Every week, I go through the list of dividend increases as part of my monitoring process. I usually focus on those companies that have raised dividends for at least a decade. I then focus on things like growth in earnings per share, in order to gauge the possibility of further dividend growth in the future. I also focus on valuation – even the best company in the world is not worth overpaying for. The discussion behind each company outlines my basic review process for proceeding with promising ideas or discarding them. I post it for educational purposes to my readers.
The companies that increased their dividends include:
Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, Mexico, Australia, New Zealand, Puerto Rico, the Dominican Republic, and the Caribbean region. The company raised its quarterly dividend by 2.70% to 67.50 cents/share. This marked the 61st consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to increase annual dividends at a rate of 6.90%/year. The company managed to grow earnings from $2.98/share in 2007 to $4.59/share in 2016. The company is expected to earn $4.77share in 2017. The stock is overvalued at 21 times forward earnings and yields 2.80%. It would be worth a second look on dips below $92/share. Check my analysis of Genuine Parts Company for more information.
Monday, February 27, 2017
Thursday, February 23, 2017
Dividend Achievers Offer Income Growth and Capital Appreciation
The NASDAQ US Broad Dividend Achievers Select Index is comprised of a select group of securities with at least ten consecutive years of increasing annual regular dividend payments. There are 272 companies in this index today. You can find all those holdings at the following location.
Peter Lynch, the legendary manager of the Fidelity Magellan Fund has mentioned the following about dividend achievers:
"The Dividend Achievers Handbook is one of my favorite bedside thrillers. Here's a simple way to succeed in Wall Street: Buy the stocks on Mergent's list and stick with them as long as they stay on the list"
The stocks he mentions in his book, "One Up on Wall Street", is Automatic Data Processing (ADP), which incidentally has kept raising distributions 25 years after his book was published.
In fact some of the best performing stocks on Wall Street over the past decade have been the dividend achievers. Dividend achievers are companies which have increased their distributions for at least ten consecutive years. They provide a superior alternative than investing in fixed income because they provide investors with the opportunity of a rising dividend payment and they could also receiving higher total returns over time as well. The premise is that higher dividends are a direct result of rising earnings, which translates into higher stock prices. When managements boost distributions, this shows what their outlook for the business and the economy really is.
Peter Lynch, the legendary manager of the Fidelity Magellan Fund has mentioned the following about dividend achievers:
"The Dividend Achievers Handbook is one of my favorite bedside thrillers. Here's a simple way to succeed in Wall Street: Buy the stocks on Mergent's list and stick with them as long as they stay on the list"
The stocks he mentions in his book, "One Up on Wall Street", is Automatic Data Processing (ADP), which incidentally has kept raising distributions 25 years after his book was published.
In fact some of the best performing stocks on Wall Street over the past decade have been the dividend achievers. Dividend achievers are companies which have increased their distributions for at least ten consecutive years. They provide a superior alternative than investing in fixed income because they provide investors with the opportunity of a rising dividend payment and they could also receiving higher total returns over time as well. The premise is that higher dividends are a direct result of rising earnings, which translates into higher stock prices. When managements boost distributions, this shows what their outlook for the business and the economy really is.
Wednesday, February 22, 2017
The Coffee Can Portfolio
I have invested in dividend growth stocks for over a decade now, and shared experiences and knowledge with you on the Dividend Growth Investor site along the way.
One of the lessons I have learned is that once I buy a solid company, I should hold on tightly and not sell no matter what "noise" I see or hear. When I evaluated my sales, I noticed that I would have been better off simply doing nothing, rather than sell to pay capital gains taxes, and to buy another company that did not do as well as the original one.
My evaluation of the Corporate Leaders Trust in 2015 confirmed the observation that time in the market trumps timing the market. It simply pays to be patient as an investor.
I recently learned of an interesting concept called the Coffee Can Portfolio:
The idea is that investors can craft a portfolio of large, blue chip stocks, and simply hold them forever. The idea is to never sell these investments, which serves several purposes.
First, investors will avoid fees and costs, that eat away at total returns.
Second, investors will let compounding interest work its magic.
This concept comes from an article by Robert Kirby from 1984, citing the investment performance of a client portfolio he managed. The article is titled " The Coffee Can Portfolio"
It definitely makes sense that by holding blue chip dividend stocks for the long-term, without selling, you will reduce investment costs and also reduce the impact of errors due to frequent transactions. Research has shown that investors tend to sell at the wrong times. This is why a do nothing approach may provide you with very good long-term results ( provided you also keep taxation costs low as well)
Do you follow the Coffee Can approach of not selling? I'd love to hear your thoughts on it.
One of the lessons I have learned is that once I buy a solid company, I should hold on tightly and not sell no matter what "noise" I see or hear. When I evaluated my sales, I noticed that I would have been better off simply doing nothing, rather than sell to pay capital gains taxes, and to buy another company that did not do as well as the original one.
My evaluation of the Corporate Leaders Trust in 2015 confirmed the observation that time in the market trumps timing the market. It simply pays to be patient as an investor.
I recently learned of an interesting concept called the Coffee Can Portfolio:
The idea is that investors can craft a portfolio of large, blue chip stocks, and simply hold them forever. The idea is to never sell these investments, which serves several purposes.
First, investors will avoid fees and costs, that eat away at total returns.
Second, investors will let compounding interest work its magic.
This concept comes from an article by Robert Kirby from 1984, citing the investment performance of a client portfolio he managed. The article is titled " The Coffee Can Portfolio"
It definitely makes sense that by holding blue chip dividend stocks for the long-term, without selling, you will reduce investment costs and also reduce the impact of errors due to frequent transactions. Research has shown that investors tend to sell at the wrong times. This is why a do nothing approach may provide you with very good long-term results ( provided you also keep taxation costs low as well)
Do you follow the Coffee Can approach of not selling? I'd love to hear your thoughts on it.
Tuesday, February 21, 2017
Thirteen Companies Building Wealth For Long Term Shareholders
Dividend growth investing is a very simple but effective wealth building strategy. The investor focuses on companies with a proven track record of annual dividend increases, which typically exemplifies quality in a company. The next step involves focusing on those enterprises that grow earnings and are available at attractive valuations today.
The next step in the process is the most difficult one - doing absolutely nothing after assembling your portfolio of quality dividend growth stocks, while watching your dividend income rise year over year for decades. Most dividend investors who fail, succumb to short-term thinking because they listen to the useless noise out there. The dividend investors who succeed hold patiently to their diversified portfolios over time, and end up generating a lot of dividends for decisions made decades prior to that. I always like seeing how my dividend stocks are continuing their streak of annual dividend increases.
As part of my monitoring process, I review the list of dividend increases with at least a ten year streak. The companies that met the criteria are listed below, along with my comments:
The next step in the process is the most difficult one - doing absolutely nothing after assembling your portfolio of quality dividend growth stocks, while watching your dividend income rise year over year for decades. Most dividend investors who fail, succumb to short-term thinking because they listen to the useless noise out there. The dividend investors who succeed hold patiently to their diversified portfolios over time, and end up generating a lot of dividends for decisions made decades prior to that. I always like seeing how my dividend stocks are continuing their streak of annual dividend increases.
As part of my monitoring process, I review the list of dividend increases with at least a ten year streak. The companies that met the criteria are listed below, along with my comments:
Friday, February 17, 2017
Coca-Cola (KO) Dividend Stock Analysis
The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverages worldwide. This dividend king has paid uninterrupted dividends on its common stock since 1893 and increased payments to common shareholders every for 55 years in a row. Warren Buffett’s Berkshire Hathaway (BRK.B) is the largest shareholder of the world’s largest beverage company.
The company’s last dividend increase was in February 2017 when the Board of Directors approved an 5.70% increase to 37 cents/share. Coca-Cola’s largest competitors include PepsiCo (PEP), Dr. Pepper Snapple (DPS) and Monster Beverage (MNST).
Over the past decade this dividend growth stock has delivered an annualized total return of 8.90% to its shareholders.
The company’s last dividend increase was in February 2017 when the Board of Directors approved an 5.70% increase to 37 cents/share. Coca-Cola’s largest competitors include PepsiCo (PEP), Dr. Pepper Snapple (DPS) and Monster Beverage (MNST).
Over the past decade this dividend growth stock has delivered an annualized total return of 8.90% to its shareholders.
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