EVEP) engages in the acquisition, development, and production of oil and natural gas properties in the United States. This master limited partnership raised quarterly distributions to 76.50 cents/unit. It has regularly boosted distributions for 6 years in a row. Yield: 5.50%
DCP Midstream Partners, LP, (DPM) together with its subsidiaries, engages in gathering, compressing, treating, processing, transporting, storing, and selling natural gas in the United States. This master limited partnership raised quarterly distributions to 67 cents/unit. It has regularly boosted distributions for 7 years in a row. Yield: 6.50%
Vanguard Natural Resources, LLC (VNR), through its subsidiaries, engages in the acquisition and development of oil and natural gas properties in the United States. This master limited partnership raised quarterly distributions to 60 cents/unit. It has regularly boosted distributions for 5 years in a row. Yield: 8.60%
Former Dividend Aristocrats
The following three companies used to be on the dividend aristocrats lists in the 1990s, but were booted off either due to inability to boost distributions in the case of Kellogg and Baxter or due to dividends cuts in the case of International Flavors & Fragrances. I was planning on researching Kellogg a little further before deciding if I wanted to add to my position in a few months, before receiving disappointing dividend increase mentioned below:
Kellogg Company (K), together with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience food products primarily in North America, Europe, Latin America, and the Asia Pacific. The company raised its quarterly dividend by 2.30% to 44 cents/share. It has regularly raised dividends for 9 years in a row. Yield: 3.70%
International Flavors & Fragrances Inc. (IFF), together with its subsidiaries, creates, manufactures, and supplies flavor and fragrance products worldwide. The company raised its quarterly dividend by 9.70% to 34 cents/share. It has regularly raised dividends for 10 years in a row. Yield: 2.50%
Baxter International Inc. (BAX), through its subsidiaries, develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. The company operates in two segments, BioScience and Medical Products. The company raised its quarterly dividend by 34.30% to 45 cents/share. It has regularly raised dividends for 6 years in a row. Yield: 2.90%
Emerging Dividend Growth Stocks
Emerging dividend growth stocks are the ones which have just or are about to attain a dividend achiever status, which typically happens after a decade of consistent dividend increases. If I have researched a stock, and like its fundamentals, valuation and growth characteristics, I would be looking to initiating a position in such a company.
Intel Corporation (INTC) designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan. The company raised its quarterly dividend by 7.10% to 22.50 cents/share. It has regularly raised dividends for 10 years in a row. The company actually has delivered a nice dividend growth over the past decade, has sustainable distributions and offers attractive valuation at the moment. Being the leader in the competitive semiconductor industry helps as well. Yield: 3.50% (analysis)
Maxim Integrated Products, Inc. (MXIM) engages in designing, developing, manufacturing, and marketing various linear and mixed-signal integrated circuits worldwide. The company raised its quarterly dividend by 9.10% to 24 cents/share. It has regularly raised dividends for 11 years in a row. Yield: 3.60%
Crane Co. (CR) manufactures and sells engineered industrial products in the United States and internationally. The company operates in five segments: Aerospace & Electronics, Engineered Materials, Merchandising Systems, Fluid Handling, and Controls. The company raised its quarterly dividend by 7.70% to 28 cents/share. It has regularly raised dividends for 8 years in a row. Yield: 2.90%
Republic Services, Inc. (RSG) provides non-hazardous solid waste collection, transfer, and disposal services for commercial, industrial, municipal, and residential customers in the United States and Puerto Rico. The company raised its quarterly dividend by 6.80% to 23.50 cents/share. It has regularly raised dividends for 10 years in a row. Yield: 3.40%
Financial Stocks that Escaped Housing Bubble
Another list of companies boosting distributions include small and medium sized banks, which have kept on boosting distributions. They had been able to reward shareholders with dividend raises during the crisis of 2007 – 2009, which effectively shows that they didn’t get too overextended during the Housing Bubble.
1st Source Corporation (SRCE) operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services to individuals and businesses in the United States. This dividend champion raised its quarterly dividend by 6.25% to 17 cents/share. It has regularly raised dividends for 25 years in a row. Yield: 3%
Community Trust Bancorp, Inc. (CTBI) operates as the holding company for Community Trust Bank, Inc. that provides various banking products and services. This dividend champion raised its quarterly dividend by 1.60% to 31.50 cents/share. It has regularly raised dividends for 32 years in a row. Yield: 3.60%
Bar Harbor Bankshares (BHB) operates as the holding company for Bar Harbor Bank & Trust that provides various banking products and services to individuals, businesses, not-for-profit organizations, and municipalities primarily in Hancock, Washington, and Knox counties. The company raised its quarterly dividend to 29.50 cents/share. It has regularly raised dividends for 9 years in a row. Yield: 3.40%
Bank of Marin Bancorp (BMRC) operates as the bank holding company for Bank of Marin that offers a range of commercial and retail banking products and services in California. The company raised its quarterly dividend by 5.90% to 18 cents/share. It has regularly raised dividends for 8 years in a row. Yield: 1.90%
United Financial Bancorp, Inc. (UBNK) operates as a holding company for United Bank that provides various banking products and services in Massachusetts. The company raised its quarterly dividend by 11.10% to 10 cents/share. It has regularly raised dividends for 7 years in a row. Yield: 2.80%
Full Disclosure: Long OKS
Relevant Articles:
- Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors
- Historical changes of the S&P Dividend Aristocrats Index
- Intel Corporation (INTC) Dividend Stock Analysis
- The ten year dividend growth requirement
Monday, July 30, 2012
Friday, July 27, 2012
Genuine Parts Company (GPC) Dividend Stock Analysis
Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada, and Mexico. This dividend king has paid dividends since 1948 and increased distributions on its common stock for 56 years in a row.
The company’s last dividend increase was in February 2012 when the Board of Directors approved a 10% increase to 49.50 cents/share. The company’s largest competitors include W.W. Grainger (GWW), Autozone (AZO) and Advanced Auto Parts (AAP).
Over the past decade this dividend growth stock has delivered an annualized total return of 9.30% to its shareholders.
The company has managed to deliver a 6.10% in annual EPS growth since 2002. Analysts expect Genuine Parts Company to earn $4.07 per share in 2012 and $4.39 per share in 2013. In comparison Genuine Parts Company earned $3.58/share in 2011.
The growth in EPS was helped by stock buybacks, where the company repurchased about 1% of their outstanding stock each year over the past decade. The company’s near term prospects should be aided by sales growth, triggered by the expansion in the US economy. It should also be able to leverage its distribution networks to increase sales in acquired companies. Margins should also be higher on cost cutting and higher volumes. Longer term the company could benefit from increased complexity of vehicles and the rising number of automobiles. The company seems to be very conservative in its finances and has a low level of debt coupled with strong cash flow from operations to fund future dividend increases. The industry will force a lot of smaller competitors out, which could result in more opportunities for Genuine Parts Company. Long-term growth will be driven by internal growth and acquisitions.
Genuine Parts Company has managed to earn a higher return on equity over the past decade. In fact, this indicator increased from 16.40% in 2002 to 20.30% in 2011. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 4.80% per year over the past decade, which is lower than to the growth in EPS. Over the past two years however, dividends have been raised at a rate of 10% per year. Given company’s EPS projections, I would expect another high single digit increase in 2013, followed by a return to the 5% growth in distributions.
A 5% growth in distributions translates into the dividend payment doubling every fifteen years. If we look at historical data, going as far back as 1983 we see that Genuine Parts Company has actually managed to double its dividend every ten years on average.
The dividend payout ratio has closely followed the rise and fall of the economic cycle. It decreased between 2003 and 2007, rose in 2008 – 2009 and has been on the decline ever since. Overall, it has remained firmly above 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Genuine Parts Company is attractively valued at 16.50 times earnings, yields 3.10% and has an adequately covered dividend. I would consider initiating a position in the stock on dips, subject to availability of funds.
Full Disclosure: Long GWW
Relevant Articles:
- Eleven Dividend Kings, Raising dividends for 50+ years
- Dividends versus Share Buybacks/Stock repurchases
- Seventeen Consistent Dividend Raisers in the News
- Dividend Aristocrats List for 2012
The company’s last dividend increase was in February 2012 when the Board of Directors approved a 10% increase to 49.50 cents/share. The company’s largest competitors include W.W. Grainger (GWW), Autozone (AZO) and Advanced Auto Parts (AAP).
Over the past decade this dividend growth stock has delivered an annualized total return of 9.30% to its shareholders.
The company has managed to deliver a 6.10% in annual EPS growth since 2002. Analysts expect Genuine Parts Company to earn $4.07 per share in 2012 and $4.39 per share in 2013. In comparison Genuine Parts Company earned $3.58/share in 2011.
The growth in EPS was helped by stock buybacks, where the company repurchased about 1% of their outstanding stock each year over the past decade. The company’s near term prospects should be aided by sales growth, triggered by the expansion in the US economy. It should also be able to leverage its distribution networks to increase sales in acquired companies. Margins should also be higher on cost cutting and higher volumes. Longer term the company could benefit from increased complexity of vehicles and the rising number of automobiles. The company seems to be very conservative in its finances and has a low level of debt coupled with strong cash flow from operations to fund future dividend increases. The industry will force a lot of smaller competitors out, which could result in more opportunities for Genuine Parts Company. Long-term growth will be driven by internal growth and acquisitions.
Genuine Parts Company has managed to earn a higher return on equity over the past decade. In fact, this indicator increased from 16.40% in 2002 to 20.30% in 2011. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 4.80% per year over the past decade, which is lower than to the growth in EPS. Over the past two years however, dividends have been raised at a rate of 10% per year. Given company’s EPS projections, I would expect another high single digit increase in 2013, followed by a return to the 5% growth in distributions.
A 5% growth in distributions translates into the dividend payment doubling every fifteen years. If we look at historical data, going as far back as 1983 we see that Genuine Parts Company has actually managed to double its dividend every ten years on average.
The dividend payout ratio has closely followed the rise and fall of the economic cycle. It decreased between 2003 and 2007, rose in 2008 – 2009 and has been on the decline ever since. Overall, it has remained firmly above 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Genuine Parts Company is attractively valued at 16.50 times earnings, yields 3.10% and has an adequately covered dividend. I would consider initiating a position in the stock on dips, subject to availability of funds.
Full Disclosure: Long GWW
Relevant Articles:
- Eleven Dividend Kings, Raising dividends for 50+ years
- Dividends versus Share Buybacks/Stock repurchases
- Seventeen Consistent Dividend Raisers in the News
- Dividend Aristocrats List for 2012
Wednesday, July 25, 2012
Dividend Paying Stocks for Retirement Income
One fundamental question that all investors ask themselves is how much money do I need in order to be able to retire. There are many methods that could help retirees generate enough cash in retirement. I have discussed the shortcomings of the popular four percent rule in previous articles. Today, I am going to discuss the concept of using dividend paying stocks for generating income in retirement.
The concept is relatively simple and involves a few easy to follow rules:
1) Accumulate a certain amount of money
2) Invest that money regularly in quality companies that pay a dividend
3) When the dividends from these income stocks exceed your expenses you are financially independent
I rarely discuss accumulating money on this site. I assume that individuals reading this article have the means to figure out means to accumulate a certain level of capital. The goal of this article is to discuss specific strategies, which will assist in investing that money until the goal of financial independence is achieved.
The goal of the dividend investor is to have a portfolio, which throws off a sufficient amount of cash to pay for their expenses. Dividends are a more stable source of returns than capital gains, which makes them an ideal source of income for retirees. While stocks are said to deliver long-term returns of 10% per year, it is not uncommon for investors to experience severe losses, followed by strong bullish moves. This roller coaster ride makes relying on total returns a very risky proposition for retired investors.
Assume that you have saved enough to have a portfolio worth $500,000, yielding 4% and growing distributions at 6% annually. This portfolio generates $20,000 in annual dividend income. If the income needs of the investor are $20,000/year, then they can easily retire. If income grows at 6% per year, the retiree will generate $21,200.
With dividends, retired investors know exactly when to expect a return on their investment. This makes planning for retirement expenses much easier. In addition, dividend payments do not fluctuate as much as the prices of common stocks. As a result, investors in dividend paying stocks receive a form of income which is stable, reliable and is deposited in your account at predictable intervals of time. In addition, because dividend stocks represent ownership in actual businesses, they can afford to raise distributions at or above the rate of inflation by simply passing on rising costs to consumers. This provides an inflation adjusted stream of income for retirees.
Dividends can get cut however. To minimize this risk, investors need to be diversified and only purchase the right stocks after rigorous screening criteria. Investors need to have a diversified income portfolio consisting of at least 30 individual stocks from as many sectors and countries as possible, without sacrificing quality of the positions of course. Investors also need to purchase stocks which are priced attractively and have the right competitive advantages to ensure their business model will keep delivering in the future. Even if a dividend cut occurs, investors should act quickly and replace this stock with another candidate, in order to minimize any further downside risk to that share of their portfolio dividend income. Chasing yield and focusing only on the highest yielding sectors will certainly lead to problems for yield chasing gamblers.
Accumulating dividend stocks is a long term process. The type of stocks I tend to invest in have wide moats, long histories of dividend increases, attractive valuations and multi-national operations. Four such examples include:
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. This dividend aristocrat has raised distributions for 40 years in a row and has a ten year dividend growth rate of 8.70%/year. Yield: 3.10% (analysis)
Johnson & Johnson (JNJ) engages in the research, development, manufacture, and sale of various products in the health care field worldwide. This dividend aristocrat has raised distributions for 50 years in a row and has a ten year dividend growth rate of 12.40%/year. Yield: 3.60% (analysis)
McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. This dividend aristocrat has raised distributions for 35 years in a row and has a ten year dividend growth rate of 27.40%/year. Yield: 3.10% (analysis)
PepsiCo, Inc. (PEP) engages in the manufacture and sale of snacks, carbonated and non-carbonated beverages, dairy products, and other foods worldwide. It operates in four divisions: PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); PepsiCo Europe; and PepsiCo Asia, Middle East, and Africa (AMEA). This dividend aristocrat has raised distributions for 40 years in a row and has a ten year dividend growth rate of 13.30%/year. Yield: 3.10% (analysis)
Full Disclosure: Long all stocks listed above
Relevant Articles:
- When can you retire on dividends?
- How to generate income from your nest egg?
- Inflation Proof your income in retirement with Dividend Stocks
- Don't Chase High Yield Stocks Blindly
The concept is relatively simple and involves a few easy to follow rules:
1) Accumulate a certain amount of money
2) Invest that money regularly in quality companies that pay a dividend
3) When the dividends from these income stocks exceed your expenses you are financially independent
I rarely discuss accumulating money on this site. I assume that individuals reading this article have the means to figure out means to accumulate a certain level of capital. The goal of this article is to discuss specific strategies, which will assist in investing that money until the goal of financial independence is achieved.
The goal of the dividend investor is to have a portfolio, which throws off a sufficient amount of cash to pay for their expenses. Dividends are a more stable source of returns than capital gains, which makes them an ideal source of income for retirees. While stocks are said to deliver long-term returns of 10% per year, it is not uncommon for investors to experience severe losses, followed by strong bullish moves. This roller coaster ride makes relying on total returns a very risky proposition for retired investors.
Assume that you have saved enough to have a portfolio worth $500,000, yielding 4% and growing distributions at 6% annually. This portfolio generates $20,000 in annual dividend income. If the income needs of the investor are $20,000/year, then they can easily retire. If income grows at 6% per year, the retiree will generate $21,200.
With dividends, retired investors know exactly when to expect a return on their investment. This makes planning for retirement expenses much easier. In addition, dividend payments do not fluctuate as much as the prices of common stocks. As a result, investors in dividend paying stocks receive a form of income which is stable, reliable and is deposited in your account at predictable intervals of time. In addition, because dividend stocks represent ownership in actual businesses, they can afford to raise distributions at or above the rate of inflation by simply passing on rising costs to consumers. This provides an inflation adjusted stream of income for retirees.
Dividends can get cut however. To minimize this risk, investors need to be diversified and only purchase the right stocks after rigorous screening criteria. Investors need to have a diversified income portfolio consisting of at least 30 individual stocks from as many sectors and countries as possible, without sacrificing quality of the positions of course. Investors also need to purchase stocks which are priced attractively and have the right competitive advantages to ensure their business model will keep delivering in the future. Even if a dividend cut occurs, investors should act quickly and replace this stock with another candidate, in order to minimize any further downside risk to that share of their portfolio dividend income. Chasing yield and focusing only on the highest yielding sectors will certainly lead to problems for yield chasing gamblers.
Accumulating dividend stocks is a long term process. The type of stocks I tend to invest in have wide moats, long histories of dividend increases, attractive valuations and multi-national operations. Four such examples include:
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. This dividend aristocrat has raised distributions for 40 years in a row and has a ten year dividend growth rate of 8.70%/year. Yield: 3.10% (analysis)
Johnson & Johnson (JNJ) engages in the research, development, manufacture, and sale of various products in the health care field worldwide. This dividend aristocrat has raised distributions for 50 years in a row and has a ten year dividend growth rate of 12.40%/year. Yield: 3.60% (analysis)
McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. This dividend aristocrat has raised distributions for 35 years in a row and has a ten year dividend growth rate of 27.40%/year. Yield: 3.10% (analysis)
PepsiCo, Inc. (PEP) engages in the manufacture and sale of snacks, carbonated and non-carbonated beverages, dairy products, and other foods worldwide. It operates in four divisions: PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); PepsiCo Europe; and PepsiCo Asia, Middle East, and Africa (AMEA). This dividend aristocrat has raised distributions for 40 years in a row and has a ten year dividend growth rate of 13.30%/year. Yield: 3.10% (analysis)
Full Disclosure: Long all stocks listed above
Relevant Articles:
- When can you retire on dividends?
- How to generate income from your nest egg?
- Don't Chase High Yield Stocks Blindly
Monday, July 23, 2012
Eight Income Stocks Boosting Investor Returns
Every week, I focus on the list of consistent dividend raisers, which announce dividend hikes. I define consistent dividend raisers as companies which have managed to reward shareholders with higher dividends for at least five years in a row. Below, I have listed each company which boosted distributions, grouped them by some common denominator, and then provided my take on the company.
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. This master limited partnership raised quarterly distributions to $1.23/unit. Kinder Morgan is a dividend achiever, which has consistently boosted distributions for 16 years in a row. Yield: 5.80% (analysis)
Kinder Morgan, Inc. (KMI) owns and operates energy transportation and storage assets in the United States and Canada. The company operates in six segments: Products Pipelines-KMP, Natural Gas Pipelines KMP, CO2—KMP, Terminals KMP, Kinder Morgan Canada KMP, and NGPL PipeCo LLC. The company raised its quarterly distributions to 35 cents/share. The general partner of Kinder Morgan Partners has raised distributions consistently since going public in 2011. I like the above average yield coupled with the above average dividend growth rate. Yield: 4% (analysis)
Long-time readers know that I own i-share units of Kinder Morgan Management LLC (KMR), which distribute stock instead of cash distributions. That way I do not have to worry about K-1 forms on my investment in the partnership. Once I retire and need the cash flow however, I would probably end up selling KMR and purchasing KMP instead. Currently, if one is in the accumulation stage, it makes sense to purchase KMR, since it is trading at a steep discount to KMP. The partnership expects long-term distribution growth of 5%/year for limited partners. The partnership does expect low double digit long term distribution growth for the general partner interest, which is what Kinder Morgan Inc (KMI) offers. KMI owns the incentive distribution rights to Kinder Morgan Partners (KMP), which entitle it to 50% of distributions above a certain threshold. As a result, KMI offers a lower yield, but much faster dividends growth, which should translate into higher total returns than KMP. Over the past year, I have been a steady acquirer of Kinder Morgan (KMI) stock on dips, while for KMR I have simply reinvested distributions.
National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust. The company raised its quarterly distributions by 2.60% to 39.50 cents/share. This dividend achiever has boosted distributions for 23 years in a row. Yield: 5.30%
Overall I find National Retail Properties’ dividend to be at risk. The company had Funds from Operations of $1.57/share, and the annual dividend is slightly over that at the new rate. As a result, this stock is a hold at best.
The following two companies have managed to boost distributions for over ten years in a row, and seem attractively priced at the moment. I would be analyzing each in detail, before deciding if they have what it takes to keep rewarding shareholders with higher distributions over time:
The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company raised its quarterly dividend by 8.30% to 52 cents/share. This dividend achiever has raised distributions for 13 years in a row. Yield: 2.70%
Stanley Black & Decker, Inc. (SWK) provides power and hand tools, mechanical access solutions, and electronic security and monitoring systems primarily in the United States, Europe, Latin America, and Canada. The company raised its quarterly dividend by 19.50% to 49 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3%
Other companies raising distributions include:
Spectra Energy Partners, LP (SEP), through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. This master limited partnership raised quarterly distributions to 48.50 cents/unit. Spectra Energy Partners has boosted distributions for 6 years in a row. Yield: 6.10%
TransMontaigne Partners L.P. (TLP) operates as a terminaling and transportation company. This master limited partnership raised quarterly distributions to 64 cents/unit. TransMontaigne Partners has boosted distributions for 8 years in a row. Yield: 7.40%
The Williams Companies, Inc. (WMB) operates as an energy infrastructure company in the United States. The company raised its quarterly dividend to 31.25 cents/share. Williams Companies has raised distributions for 9 years in a row. Yield: 4%
Since Spectra Energy, TransMontaigne Partners and Williams Companies have not boosted distributions for over ten years in a row, I would just add them to my list for further research.
Full Disclosure: Long KMR, KMI, NNN
Relevant Articles:
- Kinder Morgan Energy Partners (KMP) Dividend Stock Analysis
- General vs Limited Partners in MLP's
- Dividend Champions - The Best List for Dividend Investors
- Three Companies expecting high dividend growth and returns
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. This master limited partnership raised quarterly distributions to $1.23/unit. Kinder Morgan is a dividend achiever, which has consistently boosted distributions for 16 years in a row. Yield: 5.80% (analysis)
Kinder Morgan, Inc. (KMI) owns and operates energy transportation and storage assets in the United States and Canada. The company operates in six segments: Products Pipelines-KMP, Natural Gas Pipelines KMP, CO2—KMP, Terminals KMP, Kinder Morgan Canada KMP, and NGPL PipeCo LLC. The company raised its quarterly distributions to 35 cents/share. The general partner of Kinder Morgan Partners has raised distributions consistently since going public in 2011. I like the above average yield coupled with the above average dividend growth rate. Yield: 4% (analysis)
Long-time readers know that I own i-share units of Kinder Morgan Management LLC (KMR), which distribute stock instead of cash distributions. That way I do not have to worry about K-1 forms on my investment in the partnership. Once I retire and need the cash flow however, I would probably end up selling KMR and purchasing KMP instead. Currently, if one is in the accumulation stage, it makes sense to purchase KMR, since it is trading at a steep discount to KMP. The partnership expects long-term distribution growth of 5%/year for limited partners. The partnership does expect low double digit long term distribution growth for the general partner interest, which is what Kinder Morgan Inc (KMI) offers. KMI owns the incentive distribution rights to Kinder Morgan Partners (KMP), which entitle it to 50% of distributions above a certain threshold. As a result, KMI offers a lower yield, but much faster dividends growth, which should translate into higher total returns than KMP. Over the past year, I have been a steady acquirer of Kinder Morgan (KMI) stock on dips, while for KMR I have simply reinvested distributions.
National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust. The company raised its quarterly distributions by 2.60% to 39.50 cents/share. This dividend achiever has boosted distributions for 23 years in a row. Yield: 5.30%
Overall I find National Retail Properties’ dividend to be at risk. The company had Funds from Operations of $1.57/share, and the annual dividend is slightly over that at the new rate. As a result, this stock is a hold at best.
The following two companies have managed to boost distributions for over ten years in a row, and seem attractively priced at the moment. I would be analyzing each in detail, before deciding if they have what it takes to keep rewarding shareholders with higher distributions over time:
The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company raised its quarterly dividend by 8.30% to 52 cents/share. This dividend achiever has raised distributions for 13 years in a row. Yield: 2.70%
Stanley Black & Decker, Inc. (SWK) provides power and hand tools, mechanical access solutions, and electronic security and monitoring systems primarily in the United States, Europe, Latin America, and Canada. The company raised its quarterly dividend by 19.50% to 49 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3%
Other companies raising distributions include:
Spectra Energy Partners, LP (SEP), through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. This master limited partnership raised quarterly distributions to 48.50 cents/unit. Spectra Energy Partners has boosted distributions for 6 years in a row. Yield: 6.10%
TransMontaigne Partners L.P. (TLP) operates as a terminaling and transportation company. This master limited partnership raised quarterly distributions to 64 cents/unit. TransMontaigne Partners has boosted distributions for 8 years in a row. Yield: 7.40%
The Williams Companies, Inc. (WMB) operates as an energy infrastructure company in the United States. The company raised its quarterly dividend to 31.25 cents/share. Williams Companies has raised distributions for 9 years in a row. Yield: 4%
Since Spectra Energy, TransMontaigne Partners and Williams Companies have not boosted distributions for over ten years in a row, I would just add them to my list for further research.
Full Disclosure: Long KMR, KMI, NNN
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Friday, July 20, 2012
Casey’s (CASY) Dividend Stock Analysis
Casey’s General Stores, Inc. (CASY), together with its subsidiaries, operates convenience stores under the Casey’s General Store, HandiMart, and Just Diesel names in 11 Midwestern states, primarily Iowa, Missouri, and Illinois. This dividend achiever has paid dividends since 1990 and increased distributions on its common stock for 12 years in a row.
The company’s last dividend increase was in February 2012 when the Board of Directors approved a 11.10% increase to 15 cents/share. The company’s largest competitors include Weis Markets (WEIS), Supervalu (SVU) and Fresh Market (TFM).
Over the past decade this dividend growth stock has delivered an annualized total return of 18% to its shareholders.
The company has managed to deliver a 14.80% in annual EPS growth since 2002. Analysts expect Casey’s to earn $3.11 per share in 2012 and $3.54 per share in 2013. In comparison Casey’s earned $2.22/share in 2011.
The improved financial performance at Casey’s has been driven by increase in number of store locations, increase in in-store promotional activities as well as implementation of a product mix with higher profit margins. The company grew by 109 stores in 2011 to 1,637 stores. It currently has a presence in 11 states, although just four states account for the majority of store locations. As a result, the number of Casey’s stores is far from saturated. The company grows the number of stores through purchasing existing locations from competitors or by building new stores. The company’s goal is to increase number of stores by 4% - 6% per year. The company is also expecting to spend significant amounts on renovating a large number of stores, in an effort to increase its appeal to customers, and increase foot traffic.
Gasoline accounted for 71% of Casey’s sales in 2011, but 24.10% of gross profits. Higher gasoline prices over the past three years have led to higher sales and higher profit margins. The company’s grocery and other merchandise accounted for 21.20% of sales, but 43.70% of gross profits. Prepared foods and fountain segment contributed 7.40% of revenues and 29.30% of gross profits. Although gasoline only accounts for a quarter of gross profits, it brings in customers, who are then more likely to come in the store and purchase some of its high margin products. Casey’s has been under increased pressure in its prepared foods, as bread, meat and cheese prices have been increasing, and it has been unable to pass on price increases to consumers.
Casey’s business is seasonal, and generally the Company experiences higher sales and profitability during the first and second fiscal quarters (May-October), when customers tend to purchase greater quantities of gasoline and certain convenience items such as beer and soft drinks.
Approximately 60% of all Casey’s General Stores are located in areas with populations of fewer than 5,000 persons, while approximately 15% of all stores are located in communities with populations exceeding 20,000 persons. The company has calculated that its stores can be profitable even if it operates in communities with as little as 500 persons, as long as there isn’t any competition. Casey’s operates a central warehouse, the Casey’s Distribution Center, adjacent to its Corporate Headquarters facility in Ankeny, Iowa, through which they supply grocery and general merchandise items to our stores. The Company owns the land and the buildings behind 99% of its stores.
In the past year, Casey’s rejected an unsolicited bid to acquire it, and spent a considerable amount in legal fees as well as fees related to its recapitalization program. These one-time items amounted to 41 cents/share. Without them, EPS would have been $2.65 in 2011. As part of that program, Casey’s was able to repurchase $500 million worth of its stock at an average price of $38.25/share in 2011.
Casey’s has managed to earn a higher return on equity over the past decade. In fact, this indicator increased from 9% in 2002 to 15.40% in 2011. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 21.70% per year over the past decade, which is higher than to the growth in EPS. This has led to an expansion in the dividend payout ratio for the company.
A 22% growth in distributions translates into the dividend payment doubling almost every three and a half years. If we look at historical data, going as far back as 1990 we see that Casey’s has actually managed to double its dividend every four and a half years on average.
The dividend payout ratio has increased over the past decade, rising from a low of 12.50% in 2002 to almost 23% in 2011. This explains the fact that dividend growth has been faster than earnings growth over the past decade. 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 have been familiar with Casey’s since at least 2008, and have purchased gasoline and some of its in-store products from them. Their pizzas are good, and some customers I have spoken to go out of their way just so they can buy them. I never really researched whether Casey’s is even publicly traded, until it popped up during my weekly reviews of dividend increases. While stock price has increase significantly over the past decade, I still believe that there is room for growth. However, if the company gets acquired, investors would be giving up their share of potential future growth.
Currently, Casey’s is attractively valued at 18.70 times earnings, and has an adequately covered dividend. It only yields 1.10%, which is too low per my entry criteria. I do realize that some of the great growth stories end up yielding little, but could more than compensate for that through strong total returns over time. I added a quarter position in this stock on recent weakness over the past month. Companies like Casey’s have the potential to be a multibagger over the next few years.
Full Disclosure: Long CASY
Relevant Articles:
- Eight Golden Geese Laying Golden Eggs for Shareholders
- 7 Dividend Stocks Raising Dividends and Returns
- The New Dividend Achievers of 2010
- My Entry Criteria for Dividend Stocks
The company’s last dividend increase was in February 2012 when the Board of Directors approved a 11.10% increase to 15 cents/share. The company’s largest competitors include Weis Markets (WEIS), Supervalu (SVU) and Fresh Market (TFM).
Over the past decade this dividend growth stock has delivered an annualized total return of 18% to its shareholders.
The company has managed to deliver a 14.80% in annual EPS growth since 2002. Analysts expect Casey’s to earn $3.11 per share in 2012 and $3.54 per share in 2013. In comparison Casey’s earned $2.22/share in 2011.
The improved financial performance at Casey’s has been driven by increase in number of store locations, increase in in-store promotional activities as well as implementation of a product mix with higher profit margins. The company grew by 109 stores in 2011 to 1,637 stores. It currently has a presence in 11 states, although just four states account for the majority of store locations. As a result, the number of Casey’s stores is far from saturated. The company grows the number of stores through purchasing existing locations from competitors or by building new stores. The company’s goal is to increase number of stores by 4% - 6% per year. The company is also expecting to spend significant amounts on renovating a large number of stores, in an effort to increase its appeal to customers, and increase foot traffic.
Gasoline accounted for 71% of Casey’s sales in 2011, but 24.10% of gross profits. Higher gasoline prices over the past three years have led to higher sales and higher profit margins. The company’s grocery and other merchandise accounted for 21.20% of sales, but 43.70% of gross profits. Prepared foods and fountain segment contributed 7.40% of revenues and 29.30% of gross profits. Although gasoline only accounts for a quarter of gross profits, it brings in customers, who are then more likely to come in the store and purchase some of its high margin products. Casey’s has been under increased pressure in its prepared foods, as bread, meat and cheese prices have been increasing, and it has been unable to pass on price increases to consumers.
Casey’s business is seasonal, and generally the Company experiences higher sales and profitability during the first and second fiscal quarters (May-October), when customers tend to purchase greater quantities of gasoline and certain convenience items such as beer and soft drinks.
Approximately 60% of all Casey’s General Stores are located in areas with populations of fewer than 5,000 persons, while approximately 15% of all stores are located in communities with populations exceeding 20,000 persons. The company has calculated that its stores can be profitable even if it operates in communities with as little as 500 persons, as long as there isn’t any competition. Casey’s operates a central warehouse, the Casey’s Distribution Center, adjacent to its Corporate Headquarters facility in Ankeny, Iowa, through which they supply grocery and general merchandise items to our stores. The Company owns the land and the buildings behind 99% of its stores.
In the past year, Casey’s rejected an unsolicited bid to acquire it, and spent a considerable amount in legal fees as well as fees related to its recapitalization program. These one-time items amounted to 41 cents/share. Without them, EPS would have been $2.65 in 2011. As part of that program, Casey’s was able to repurchase $500 million worth of its stock at an average price of $38.25/share in 2011.
Casey’s has managed to earn a higher return on equity over the past decade. In fact, this indicator increased from 9% in 2002 to 15.40% in 2011. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 21.70% per year over the past decade, which is higher than to the growth in EPS. This has led to an expansion in the dividend payout ratio for the company.
A 22% growth in distributions translates into the dividend payment doubling almost every three and a half years. If we look at historical data, going as far back as 1990 we see that Casey’s has actually managed to double its dividend every four and a half years on average.
The dividend payout ratio has increased over the past decade, rising from a low of 12.50% in 2002 to almost 23% in 2011. This explains the fact that dividend growth has been faster than earnings growth over the past decade. 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 have been familiar with Casey’s since at least 2008, and have purchased gasoline and some of its in-store products from them. Their pizzas are good, and some customers I have spoken to go out of their way just so they can buy them. I never really researched whether Casey’s is even publicly traded, until it popped up during my weekly reviews of dividend increases. While stock price has increase significantly over the past decade, I still believe that there is room for growth. However, if the company gets acquired, investors would be giving up their share of potential future growth.
Currently, Casey’s is attractively valued at 18.70 times earnings, and has an adequately covered dividend. It only yields 1.10%, which is too low per my entry criteria. I do realize that some of the great growth stories end up yielding little, but could more than compensate for that through strong total returns over time. I added a quarter position in this stock on recent weakness over the past month. Companies like Casey’s have the potential to be a multibagger over the next few years.
Full Disclosure: Long CASY
Relevant Articles:
- Eight Golden Geese Laying Golden Eggs for Shareholders
- 7 Dividend Stocks Raising Dividends and Returns
- The New Dividend Achievers of 2010
- My Entry Criteria for Dividend Stocks
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