Nowadays, everyone knows what the fiscal cliff is all about as news channels, websites and newspapers have explained everything there is to the matter. Now that we are past “fiscal cliff” territory, the markets have been jittery. Despite the recent relief rally, some spending deals have only been postponed by a few months. In addition, the uncertainty around the US debt ceiling is another factor that could weigh in on investors sentiments.
Fears of the effect of this fiscal cliff and hitting the debt ceiling on the economy, could drive stock prices down. As a dividend investor however, my holding period is forever. I am a firm believer that if I choose the companies with the right fundamentals, with solid competitive advantages and a strategy to grow earnings, I can ignore market fluctuations. This is particularly true, since I purchase dividend stocks at attractive valuations. Many investors view stocks simply as lottery tickets, and Wall Street is viewed as a giant casino. These investors are forgetting the fact that stocks represent ownership of real businesses that provide something of value to their customers.
I focus on businesses generating growing amounts of excess free cash flow and then regularly raise dividends. As dividends always represent a positive return on investment, I would generate returns even if the market is down. In addition, even if the markets closed for 5 or 10 years, my investments would still generate a positive cash return on aggregate in the form of dividends.
If the fiscal cliff sends stocks tumbling by 10% - 20%, I would be a buyer on dips. Many companies with solid operating performance would be even cheaper. A market decline also offers the opportunity to buy shares in companies, which are perennially overvalued.
I plan on adding to my positions in the following companies on dips:
The Coca-Cola Company (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company has raised distributions for 50 years in a row, and has raised them by 9.80%/year over the past decade. Currently, Coca-Cola trades at 19.70 times earnings and yields 2.70%. I would be a buyer if the stock drops to $34 - $35/range. Check my analysis of the stock for more detail.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company has raised distributions for 5 years in a row. Currently, Philip Morris International trades at 17.30 times earnings and yields 3.90%. I would be a buyer on dips. Check my analysis of the stock for more detail.
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company has raised distributions for 38 years in a row, and has raised them by 18.10%/year over the past decade. Currently, Wal-Mart Stores trades at 14.20 times earnings and yields 2.30%. I would be a buyer on dips below $64/share. Check my analysis of the stock for more detail.
YUM! Brands, Inc. (YUM), together with its subsidiaries, operates quick service restaurants in the United States and internationally. The company has raised distributions for 9 years in a row, and has raised them by 17.80%/year over the past five years. Currently, YUM! Brands trades at 20.10 times earnings and yields 2%. I would be a buyer on dips below $54/share.
The following stocks have the potential to grow earnings over time, which should increase their value. In addition, increased earnings would allow these companies to boost investor dividends.
Full Disclosure: Long KO, YUM, PM, WMT
Relevant Articles:
- Wal-Mart Stores (WMT) Dividend Stock Analysis
- Coca-Cola Company (KO) Dividend Stock Analysis
- PepsiCo (PEP): A Better Value than Coca Cola (KO)
- How to get dividend investment ideas
This post was included in the Carnival of Personal Finance #396 hosted by Financial Coach Adam Hagerman.
Wednesday, January 9, 2013
Monday, January 7, 2013
Seven companies expected to grow dividends in 2013
Over the past year, many companies kept increasing dividends. Payouts are expected to reach a record amount in 2012. Despite fears of fiscal cliff, the US economy is doing ok, and corporate profits are also doing well. In a previous article I outlined why I am not worried about the fiscal cliff. Strong profits lead to stable and growing dividend checks. As a result, I expect companies in general to be able to distribute a record amount of cash to shareholders in 2013.
In this article, I have outlined several companies which I expect to reward their shareholders with the gift of dividend growth. Several of these companies have managed to boost distributions for over half a century each. These companies have consistently paid and raised distributions during situations where the top marginal tax rates exceeded 70%. Companies that follow such managed dividend policies are much more likely to keep boosting dividends, especially when their financial conditions are improving.
Johnson & Johnson (JNJ), together with its subsidiaries, engages in the research and development, manufacture, and sale of various products in the health care field worldwide. In 2012 the company raised quarterly dividends by 7%, to 61 cents/share, marking the 50th consecutive annual dividend increase. The five year average dividend growth is 9.10%/annually. Earnings per share are expected to increase to $5.09 in 2012 and $5.49 in 2013. I expect quarterly dividends to increase to 65 – 66 cents/share in 2013. Currently, the stock is attractively valued at 14.30 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Coca-Cola Company (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. In 2012 the company raised quarterly dividends by 8.50%, to 25.50 cents/share, marking the 50th consecutive annual dividend increase. The five year average dividend growth is 8.70%/annually. Earnings per share are expected to increase to $2 in 2012 and $2.19 in 2013. I expect quarterly dividends to increase to 27 - 27.5 cents/share in 2013. Currently, the stock is attractively valued at 18.90 times earnings and yields 2.80%. Check my analysis of the stock for more information.
McDonald’s Corporation (MCD) franchises and operates McDonald's restaurants in the global restaurant industry. In 2012 the company raised quarterly dividends by 10%, to 77 cents/share, marking the 36th consecutive annual dividend increase. The five year average dividend growth is 20.40%/annually. Earnings per share are expected to increase to $5.31 in 2012 and $5.78 in 2013. I expect quarterly dividends to increase to 85 – 86 cents/share in 2013. Currently, the stock is attractively valued at 16.60 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Procter & Gamble Company (PG), together with its subsidiaries, engages in the manufacture and sale of a range of branded consumer packaged goods. In 2012 the company raised quarterly dividends by 7%, to 56.20 cents/share, marking the 56th consecutive annual dividend increase. The five year average dividend growth is 11.20%/annually. Earnings per share are expected to increase to $3.96 in 2013 and $4.30 in 2014. I expect quarterly dividends to increase to 60 – 61 cents/share in 2013. Currently, the stock is attractively valued at 18.90 times earnings and yields 3.30%. Check my analysis of the stock for more information.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. In 2012 the company raised quarterly dividends by 10.40%, to 85 cents/share, marking the 5th consecutive annual dividend increase. The five year average dividend growth is 13.20%. Earnings per share are expected to increase to $5.21 in 2012 and $5.81 in 2013. I expect quarterly dividends to increase to 95 – 96 cents/share in 2013. Currently, the stock is attractively valued at 16.70 times earnings and yields 4.10%. Check my analysis of the stock for more information.
Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. In 2012 the company raised quarterly dividends by 11.10%, to 90 cents/share, marking the 25th consecutive annual dividend increase. The five year average dividend growth is 9 %/annually. Earnings per share are expected to reach $12.55 in 2012 and $12.18 in 2013. I expect quarterly dividends to increase to $1/share in 2013. Currently, the stock is attractively valued at 8.80 times earnings and yields 3.30. Check my analysis of the stock for more information.
United Technologies Corporation (UTX) provides technology products and services to the building systems and aerospace industries worldwide. In 2012 the company raised quarterly dividends by 11.50%, to 53.50 cents/share, marking the 19th consecutive annual dividend increase. The five year average dividend growth is 12.70%/annually. Earnings per share are expected to increase to $5.32in 2012 and $6.06 in 2013. I expect dividends to increase to 59 – 60 cents/share in 2013. The company typically raises distributions every five quarters. Currently, the stock is attractively valued at 16.80 times earnings and yields 2.60%. Check my analysis of the stock for more information.
Full Disclosure: Long JNJ, KO, MCD, PG, PM, CVX, UTX\
Relevant Articles:
- Why I am not worried about the Fiscal Cliff and Dividend Tax Hikes
- Eleven Dividend Kings, Raising dividends for 50+ years
- Best Dividend Stocks for 2013, and beyond
- Dividend Investing Goals for 2013
In this article, I have outlined several companies which I expect to reward their shareholders with the gift of dividend growth. Several of these companies have managed to boost distributions for over half a century each. These companies have consistently paid and raised distributions during situations where the top marginal tax rates exceeded 70%. Companies that follow such managed dividend policies are much more likely to keep boosting dividends, especially when their financial conditions are improving.
Johnson & Johnson (JNJ), together with its subsidiaries, engages in the research and development, manufacture, and sale of various products in the health care field worldwide. In 2012 the company raised quarterly dividends by 7%, to 61 cents/share, marking the 50th consecutive annual dividend increase. The five year average dividend growth is 9.10%/annually. Earnings per share are expected to increase to $5.09 in 2012 and $5.49 in 2013. I expect quarterly dividends to increase to 65 – 66 cents/share in 2013. Currently, the stock is attractively valued at 14.30 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Coca-Cola Company (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. In 2012 the company raised quarterly dividends by 8.50%, to 25.50 cents/share, marking the 50th consecutive annual dividend increase. The five year average dividend growth is 8.70%/annually. Earnings per share are expected to increase to $2 in 2012 and $2.19 in 2013. I expect quarterly dividends to increase to 27 - 27.5 cents/share in 2013. Currently, the stock is attractively valued at 18.90 times earnings and yields 2.80%. Check my analysis of the stock for more information.
McDonald’s Corporation (MCD) franchises and operates McDonald's restaurants in the global restaurant industry. In 2012 the company raised quarterly dividends by 10%, to 77 cents/share, marking the 36th consecutive annual dividend increase. The five year average dividend growth is 20.40%/annually. Earnings per share are expected to increase to $5.31 in 2012 and $5.78 in 2013. I expect quarterly dividends to increase to 85 – 86 cents/share in 2013. Currently, the stock is attractively valued at 16.60 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Procter & Gamble Company (PG), together with its subsidiaries, engages in the manufacture and sale of a range of branded consumer packaged goods. In 2012 the company raised quarterly dividends by 7%, to 56.20 cents/share, marking the 56th consecutive annual dividend increase. The five year average dividend growth is 11.20%/annually. Earnings per share are expected to increase to $3.96 in 2013 and $4.30 in 2014. I expect quarterly dividends to increase to 60 – 61 cents/share in 2013. Currently, the stock is attractively valued at 18.90 times earnings and yields 3.30%. Check my analysis of the stock for more information.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. In 2012 the company raised quarterly dividends by 10.40%, to 85 cents/share, marking the 5th consecutive annual dividend increase. The five year average dividend growth is 13.20%. Earnings per share are expected to increase to $5.21 in 2012 and $5.81 in 2013. I expect quarterly dividends to increase to 95 – 96 cents/share in 2013. Currently, the stock is attractively valued at 16.70 times earnings and yields 4.10%. Check my analysis of the stock for more information.
Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. In 2012 the company raised quarterly dividends by 11.10%, to 90 cents/share, marking the 25th consecutive annual dividend increase. The five year average dividend growth is 9 %/annually. Earnings per share are expected to reach $12.55 in 2012 and $12.18 in 2013. I expect quarterly dividends to increase to $1/share in 2013. Currently, the stock is attractively valued at 8.80 times earnings and yields 3.30. Check my analysis of the stock for more information.
United Technologies Corporation (UTX) provides technology products and services to the building systems and aerospace industries worldwide. In 2012 the company raised quarterly dividends by 11.50%, to 53.50 cents/share, marking the 19th consecutive annual dividend increase. The five year average dividend growth is 12.70%/annually. Earnings per share are expected to increase to $5.32in 2012 and $6.06 in 2013. I expect dividends to increase to 59 – 60 cents/share in 2013. The company typically raises distributions every five quarters. Currently, the stock is attractively valued at 16.80 times earnings and yields 2.60%. Check my analysis of the stock for more information.
Full Disclosure: Long JNJ, KO, MCD, PG, PM, CVX, UTX\
Relevant Articles:
- Why I am not worried about the Fiscal Cliff and Dividend Tax Hikes
- Eleven Dividend Kings, Raising dividends for 50+ years
- Best Dividend Stocks for 2013, and beyond
- Dividend Investing Goals for 2013
Friday, January 4, 2013
Becton Dickinson (BDX) Dividend Stock Analysis
Becton, Dickinson and Company (BDX), a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company is a member of the dividend champions list, and has been able to boost distributions for 42 years in a row.
The company’s last dividend increase was in November 2012 when the Board of Directors approved a 10% increase to 49.50 cents/share. The company’s peer group includes Medtronic (MDT), Baxter International (BAX) and St. Jude Medical (STJ).
Over the past decade this dividend growth stock has delivered an annualized total return of 11.70% to its shareholders.
The company has managed to deliver an 11% average increase in annual EPS since 2002. Analysts expect BDX to earn $5.63 per share in 2013 and $6.14 per share in 2014. In comparison, the company earned $5.30/share in 2012.
Despite soft economic outlook, Becton Dickinson should be able to generate higher sales in due to the sustainable demand for its diabetes products, disease testing products, and cell analysis products. The company generates almost 60% of its sales from international operations, which is expected to increase as it grows its presence in emerging markets. Becton Dickinson is also active on the acquisition front and is investing heavily in research and development, which should benefit the company through new product launches. Becton Dickinson has a solid long-term potential for its business, due to its strong position and due to the good prospects for its industry. The company enjoys strong demand for its products and a more favorable pricing than other competitors in its industry.
While the company could suffer from the implementation of a new medical device tax in 2013, it should be able to benefit from increased healthcare spending in the US and internationally.
The return on equity has increased from 20% in 2003 to 26% by 2012. I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 15.70% per year over the past decade, which is higher than the growth in EPS.
A 16% growth in distributions translates into the dividend payment doubling every four and a half years on average. If we look at historical data, going as far back as 1975, one would notice that the company has actually managed to double distributions every six years on average.
The dividend payout ratio has increased from 19% in 2003 to 34% in 2012. 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 Becton Dickinson is attractively valued at 13.70 times earnings, yields 2.60% and has a sustainable distribution. I plan on initiating a position in the stock subject to availability of funds.
Full Disclosure: Long MDT
Relevant Articles:
- My Entry Criteria for Dividend Stocks
- Dividend Champions - The Best List for Dividend Investors
- Medtronic (MDT) Dividend Stock Analysis 2012
- Ten Top High Dividend Growth Stocks for Long Term Returns
The company’s last dividend increase was in November 2012 when the Board of Directors approved a 10% increase to 49.50 cents/share. The company’s peer group includes Medtronic (MDT), Baxter International (BAX) and St. Jude Medical (STJ).
Over the past decade this dividend growth stock has delivered an annualized total return of 11.70% to its shareholders.
The company has managed to deliver an 11% average increase in annual EPS since 2002. Analysts expect BDX to earn $5.63 per share in 2013 and $6.14 per share in 2014. In comparison, the company earned $5.30/share in 2012.
Despite soft economic outlook, Becton Dickinson should be able to generate higher sales in due to the sustainable demand for its diabetes products, disease testing products, and cell analysis products. The company generates almost 60% of its sales from international operations, which is expected to increase as it grows its presence in emerging markets. Becton Dickinson is also active on the acquisition front and is investing heavily in research and development, which should benefit the company through new product launches. Becton Dickinson has a solid long-term potential for its business, due to its strong position and due to the good prospects for its industry. The company enjoys strong demand for its products and a more favorable pricing than other competitors in its industry.
While the company could suffer from the implementation of a new medical device tax in 2013, it should be able to benefit from increased healthcare spending in the US and internationally.
The return on equity has increased from 20% in 2003 to 26% by 2012. I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 15.70% per year over the past decade, which is higher than the growth in EPS.
A 16% growth in distributions translates into the dividend payment doubling every four and a half years on average. If we look at historical data, going as far back as 1975, one would notice that the company has actually managed to double distributions every six years on average.
The dividend payout ratio has increased from 19% in 2003 to 34% in 2012. 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 Becton Dickinson is attractively valued at 13.70 times earnings, yields 2.60% and has a sustainable distribution. I plan on initiating a position in the stock subject to availability of funds.
Full Disclosure: Long MDT
Relevant Articles:
- My Entry Criteria for Dividend Stocks
- Dividend Champions - The Best List for Dividend Investors
- Medtronic (MDT) Dividend Stock Analysis 2012
- Ten Top High Dividend Growth Stocks for Long Term Returns
Wednesday, January 2, 2013
Best Dividend Stocks for 2013, and beyond
Dividend investing is a long term process, where capital is invested upfront today, with the intention to receive dividends for many years to come. Dividends have historically represented approximately 40% of average annual total returns, which is why they are an important part of the investing decision. The thing about dividend checks is that unlike capital gains, they are always positive. As long as the company you purchased is sound financially, it should be able to distribute cash in your brokerage account like clockwork every single quarter. As a result, it is no surprise that dividend stocks are getting a lot of attention from current and future retirees.
The most important decision for someone who wants to retire with dividend stocks is to actually get started. This means saving money consistently, and then investing it in the dividend stocks of their choice. In this article, I am going to outline a few dividend stocks, which make very good candidates for a beginning income portfolio. In other words, if I were starting a portfolio tomorrow, I would include the following stocks.
Consumer Staples
Clorox Company (CLX), The-Global Auto-Care Business is a United States-based Company, which manufacturers and markets consumer and institutional products. The company has raised distributions for 35 years in a row. The stock trades at 17.60 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Procter & Gamble Company (PG) is focused on providing consumer packaged goods, which are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores. The company has raised distributions for 56 years in a row. The stock trades at 18.70 times earnings and yields 3.30%. Check my analysis of the stock for more information.
Colgate-Palmolive Company (CL) is a consumer products company, which operates in over 200 countries and territories worldwide. The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition. The company has raised distributions for 49 years in a row. The stock trades at 20.40 times earnings and yields 2.40%. Check my analysis of the stock for more information.
Kimberly-Clark Corporation (KMB), is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers using advanced technologies in fibers, nonwovens and absorbency. The company has raised distributions for 40 years in a row. The stock trades at 17.50 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Coca-Cola Company (KO) is a beverage company, which owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages, such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. The company has raised distributions for 50 years in a row. The stock trades at 18.80 times earnings and yields 2.80%. Check my analysis of the stock for more information.
PepsiCo, Inc. (PEP) is a global food and beverage company. The company has raised distributions for 40 years in a row. The stock trades at 18.10 times earnings and yields 3.10%. Check my analysis of the stock for more information.
Walgreen Co. (WAG), operates a drugstore chain in the United States which provides its customers with access to consumer goods and services, pharmacy, and health and wellness services in communities across America. The company has raised distributions for 37 years in a row. The stock trades at 16.50 times earnings and yields 3%. Check my analysis of the stock for more information.
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats around globally. The company has raised distributions for 38 years in a row. The stock trades at 13.90 times earnings and yields 2.30%. Check my analysis of the stock for more information.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company has raised distributions for five years in a row. The stock trades at 16.50 times earnings and yields 4.10%. Check my analysis of the stock for more information.
Consumer Discretionary
McDonald’s Corporation (MCD) franchises and operates McDonald’s restaurants in 119 countries globally. The company has raised distributions for 36 years in a row. The stock trades at 16.50 times earnings and yields 3.50%. Check my analysis of the stock for more information.
Health Care
Johnson & Johnson (JNJ) is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The company has raised distributions for 50 years in a row. The stock trades at 14.20 times earnings and yields 3.50%. Check my analysis of the stock for more information.
Becton, Dickinson and Company (BDX) is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The company has raised distributions for 41 years in a row. The stock trades at 13.80 times earnings and yields 2.50%. Check my analysis of the stock for more information.
Medtronic (MDT) develops and manufactures a range of products and therapies providing a continuum of care to diagnose, prevent and monitor chronic conditions. The company has raised distributions for 35 years in a row. The stock trades at 12.40 times earnings and yields 2.50%. Check my analysis of the stock for more information.
Financials
Aflac Incorporated (AFL) is engaged in providing supplemental health and life insurance, through its subsidiary, American Family Life Assurance Company of Columbus, which operates in the United States and as a branch in Japan. The company has raised distributions for 30 years in a row. The stock trades at 8.60 times earnings and yields 2.60%. Check my analysis of the stock for more information.
Materials
Air Products and Chemicals, Inc. (APD) has a portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, performance materials, equipment, and services. The company has raised distributions for 30 years in a row. The stock trades at 15.20 times earnings and yields 3%. Check my analysis of the stock for more information.
Industrials
Emerson Electric Co. (EMR) is engaged in designing and supplying products and technology, and delivering engineering services and solutions in a range of industrial, commercial and consumer markets globally. The company has raised distributions for 56 years in a row. The stock trades at 19.50 times earnings and yields 3.10%. Check my analysis of the stock for more information.
United Technologies Corporation (UTX) provides high technology products and services to the building systems and aerospace industries worldwide. The company has raised distributions for 19 years in a row. The stock trades at 16.60 times earnings and yields 2.60%. Check my analysis of the stock for more information.
Energy
Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company has raised distributions for 25 years in a row. The stock trades at 8.70 times earnings and yields 3.30%. Check my analysis of the stock for more information.
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. The partnership has raised distributions for 16 years in a row. The units currently yield 6.50%. Check my analysis of this MLP for more information.
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. The partnership has raised distributions for 15 years in a row. The units currently yield 5.30%. Check my analysis of this MLP for more information.
It is important when you build you income portfolio is to aim at being diversified. Holding at least 30 individual stocks is essential to ensure that income is relatively diversified. While the list above includes 20 stocks, with heavy representation from Consumer Staples stocks. I have found that over time new companies could become attractively priced, and thus be added by the enterprising dividend investor. It is important to be diversified, but do not diversify at all costs. For example technology companies are in an industry characterized with rapid technological advancement and obsolescence of existing products. As a result, tech companies might have to invest large amounts each year simply to stay competitive. This leaves little money for establishment of a consistent streak of dividend increases.
In addition, it is also important to build your portfolio slowly, by dollar cost averaging your way into positions. It is also important to focus on entry price as well, since overpaying even for quality stocks can lead to subpar returns. Investors should also remain flexible in their investment approach. They need to focus on the big picture, and not get lost in the details. Of course. dividend investing is a buy and monitor, not a buy and forget type of investment strategy. Investors should monitor each investment regularly, and decide whether it makes sense to buy more, simply hold on or sell right away.
Once invested, I would look for opportunities to add into shares of other companies’. By accumulating dividends in cash, and then selectively initiating shares of quality dividend stocks over time, the investor would be able to diversify their portfolio even further, while also compounding their capital as well.
To summarize, the companies above represent great buys at current valuations for a portfolio in 2013 and beyond. By monitoring your portfolio holdings, adding funds, and reinvesting dividends, your passive income stream will eventually lead to your dividend crossover point.
Full Disclosure: Long all shares listed above
Relevant Articles:
- Dividend investing timeframes- what's your holding period?
- How to retire with dividend stocks
- Dividend Portfolios – concentrate or diversify?
- Is Buy and Hold Dividend Investing dead?
The most important decision for someone who wants to retire with dividend stocks is to actually get started. This means saving money consistently, and then investing it in the dividend stocks of their choice. In this article, I am going to outline a few dividend stocks, which make very good candidates for a beginning income portfolio. In other words, if I were starting a portfolio tomorrow, I would include the following stocks.
Consumer Staples
Clorox Company (CLX), The-Global Auto-Care Business is a United States-based Company, which manufacturers and markets consumer and institutional products. The company has raised distributions for 35 years in a row. The stock trades at 17.60 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Procter & Gamble Company (PG) is focused on providing consumer packaged goods, which are sold in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores and high-frequency stores. The company has raised distributions for 56 years in a row. The stock trades at 18.70 times earnings and yields 3.30%. Check my analysis of the stock for more information.
Colgate-Palmolive Company (CL) is a consumer products company, which operates in over 200 countries and territories worldwide. The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition. The company has raised distributions for 49 years in a row. The stock trades at 20.40 times earnings and yields 2.40%. Check my analysis of the stock for more information.
Kimberly-Clark Corporation (KMB), is engaged in the manufacturing and marketing of a range of products made from natural or synthetic fibers using advanced technologies in fibers, nonwovens and absorbency. The company has raised distributions for 40 years in a row. The stock trades at 17.50 times earnings and yields 3.50%. Check my analysis of the stock for more information.
The Coca-Cola Company (KO) is a beverage company, which owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages, such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. The company has raised distributions for 50 years in a row. The stock trades at 18.80 times earnings and yields 2.80%. Check my analysis of the stock for more information.
PepsiCo, Inc. (PEP) is a global food and beverage company. The company has raised distributions for 40 years in a row. The stock trades at 18.10 times earnings and yields 3.10%. Check my analysis of the stock for more information.
Walgreen Co. (WAG), operates a drugstore chain in the United States which provides its customers with access to consumer goods and services, pharmacy, and health and wellness services in communities across America. The company has raised distributions for 37 years in a row. The stock trades at 16.50 times earnings and yields 3%. Check my analysis of the stock for more information.
Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats around globally. The company has raised distributions for 38 years in a row. The stock trades at 13.90 times earnings and yields 2.30%. Check my analysis of the stock for more information.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company has raised distributions for five years in a row. The stock trades at 16.50 times earnings and yields 4.10%. Check my analysis of the stock for more information.
Consumer Discretionary
McDonald’s Corporation (MCD) franchises and operates McDonald’s restaurants in 119 countries globally. The company has raised distributions for 36 years in a row. The stock trades at 16.50 times earnings and yields 3.50%. Check my analysis of the stock for more information.
Health Care
Johnson & Johnson (JNJ) is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The company has raised distributions for 50 years in a row. The stock trades at 14.20 times earnings and yields 3.50%. Check my analysis of the stock for more information.
Becton, Dickinson and Company (BDX) is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. The company has raised distributions for 41 years in a row. The stock trades at 13.80 times earnings and yields 2.50%. Check my analysis of the stock for more information.
Medtronic (MDT) develops and manufactures a range of products and therapies providing a continuum of care to diagnose, prevent and monitor chronic conditions. The company has raised distributions for 35 years in a row. The stock trades at 12.40 times earnings and yields 2.50%. Check my analysis of the stock for more information.
Financials
Aflac Incorporated (AFL) is engaged in providing supplemental health and life insurance, through its subsidiary, American Family Life Assurance Company of Columbus, which operates in the United States and as a branch in Japan. The company has raised distributions for 30 years in a row. The stock trades at 8.60 times earnings and yields 2.60%. Check my analysis of the stock for more information.
Materials
Air Products and Chemicals, Inc. (APD) has a portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, performance materials, equipment, and services. The company has raised distributions for 30 years in a row. The stock trades at 15.20 times earnings and yields 3%. Check my analysis of the stock for more information.
Industrials
Emerson Electric Co. (EMR) is engaged in designing and supplying products and technology, and delivering engineering services and solutions in a range of industrial, commercial and consumer markets globally. The company has raised distributions for 56 years in a row. The stock trades at 19.50 times earnings and yields 3.10%. Check my analysis of the stock for more information.
United Technologies Corporation (UTX) provides high technology products and services to the building systems and aerospace industries worldwide. The company has raised distributions for 19 years in a row. The stock trades at 16.60 times earnings and yields 2.60%. Check my analysis of the stock for more information.
Energy
Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company has raised distributions for 25 years in a row. The stock trades at 8.70 times earnings and yields 3.30%. Check my analysis of the stock for more information.
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. The partnership has raised distributions for 16 years in a row. The units currently yield 6.50%. Check my analysis of this MLP for more information.
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. The partnership has raised distributions for 15 years in a row. The units currently yield 5.30%. Check my analysis of this MLP for more information.
It is important when you build you income portfolio is to aim at being diversified. Holding at least 30 individual stocks is essential to ensure that income is relatively diversified. While the list above includes 20 stocks, with heavy representation from Consumer Staples stocks. I have found that over time new companies could become attractively priced, and thus be added by the enterprising dividend investor. It is important to be diversified, but do not diversify at all costs. For example technology companies are in an industry characterized with rapid technological advancement and obsolescence of existing products. As a result, tech companies might have to invest large amounts each year simply to stay competitive. This leaves little money for establishment of a consistent streak of dividend increases.
In addition, it is also important to build your portfolio slowly, by dollar cost averaging your way into positions. It is also important to focus on entry price as well, since overpaying even for quality stocks can lead to subpar returns. Investors should also remain flexible in their investment approach. They need to focus on the big picture, and not get lost in the details. Of course. dividend investing is a buy and monitor, not a buy and forget type of investment strategy. Investors should monitor each investment regularly, and decide whether it makes sense to buy more, simply hold on or sell right away.
Once invested, I would look for opportunities to add into shares of other companies’. By accumulating dividends in cash, and then selectively initiating shares of quality dividend stocks over time, the investor would be able to diversify their portfolio even further, while also compounding their capital as well.
To summarize, the companies above represent great buys at current valuations for a portfolio in 2013 and beyond. By monitoring your portfolio holdings, adding funds, and reinvesting dividends, your passive income stream will eventually lead to your dividend crossover point.
Full Disclosure: Long all shares listed above
Relevant Articles:
- Dividend investing timeframes- what's your holding period?
- How to retire with dividend stocks
- Dividend Portfolios – concentrate or diversify?
- Is Buy and Hold Dividend Investing dead?
Friday, December 28, 2012
Is Intel Corporation the Ultimate Value Trap for Investors?
Intel Corporation (INTC) designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan. This dividend achiever has paid dividends since 1992 an increased them for 10 years in a row.
The company’s last dividend increase was in July 2012 when the Board of Directors approved a 7.10% increase to 22.50 cents/share. The company’s peer group includes Altera (ALTR), Xilinx (XLNX) and Advanced Micro Devices (AMD).
Over the past decade this dividend growth stock has delivered an annualized total return of 4.50% to its shareholders.
The company has managed to deliver a 20.10% average increase in annual EPS since 2002. Most of the increase came over the past two years however. Before that, earnings were following a rollercoaster pattern. Analysts expect Intel to earn $2.10 per share in 2012 and $2.03 per share in 2013. In comparison, the company earned $2.37/share in 2011.
The company is the dominant supplier of microchips for the computer industry worldwide. Its heavy investment in R&D have ensured that it maintains its dominant position in the market. Unfortunately, the market for traditional computers and notebooks is starting a long decline in units sold as more consumers are going mobile and embracing tablets. Intel has not been very successful in gathering a key position as a supplier of semiconductors for tablets and mobile phones. While shares are really cheap and trading at a super low P/E ratio, the real question is whether earnings will be flat over time or whether they will decrease. If earnings dip due to declines in PC sales and company’s inability to break into mobile, further growth in the dividend will be severely limited and it might even be at risk for a cut. Technology companies are notorious for being in an industry where rapid changes in products due to innovation lead to obsolescence and loss of consumers and revenues. As a dividend investor, I keep asking myself whether the dividend is secure, and whether I can rely on it for the next decade and beyond. While the yield is very high, I have strong doubts that the party would last for long. Even under the best case scenario, it looks like flat earnings would limit growth in distributions, but investors would still get paid a very respectable 4.50% yield for a few years. Shares might even double in value, mostly due to P/E multiple expansion. Of course, what happens if the market actually expects an EPS of $1/share by 2020?
That being said, given the fact that Intel is a market leader in the still very lucrative semiconductor market for PC’s, it has the scale to deliver product at a lower cost than competitors such as AMD. I doubt that the PC is going away, as I simply cannot foresee all businesses replacing computers with tablets. However, companies that end up selling less product than anticipated, might end up with extra inventory that might have to be written down. Inventory obsolescence is a particular concern for technology companies, because technology changes so quickly.
The return on equity has closely followed the trends in earnings per share over the past decade. 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 25.60% per year over the past decade, which is higher than the growth in EPS.
A 25% growth in distributions translates into the dividend payment doubling every three years on average. If we look at historical data, going as far back as 1994, one would notice that the company had managed to double distributions every three years on average.
The dividend payout ratio has increased from 17.40% in 2002 to 72.70% in 2009, before reaching a more sustainable 32.60 % in 2011. 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 Intel is trading at 8.80 times earnings, yields 4.50% and has a sustainable distribution. Despite the ultra-low valuation, I am hesitant to pull the trigger on this one, due to my inability to determine whether Intel will be able to keep innovating and maintain profitability in the long run. Because of my inability to gauge whether tectonic shifts in technologies will impact the long-term picture for Intel, I will maintain a hold opinion on the stock. I am also unable to determine whether Intel will be able to boost earnings in the near term. That being said, the company’s shares can easily rebound from current lows, and its dividend yield would probably be sustained for the next several years. In addition, it also would add some exposure to technology for my income portfolio.
Full Disclosure: None
Relevant Articles:
- Master Limited Partnerships Continue with Consistent Dividend Increases
- Investors Get Paid for Holding Dividend Stocks
- How to get dividend investment ideas
- Tech Dividends on the Rise
The company’s last dividend increase was in July 2012 when the Board of Directors approved a 7.10% increase to 22.50 cents/share. The company’s peer group includes Altera (ALTR), Xilinx (XLNX) and Advanced Micro Devices (AMD).
Over the past decade this dividend growth stock has delivered an annualized total return of 4.50% to its shareholders.
The company has managed to deliver a 20.10% average increase in annual EPS since 2002. Most of the increase came over the past two years however. Before that, earnings were following a rollercoaster pattern. Analysts expect Intel to earn $2.10 per share in 2012 and $2.03 per share in 2013. In comparison, the company earned $2.37/share in 2011.
The company is the dominant supplier of microchips for the computer industry worldwide. Its heavy investment in R&D have ensured that it maintains its dominant position in the market. Unfortunately, the market for traditional computers and notebooks is starting a long decline in units sold as more consumers are going mobile and embracing tablets. Intel has not been very successful in gathering a key position as a supplier of semiconductors for tablets and mobile phones. While shares are really cheap and trading at a super low P/E ratio, the real question is whether earnings will be flat over time or whether they will decrease. If earnings dip due to declines in PC sales and company’s inability to break into mobile, further growth in the dividend will be severely limited and it might even be at risk for a cut. Technology companies are notorious for being in an industry where rapid changes in products due to innovation lead to obsolescence and loss of consumers and revenues. As a dividend investor, I keep asking myself whether the dividend is secure, and whether I can rely on it for the next decade and beyond. While the yield is very high, I have strong doubts that the party would last for long. Even under the best case scenario, it looks like flat earnings would limit growth in distributions, but investors would still get paid a very respectable 4.50% yield for a few years. Shares might even double in value, mostly due to P/E multiple expansion. Of course, what happens if the market actually expects an EPS of $1/share by 2020?
That being said, given the fact that Intel is a market leader in the still very lucrative semiconductor market for PC’s, it has the scale to deliver product at a lower cost than competitors such as AMD. I doubt that the PC is going away, as I simply cannot foresee all businesses replacing computers with tablets. However, companies that end up selling less product than anticipated, might end up with extra inventory that might have to be written down. Inventory obsolescence is a particular concern for technology companies, because technology changes so quickly.
The return on equity has closely followed the trends in earnings per share over the past decade. 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 25.60% per year over the past decade, which is higher than the growth in EPS.
A 25% growth in distributions translates into the dividend payment doubling every three years on average. If we look at historical data, going as far back as 1994, one would notice that the company had managed to double distributions every three years on average.
The dividend payout ratio has increased from 17.40% in 2002 to 72.70% in 2009, before reaching a more sustainable 32.60 % in 2011. 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 Intel is trading at 8.80 times earnings, yields 4.50% and has a sustainable distribution. Despite the ultra-low valuation, I am hesitant to pull the trigger on this one, due to my inability to determine whether Intel will be able to keep innovating and maintain profitability in the long run. Because of my inability to gauge whether tectonic shifts in technologies will impact the long-term picture for Intel, I will maintain a hold opinion on the stock. I am also unable to determine whether Intel will be able to boost earnings in the near term. That being said, the company’s shares can easily rebound from current lows, and its dividend yield would probably be sustained for the next several years. In addition, it also would add some exposure to technology for my income portfolio.
Full Disclosure: None
Relevant Articles:
- Master Limited Partnerships Continue with Consistent Dividend Increases
- Investors Get Paid for Holding Dividend Stocks
- How to get dividend investment ideas
- Tech Dividends on the Rise
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