Dividend Growth Investor

Two Companies Raising Dividends for Over 50 years Announce Dividend Hikes

noreply@blogger.com (D) — Mon, 13 Feb 2012 01:00:00 PST

The companies that raised distributions over the past week include two which have raised distributions for over half a century. This includes several wars, oil price shocks, market crashes and inflation. While a long record of consistent dividend increases does not automatically translate into making these stocks great buys all the time, students of successful dividend investing should study the factors that led to the success of these enterprises. It takes a unique business model, coupled with the right environment to create such long lasting success, which has enabled them to foster a culture that led to dividends increases in every single year for over half a century. There are only eleven dividend kings in the world which have managed to accomplish this task.

The companies raising distributions over the past week include:

3M Company (MMM), together with subsidiaries, operates as a diversified technology company worldwide. This dividend king raised its quarterly dividends by 7.30% to 59 cents/share. The company has raised dividends for 54 years in a row. Yield: 2.70% (analysis)

Diebold, Incorporated (DBD) provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. This dividend king raised its quarterly dividends by 1.80% to 28.50 cents/share. The company has raised dividends for 59 years in a row. Yield: 3.60% (analysis)

Church & Dwight Co. (CHD), Inc., together with its subsidiaries, develops, manufactures, and markets a range of household, personal care, and specialty products under various brand names in the United States and internationally. This dividend achiever raised its quarterly dividends by 41.20% to 24 cents/share. The company has raised dividends for 16 years in a row. Yield: 2.10%

The Dun & Bradstreet Corporation (DNB) provides commercial information and insight on businesses worldwide. The company raised its quarterly dividends by 5.60% to 38 cents/share. The company has raised dividends for 6 years in a row. Yield: 1.80%

Jack Henry & Associates, Inc. (JKHY) provides integrated computer systems and services for in-house and outsourced data processing to commercial banks, credit unions, and other financial institutions primarily in the United States. The company raised its quarterly dividends by 9.50% to 11.50 cents/share. The company has raised dividends for 20 years in a row. Yield: 1.30%

Avista Corporation (AVA), an energy company, engages in the generation, transmission, and distribution of energy and other energy-related businesses in the United States and Canada. The company raised its quarterly dividends by 5.50% to 29 cents/share. The company has raised dividends for 10 years in a row. Yield: 4.60%

Owens & Minor, Inc. (OMI), together with its subsidiaries, provides distribution, third-party logistics, and other supply-chain management services to healthcare providers and suppliers of medical and surgical products, as well as distributes medical and surgical supplies to the acute-care market. The company raised its quarterly dividends by 10% to 22 cents/share. The company has raised dividends for 15 years in a row. Yield: 2.90%

PartnerRe Ltd. (PRE) , through its subsidiaries, provides reinsurance services worldwide. The company raised its quarterly dividends by 3.30% to 62 cents/share. The company has raised dividends for 19 years in a row. Yield: 3.90%

L-3 Communications Holdings, Inc. (LLL)provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; aircraft modernization and maintenance; and government services in the United States and internationally. This dividend achiever raised its quarterly dividends by 11.10% to 50 cents/share. The company has raised dividends for 19 years in a row. Yield: 2.90%

Occidental Petroleum Corporation (OXY), together with its subsidiaries, operates as an oil and gas exploration and production company primarily in the United States. The company raised its quarterly dividends by 17.40% to 54 cents/share. The company has raised dividends for 10 years in a row. Yield: 2.20%

Full disclosure: Long MMM

Relevant Articles:

- Eleven Dividend Kings, Raising dividends for 50+ years

- Avoid Cyclical Dividend Growth Stock

- Active Dividend Growth Investing

- We are not in a Dividend Bubble

Johnson & Johnson (JNJ) - A Reliable Dividend Growth Stock

noreply@blogger.com (D) — Fri, 10 Feb 2012 01:00:00 PST

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. This dividend aristocrat has paid uninterrupted dividends on its common stock since 1944 and increased payments to common shareholders every for 49 consecutive years. One of the largest shareholders is no other but Warren Buffett’s Berkshire Hathaway (BRK.B).

The company’s last dividend increase was in when the Board of Directors approved a 5.60% increase to 57 cents/share. Johnson & Johnson's major competitors include Abbott Laboratories (ABT), Bristol Myers Squibb (BMY) and Novartis (NVS).

Over the past decade this dividend growth stock has delivered an annualized total return of 3.50% to its shareholders.

The company has managed to deliver an 11.20% annual increase in EPS since 2001. Analysts expect Johnson & Johnson to earn $4.97 per share in 2011 and $5.23 per share in 2012. In comparison Johnson & Johnson earned $4.78 /share in 2010. The company has managed to consistently repurchase 1.40% of its outstanding shares on average in each year over the past decade.

Johnson & Johnson has a diversified product line across medical devices, consumer products and drugs, which should serve it well in the future. In addition ot that Johnson & Johnson is expanding into new long term opportunities such as vaccines business of Crucell NV. Emerging market growth and opportunities for cost restructurings should further help the company in squeezing out extra profits in the long run. Sales in drugs like Simponi, Stelara, Zytiga, Edurant, Incivek, Xaralto and Prezista should more than offset the generic erosion from older drugs which are losing their patent protection. The acquisition of Synthes, which is expected to be completed

by the first half of 2012, is expected to generate significant synergies for Johnson & Johnson.

The company’s return on equity has remained between 25% and 30% 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 13% per year since 2002, which is higher than to the growth in EPS.

A 13% growth in distributions translates into the dividend payment doubling every five and a half years. If we look at historical data, going as far back as 1971 we see that Johnson & Johnson has actually managed to double its dividend every five years on average.

The dividend payout ratio has increased from 38% in 2001 to 44% in 2010. 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 Johnson & Johnson is attractively valued at 14.50 times earnings, has a sustainable dividend payout and yields 3.50%. The current EPS of $4.53 used to calculate the P/E ratio is derived by adding back one time charges of $2.90 Billion ($1.05/share). I recently added to my position in the stock.

Full Disclosure: Long ABT and JNJ

Relevant Articles:

- Dividend Aristocrats List for 2012

- How to create a bulletproof dividend portfolio

- Roth IRA’s for Dividend Investors

- Four Dividend Stocks safer than US Treasuries

- A record number of consistent dividend companies raising distributions

Dividend investing for monthly income

noreply@blogger.com (D) — Wed, 08 Feb 2012 01:00:00 PST

Investors spend a large portion of their working lives accumulating wealth. When a person is in the workforce, they tend to get accustomed to generating income on a consistent basis either every two weeks or once a month. The only investment vehicles which could provide investment income on a consistent basis without too much maintenance include dividend stocks and bonds.

By focusing on dividend growth stocks, investors could not only generate a consistent stream of income, but also effectively hedge their income against inflation. This is because many dividend growth stocks tend to regularly increase distributions every year.

Most dividend stocks like Coca Cola (KO) pay distributions quarterly. Some foreign stocks like Diageo (DEO) pay distributions semi-annually, while others like Nestle (NSRGY) pay distributions once per year. This makes budgeting for investors living off dividends somewhat difficult. As a result, some investors try to include monthly dividend stocks in their portfolios. However, the universe of monthly dividend payers which pay stable and rising distributions is very limited. Most monthly dividend payers tend to pay a fluctuating dividend, which makes it impossible to budget for recurring expenses.

One strategy that investors could implement is to find quality dividend stocks which pay dividends at different months. Thus, by laddering dividend stocks with differing payout dates, it is possible to generate a portfolio which pays a consistent monthly distribution without limiting one’s investment options strictly to monthly dividend stocks.

For example the following three companies pay dividends in January, April, July and October.

Kimberly-Clark (KMB) engages in the manufacture and marketing of health care products worldwide. Yield: 3.90% (analysis)

Automatic Data Processing (ADP) provides business outsourcing solutions. Yield: 2.90% (analysis)

Sysco (SYY) engages in the marketing and distribution of a range of food and related products primarily to the foodservice or food-away-from-home industry. Yield: 3.50% (analysis)

The following three companies pay distributions in February, May, August and November.

Abbott Labs (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. Yield: 3.50% (analysis)

Clorox (CLX) manufactures and markets consumer and institutional products worldwide. Yield: 3.50% (analysis)

Procter & Gamble (PG) provides consumer packaged goods in the United States and internationally. Yield: 3.30% (analysis)

These three corporations below pay dividends in March, June, September and December.

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. Yield: 3.50% (analysis)

McDonald's (MCD) franchises and operates McDonald’s restaurants that offer various food items, soft drinks, coffee, desserts, snacks, and other beverages, as well as full or limited breakfast menu. Yield: 2.80% (analysis)

Chevron (CVX) engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Yield: 3.10% (analysis)

Investors could allocate funds in this sample list of stocks in different ways. They could either allocate the same amount to each of the nine companies. They could also allocate their funds based off the current yield at the time of purchase, in order to generate an income stream that is consistent from month to month at least in the first year.

The goal of the above list of stocks was simply to illustrate how laddering income stocks with different dividend payout dates can create a monthly income stream. Income investors should still focus on quality, diversification and valuation when constructing their dividend portfolios.

Full Disclosure: Long all companies listed in this article

Relevant Articles:

- Dividend Portfolio Investing for monthly income

- Monthly Dividend Stocks

- How to create a bulletproof dividend portfolio

- Four important dates for dividend investors

- Dividend Investing Risks

Dividend Investing in times of a Social Media Bubble

noreply@blogger.com (D) — Mon, 06 Feb 2012 01:00:00 PST

Last week, the icon of Social Media Facebook filed for its IPO. As a result, it was pretty hard to miss news articles proclaiming that it will have a $100 billion valuation. This is equivalent to 25 times revenues for 2011, and about 100 times earnings. In order to justify its valuation, the company needs to keep growing rapidly for the next few years.

Facebook might indeed deserve a big valuation if it manages to rapidly increase revenues. However, this looks like a highly speculative venture. As a dividend investor, I prefer the slow and steady approach for building wealth by investing in companies with proven business models and strong brands, which have a long history of delivering a product or service which consumers are in love with. The switching costs for consumers are typically very high for the products and services that most dividend champions offer. For example, if you care about your teeth, you would keep brushing them with Colgate (CL) toothpaste. This is what has allowed many dividend companies to enjoy steady increases in earnings, which have trickled down to result in years of dividend growth. The steady rise in earnings, coupled with the compounding effect of growing dividends create much better odds of building wealth than the heads I win tails I lose type mentality that investors in highly speculative Internet IPO’s seem to have.

Every week, I focus on consistent dividend paying companies, as identified by a record of at least five years of consecutive dividend increases. While not all might be good additions at the time of my weekly review, I end up uncovering hidden gems in the process and begin studying the story of companies. This enables me to be ready to pull the trigger whenever a certain stock that is overpriced today reaches my buy territory.

Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials in the United States, Canada, Mexico, South America, Europe, and Australasia. The company operates in two segments, Flexible Packaging and Pressure Sensitive Materials. The company raised quarterly distributions by 4.20% to 25 cents/share. This marked the 29th consecutive annual dividend increase for this dividend aristocrat. Yield: 3.20% (analysis)

Pitney Bowes Inc. (PBI) provides mail processing equipment and integrated mail solutions worldwide. The company raised quarterly distributions by 1.40% to 37.50 cents/share. This marked the 30th consecutive annual dividend increase for this dividend aristocrat. Yield: 7.80%

Polaris Industries Inc. (PII) designs, engineers, and manufactures off-road vehicles. The company raised quarterly distributions by 64.40% to 37 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Yield: 2.30%

Sunoco Logistics Partners L.P. (SXL) engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States. This master limited partnership raised quarterly distributions to 42 cents/unit. Sunoco Logistics Partners is a dividend achiever, which has raised distributions for 11 years in a row. Yield: 4.60%

Praxair, Inc. (PX) engages in the production, sale, and distribution of industrial gases primarily in North America, South America, Europe, and Asia. The company raised quarterly distributions by 10% to 55 cents/share. This marked the 20th consecutive annual dividend increase for this dividend achiever. Yield: 2.10%

Hasbro, Inc. (HAS) engages in the design, manufacture, and marketing of games and toys, and other entertainment offerings worldwide. The company raised quarterly distributions by 20% to 36 cents/share. This marked the 9th consecutive annual dividend increase for this dividend stock. Yield: 4.20%

J.B. Hunt Transport Services, Inc. (JBHT), together with its subsidiaries, operates as a surface transportation, delivery, and logistics company in North America. The company raised quarterly distributions by 7.70% to 14 cents/share. This marked the 9th consecutive annual dividend increase for this dividend stock. Yield: 1.10%

Microchip Technology Incorporated (MCHP) engages in the design, development, manufacture, and market of semiconductor products for embedded control applications. The company raised quarterly distributions to 34.90 cents/share. This marked the 10th consecutive annual dividend increase for this dividend achiever. Yield: 3.80%

Nu Skin Enterprises, Inc. (NUS) develops and distributes anti-aging personal care products and nutritional supplements worldwide. The company raised quarterly distributions by 25% to 20 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Yield: 1.60%

TECO Energy, Inc. (TE), an electric and gas utility company, through its subsidiaries, engages in the generation, purchase, transmission, distribution, and sale of electric energy. The company raised quarterly distributions by 2.30% to 22 cents/share. This marked the 6th consecutive annual dividend increase for this dividend stock. Yield: 4.90%

National Instruments Corporation (NATI) manufactures and supplies measurement and automation products. The company raised quarterly distributions by 40% to 14 cents/share. This marked the 11th consecutive annual dividend increase for this dividend achiever. Yield: 2.10%

Full Disclosure: Long CL

Relevant Articles:

- How to Uncover Hidden Dividend Gems

- Why Dividend Growth Stocks Rock?

- Dividend Aristocrats List for 2012

- Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors

Procter & Gamble (PG)- A dividend stock to hold forever

noreply@blogger.com (D) — Fri, 03 Feb 2012 01:00:00 PST

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. This dividend aristocrat has paid uninterrupted dividends on its common stock since 1891 and increased payments to common shareholders every for 55 consecutive years. There are only eleven companies in the world which have managed to boost distributions over half a century. One of the largest shareholders is no other but Warren Buffett’s Berkshire Hathaway (BRK.B).

The company’s last dividend increase was in April 2011 when the Board of Directors approved an 8.90% increase to 52.50 cents/share. Procter & Gamble’s largest competitors include Kimberly-Clark (KMB), Colgate-Palmolive (CL) and Clorox (CLX).

Over the past decade this dividend growth stock has delivered an annualized total return of 7.60% to its shareholders.

The company has managed to deliver an 11% annual increase in EPS since 2002. Analysts expect Procter & Gamble to earn $4.23 per share in 2012 and $4.57 per share in 2013. In comparison Procter & Gamble earned $3.93 /share in 2011.

Procter & Gamble is a globally diversified consumer products company. It offers a broad scope of products for every consumer at different price points, and has a sizeable distribution network, which enables it to have a global geographic reach. The company invests in innovation, has a broad portfolio of products and strengths in emerging markets. Procter & Gamble also owns strong brand names, which allow it to maintain pricing power, in order to be able to pass price increases to consumers. The sheer scale of its massive operations and broad geographic reach ensure that the company is able to generate consistent revenue streams.

Procter & Gamble’s long-term strategic goals include growing organic sales at 1% to 2% faster than market growth in the markets in which the company competes. Another important goal include EPS growth in the high single digits to low double digits. For fiscal year 2012 net sales are expected to increase five to nine percent in fiscal 2012. Organic sales are estimated to grow three to six percent, while EPS is expected to range between $4.17- $4.33.

The company’s return on equity decreased in half when it acquired Gillette in 2005. This indicator has stabilized around 19% for the past four years. 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 11.10% per year since 2002, which is equal to the growth in EPS.

An 11% growth in distributions translates into the dividend payment doubling every six and a half years. If we look at historical data, going as far back as 1975 we see that Procter & Gamble has actually managed to double its dividend every seven years on average.

The dividend payout ratio has mostly remained between 40% and 50%. Currently, it is just a little bit over 50%, but it appears sustainable. 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 Procter & Gamble is attractively valued at 16.30 times earnings, has a sustainable dividend payout and yields 3.30%. I consider Procter & Gamble to have the qualities of a perfect dividend stock, that should be a core holding for any serious dividend investor. I would consider adding to my position in the stock on dips.

Full Disclosure: Long CL, CLX, KMB, PG

Relevant Articles:

- High Yield Stocks Raising Dividends

- Six Dividend Stocks to Hold Forever

- Ten Dividend Kings raising dividends for over 50 years

- Best Dividend Stocks of 2011, Q3 Update

Monthly Dividend Stocks

noreply@blogger.com (D) — Wed, 01 Feb 2012 01:00:00 PST

Most dividend stocks trading in the US pay dividends every quarter. A few pay dividends semi-annually, while a very small minority (mostly ADR’s) pay dividends once a year.

From a dividend investment standpoint, I have always focused on strong fundamentals, strong competitive advantages, potential for earnings and dividend growth, and adequate valuation. You could read more about my entry criteria in this article. I never really focused on the timing of the dividend cashflows. As it stands out, it could be beneficial to own stocks that pay dividends monthly.

The perfect monthly dividend stock is Realty Income (O) – The monthly dividend company. Although the company is trading at a rich valuation, I would consider adding to my position in the stock on dips below $29. Check my analysis of this REIT.

The first benefit would be that it would make budgeting for expenses much easier. Investors would not have to wait for three months before obtaining their distribution from a stock, only to split them in three and then allocate an equal portion to spend each month. Knowing that the dividend income is coming once a month , would make life easier for retirees living off dividends.

The second benefit of monthly dividend stocks is compounding. By reinvesting dividends, investors use the power of compounding to increase their wealth. By increasing the frequency of compounding however, investors have a higher chance of increasing their net worth.

The main disadvantage of monthly dividend stocks is that investors are limiting themselves to a very small universe of stocks. As a result it would be difficult to find a company that is a good fit in a dividend retirement portfolio. Basically I am looking for a company with a stable dividend payment that is also growing. Most monthly dividend stocks I found were funds which paid fluctuating distributions. In order to find a suitable monthly dividend stock for this article however, I had to lower my criteria to ignore companies with fluctuating dividends and focus on the ones paying stable distributions.

Realty Income Corporation (O) is The Monthly Dividend Company, which operates as an equity real estate investment trust (REIT). The Company’s primary business objective is to generate dependable monthly cash distributions from a consistent and predictable level of funds from operations (FFO) per share. Yield: 4.80% ( analysis )

Gas Natural Inc. (EGAS), is a natural gas utility with operations in Montana, Wyoming, North Carolina and Maine. The Company operates in four business segments: natural gas operations, marketing and production operations, pipeline operations, and corporate and other. Yield: 4.80%

Shaw Communications Inc. (SJR) is a diversified Canadian communications company. Shaw is engaged in the business of providing broadband cable television, Internet, Digital Phone, telecommunications services (through Shaw Business Solutions), satellite direct-to-home services (through Shaw Direct) and engaging programming content (through Shaw Media). Yield: 4.90%

Main Street Capital Corporation (MAIN) is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market (LMM) companies with annual revenues between $10 million and $100 million that operate in diverse industries. The Company invests primarily in secured debt instruments, equity investments, warrants and other securities of LMM companies based in the United States. Yield: 7.40%

Gladstone Commercial Corporation (GOOD) is a real estate investment trust (REIT). The Company invests in and owns net leased industrial and commercial real estate property and makes long-term industrial and commercial mortgage loans. Most of the properties that the Company owns are leased to tenants, including small businesses and public companies. Yield: 8.30%

Other than that, if we exclude funds, we are mostly left out with royalty trusts paying fluctuating distributions:

Enerplus Corporation (ERF) operates as an independent oil and gas producer. The company's property interests are located in western Canada in the provinces of Alberta, British Columbia, Saskatchewan, and Manitoba, as well as in Montana, North Dakota, Pennsylvania, Maryland, and Delaware in the United States. Yield: 9.10%

Pengrowth Energy Corporation (PGH) engages in the acquisition, exploration, development, and production of oil and natural gas reserves in the Western Canadian Sedimentary Basin. It primarily explores for crude oil, natural gas, and natural gas liquids in the provinces of Alberta, British Columbia, Saskatchewan, and Nova Scotia. Yield: 8.20%

Penn West Petroleum Ltd. (PWE) engages in acquiring, exploring, developing, exploiting, and holding interests in petroleum and natural gas properties and related assets in North America. The company produces light and medium crude oil, natural gas liquids, heavy oil, and natural gas. Yield: 4.90%

Provident Energy Ltd. (PVX) engages in the natural gas liquids (NGLs) infrastructure and marketing business in Canada and the United States. The company involves in the extraction, processing, storage, transportation, and marketing of NGLs, as well as offers these services to third party customers. Yield: 4.80%

While it feels great to receive a dividend from one stock every month, investors should not confuse feeling good with making a good investment. With the exception of Realty Income (O), and (EGAS), most other stocks are not suited for a retirement portfolio. It is much easier to generate monthly income, by stacking quality dividend paying stocks with different payout dates. This way one does not compromise investment quality for the benefits of questionable monthly dividend payers.

Full Disclosure: Long O

Relevant Articles:

- Dividend Portfolio Investing for monthly income

- Margin of Safety in Dividends

- How to invest like a Dividend Billionaire

- My Dividend Growth Plan - Diversification

High Yielding Stocks Boosting Distributions

noreply@blogger.com (D) — Mon, 30 Jan 2012 01:00:00 PST

Utilities, Pipeline Master Limited Partnerships and Real Estate Investment trusts typically distribute a large portion of their earnings and cash flows to their shareholders. As a result, most of them typically enjoy high dividend yields in comparison to the broader market. The main disadvantage is that dividend increases are not as high as those for other traditional dividend growth stocks such as PepsiCo (PEP) or Coca Cola (KO). Given the low interest rate environment over the past two years however, many investors have started chasing the high distributions from these sectors, which has lead to increases in stock prices and decrease in dividend yields to historic lows. This has led some market analysts to proclaim that we might be approaching a dividend bubble. In a previous article I noted that we are far from a dividend bubble at this point. Any further increase in popularity for high yielding stocks such as Utilities, Master Limited Partnerships and Real Estate Investment Trusts however could bring us closer to this point for these sectors, and would make other dividend growth sectors more appealing.

The dividend growth companies that announced distribution increases over the past week included:

Consolidated Edison, Inc. (ED), through its subsidiaries, provides energy services to residential, commercial, industrial, and government customers in the United States. The company raised its quarterly dividend by 0.83% to 60.50cents/share. This dividend aristocrat has raised distributions for 38 years in a row. The low dividend growth and the steep run up in price, which pushed the yield down to multi-decade lows make this stock a hold. Yield: 4.10% (analysis)

HCP, Inc. (HCP) is a real estate investment trust which primarily invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing. The company raised its quarterly dividend by 4.20% to 50 cents/share. This dividend champion has raised distributions for 27 years in a row. Yield: 4.80% (analysis)

Health Care REIT, Inc. (HCN) is a real estate investment trust which invests in senior living and health care properties. The company raised its quarterly dividend by 3.50% to 74 cents/share. This dividend stock has raised distributions for 6 years in a row. Yield: 5.20%

Magellan Midstream Partners, L.P. (MMP), together with its subsidiaries, engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. The master limited partnership raised its quarterly distributions 81.50 cents/unit, which was a 7.60% increase over the Q1 2011 distribution. This dividend achiever has raised distributions for 11 years in a row. Yield: 4.90%

Holly Energy Partners, L.P. (HEP) operates a system of petroleum product and crude oil pipelines, storage tanks, distribution terminals, and loading rack facilities. The master limited partnership raised its quarterly distributions 88.50 cents/unit, which was a 4.70% increase over the Q1 2011 distribution. This Holly Energy Partners has raised distributions for 7 years in a row. Yield: 6.50%

SJW Corp. (SJW), through its subsidiaries, engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. The company raised its quarterly dividend by 2.90% to 17.75 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3%

California Water Service Group (CWT), through its subsidiaries, provides water utility and other related services in California, Washington, New Mexico, and Hawaii. The company raised its quarterly dividend by 2.40% to 15.75 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3.40%

Energen Corporation (EGN), an energy holding company, engages in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in the continental United States. The company raised its quarterly dividend by 3.70% to 14 cents/share. This dividend champion has raised distributions for 30 years in a row. Yield: 1%

CMS Energy Corporation (CMS), through its subsidiaries, operates as an energy company primarily in Michigan. The company operates in three segments: Electric Utility, Gas Utility, and Enterprises. The company raised its quarterly dividend by 14.30% to 24 cents/share. This dividend stock has raised distributions for 6 years in a row. Yield: 4.40%

Canadian National Railway Company (CNI), together with its subsidiaries, engages in the rail and related transportation business in North America. The company raised its quarterly dividend by 15% to 37.50 cents/share. This international dividend achiever has raised distributions every year since 1996. Yield: 2%

Norfolk Southern Corporation (NSC), through its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods primarily in the United States. The company raised its quarterly dividend by 9.30% to 47 cents/share. This dividend achiever has raised distributions every year for 11 years. Yield: 2.50%

Donaldson Company, Inc. (DCI) engages in the manufacture and sale of filtration systems and replacement parts worldwide. The company operates in two segments, Engine Products and Industrial Products. The company raised its quarterly dividend by 6.70% to 16 cents/share. This dividend champion has raised distributions for 26 years in a row. Yield: 0.90%

Parker Hannifin Corporation (PH) manufactures fluid power systems, electromechanical controls, and related components worldwide. The company raised its quarterly dividend by 5.40% to 39 cents/share. This dividend king has raised distributions for 55 years in a row. Yield: 1.90%

Rollins, Inc. (ROL), through its subsidiaries, provides pest and termite control services to residential and commercial customers in North America. The company raised its quarterly dividend by 14.30% to 8 cents/share. This dividend stock has raised distributions for 10 years in a row. Yield: 1.40%

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. The company raised its quarterly dividend to 28.50cents/share, which represents a 5.60% increase over the Q1 2011 dividend. This dividend stock has raised distributions for 9 years in a row. Yield: 3.80%

Full Disclosure: Long ED

Relevant Articles:

- Master Limited Partnerships (MLPs) – an island of opportunity for dividend investors
- Four High Yield REITs for current income

- Dividend Aristocrats List for 2012

- Dividend Achievers Offer Income Growth and Capital Appreciation Potential

Diageo (DEO) Dividend Stock Analysis 2011

noreply@blogger.com (D) — Fri, 27 Jan 2012 01:00:00 PST

Diageo plc (DEO) engages in producing, distilling, brewing, bottling, packaging, distributing, developing, and marketing spirits, beer, and wine products worldwide. This international dividend achiever has paid uninterrupted dividends on its common stock since 1988 and increased payments to common shareholders every year since 1998.

Diageo’s largest competitors include Brown-Forman (BF-B), Constellation Brands (STZ) and SAB Miller (SBMRY).

Over the past decade this dividend growth stock has delivered an annualized total return of 10.20% to its shareholders.

The company has managed to deliver a 5.50% annual increase in EPS since 2001. Analysts expect Diageo to earn $5.77 per share in 2012 and $6.44 per share in 2013. In comparison Diageo earned $4.84 /share in 2011.

Diageo owns some of the best known brands in spirits, including Smirnoff, Johnnie Walker, Baileys, Guinness, Captain Morgan and Jose Cuervo. I have previously written how strong brands are good for dividend growth. Diageo has focused exclusively on organic growth in its premium brands, shedding non-core assets over the past decade, and also focusing on achieving sales growth through acquisition of other premium spirits names. Diageo has benefited from strong demand for its premium products worldwide, as evidenced by strong volume growth over the past few years. A particular bright spot is the company’s performance in emerging markets, which accounts for one third of its revenues.

The company has maintained a high return on equity of over 30% for the majority of the 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 in US Dollars has increased by 7.30% per year since 2001, which is higher than the growth in EPS. With international dividend achievers, it is important to look at the trend in distributions in their base currencies. Despite the fact that the annual dividend payment appears volatile in US dollars, the growth in distributions in UK pounds has shown a consistent upward trend in distributions.

An 7% growth in distributions translates into the dividend payment doubling almost every ten years.

The company pays dividends twice per year. The interim payment is typically almost 40% of the total annual amount and is paid in April. The Final payment is approximately 60% of the total dividend and is typically paid in October.

The dividend payout ratio has mostly remained above 50%. It is just a tad above 50% currently, which means that the distributions are sustainable. 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 Diageo is attractively valued at 18.20 times earnings, has a sustainable dividend payout and yields 3%.

Full Disclosure: Long BF-B and DEO

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Active Dividend Growth Investing

noreply@blogger.com (D) — Wed, 25 Jan 2012 01:00:00 PST

My strategy relates to buying quality dividend stocks which fit my criteria, then sit back and hold on until one of these three events happens. However, there are other ways for investors to actively generate income from dividend paying stocks. Although they are mostly for sophisticated investors, everyone should be aware of them.

One such strategy is active dividend investing. This relates to selling a stock when its current yield drops below a certain threshold. For example, back in 2009, investors could have purchased shares of Aflac (AFL) at $20 or less per share. As a result they would be earning a yield on cost of 6%. However, given the steep run up in the share price since then, the current yield is 2.80%.

The question that some investors ask themselves is whether it makes sense to sell a company yielding 2.80% today, and substituting it for a company which has a higher current yield. After all, this would only increase the current income that the portfolio generates. For investors who are in the distribution phase of their dividend investing lifecycle, any boost in the dividend income could be seen as a nice bonus.

I typically worry about replacing dividend stocks after I sell dividend stocks when one of these three events occur. The reason why I don’t sell stocks that have gone up so much, that their current yield is low, is because I would not want to miss out on any dividend growth potential.
For example, investors holding onto Yum! Brands (YUM), might be disappointed with the low current yield of the stock. I purchased the stock last year at $41/share. My yield on cost is almost 2.80%. The current yield on the stock is 1.80%. Theoretically, if I sold my Yum! Brands stock, and purchased shares of McDonald’s (MCD) with the proceeds, I would increase my dividend income by 50%. The current yield on McDonald’s (MCD) is 2.80%. However, I am careful not to focus too much on one aspect, which is yield. You can read more about choosing between dividend stocks in a previous article on the topic. In a potential decision of whether to sell or hold on-to Yum! Stock includes:

- Total returns

The main reason why I invest in stocks with growing dividends is the rising stream of passive income over time. The beauty of dividend growth stocks is that the increased dividends tend to lead to share price appreciation. While this process is not as linear as that of consistent dividend increases, total returns will increase your portfolio value, while also maintaining purchasing power of your principal. I believe that both McDonald’s (MCD) and Yum! Brands (YUM) have the potential to deliver strong total returns. However, given Yum! Brands strong position in China, I would expect them to slightly outperform the golden arches.

- Valuation

Valuation is important as well. Right now McDonald’s (MCD) is trading at 20 times earnings, while Yum! Brands (YUM) is trading at 24.50 times earnings. Valuation also drives total returns over time. Overpaying for stocks could result in subpar performance. Since Yum! was spun off from PepsiCo (PEP) in 1997, it has handily outperformed Mcdonald’s (MCD). Over the past five years however, McDonald’s (MCD) was able to deliver stronger price gains in comparison to Yum!.

- Dividend Growth

Over the past five year, MCD has managed to increase dividends per share at 27.50% per year and has raised distributions for 35 years in a row. YUM has been able to deliver 32.60% dividend growth over the same time frame, but has only raised distributions for eight consecutive years. The latest dividend increases of Yum! Brands however have been much higher than those for McDonald’s. In addition to that, the dividend payout ratio for Yum! Brands is much lower than the payout ratio for McDonald’s (MCD). Investors should also evaluate the risk of dividend cut, particularly if the dividend payout ratio is overextended above 60% for one of the companies.

- Earnings Growth

Over the past decade, MCD has managed to increase earnings per share at 20.70% per year. YUM has been able to deliver 13% EPS growth over the same time frame. McDonald’s generates 2.5 times the amount of sales that Yum! generates. In addition to that, the golden arches have a market capitalization that is three times the size of its rival. The future earnings growth, the expectations behind earnings growth are the fundamental factors that are going to drive dividend increases, share price growth over time. No two analysts have the same opinions on who will perform better over the next decade. This is exactly why picking one company over the other is more complicated.

- Diversification

I always stress diversification in as many sectors as possible. I also try to be exposed to several issues within a sector, in order to avoid any losses in income or principal stemming from a few bad apples. Investing is all about making assumptions and having a set of estimates of what might happen. Whether your theory materializes or not, is yet to be seen. However, by owning shares in two fast-food companies with global operations, you are better positioned than owning just one fast food company.

For example, investors who owned Wal-Mart (WMT) over the past decade have seen very little in terms of total returns. On the other hand, investors who owned Target (TGT) shares, did very during the same period. Back in the year 2000, it would have been impossible to determine which of these two companies would have outperformed the other. That’s why having an allocation to both could be a winning strategy after all.

In addition, investors who favored British Petroleum (BP) in 2009 over Chevron (CVX) for example, would have been in for a nasty surprise when BP was involved in the Gulf of Mexico oil spill. This resulted in steep declines in the company’s share price, as well as a suspension of its quarterly dividend.

Full Disclosure: Long AFL, YUM, MCD, PEP, WMT

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Avoid Cyclical Dividend Growth Stocks

noreply@blogger.com (D) — Mon, 23 Jan 2012 01:00:00 PST

For my retirement strategy, I purchase dividend paying stocks with shareholder friendly managements, that can afford to raise dividends every year. I typically tend to focus on companies which have raised annual distributions every year for over one decade. I do however try to analyze the long-term dividend histories of companies I am researching, in order to determine if there are any past events which could forecast trouble for my income stream in the future. Utilities are notorious for raising distributions for one or two decades, before cutting or freezing them for several years. After that, it is pretty easy to start raising distributions again, and the company might even reach dividend achiever status once again, while early investors might be receiving less in distributions than a decade earlier. In my dividend strategy, I try to avoid these cyclical dividend achievers.

The following companies increased distributions over the past week:

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products, and petrochemicals in North America. This master limited partnership raised quarterly distributions to 62 cents/unit. This represents a 5.10% increase over the Q1 2011 distribution paid to unitholders. Enterprise Products Partners has raised distributions for 14 years in row. Yield: 5.20% (analysis)

Family Dollar Stores, Inc. (FDO) operates a chain of self-service retail discount stores primarily for low and middle income consumers in the United States. The company raised its quarterly distribution by 16.70% to 21 cents/share. This dividend aristocrat has boosted distributions for 36 years in a row. The current yield is1.50%, but my yield on cost is more than twice that much (analysis)

ONEOK, Inc. (OKE), a diversified energy company, operates as a natural gas distributor primarily in the United States. It operates through three segments: ONEOK Partners; Distribution; and Energy Services. The company raised its quarterly distribution by 9% to 61 cents/share. ONEOK has boosted distributions for 10 years in a row. The current yield is 2.80% (analysis)

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 its quarterly distributions to 61 cents/unit, which represents a 7% increase over the distribution paid in Q1 2011. ONEOK Partners has boosted distributions for 7 years in a row. The current yield is 4.40%

The McGraw-Hill Companies, Inc. (MHP) provides various information services for financial, educational, and business information markets worldwide. It operates in four segments: Standard & Poor’s (S&P), McGraw-Hill Financial, McGraw-Hill Education (MHE), and McGraw-Hill Information & Media (I&M). The company raised its quarterly distribution by 2% to 25.50 cents/share. This dividend aristocrat has boosted distributions for 39 years in a row. The current yield is 2.20% (analysis)

CenterPoint Energy, Inc. (CNP) operates as a public utility holding company in the United States. The company raised its quarterly distribution by 2.50% to 20.25 cents/share. CenterPoint Energy has boosted distributions for 7 years in a row. The current payment is still below the 37.50 cents/share quarterly dividend paid between 1992 and 2002. Yield: 4.30%

Dominion Resources, Inc. (D), together with its subsidiaries, engages in producing and transporting energy in the United States. It operates in three segments: DVP, Dominion Generation, and Dominion Energy. The company raised its quarterly distribution by 7.10% to 52.75 cents/share. Dominion Resources has boosted distributions for 9 years in a row. The company had boosted distributions for 19 consecutive years as of 1995, before it froze the distributions until 2004. Yield: 4.20%

Pall Corporation (PLL), together with its subsidiaries, manufactures and markets filtration, purification, and separation products and integrated systems solutions worldwide. The company raised its quarterly distribution by 20% to 21 cents/share. Pall Corporation has boosted distributions for 8 years in a row. The company ended its 20 year streak of dividend increases in 2002, when it cut distributions by 47% to 9 cents/share. Yield: 1.40%

AmeriGas Partners, L.P. (APU), through its subsidiary, AmeriGas Propane, L.P., operates as a retail and wholesale distributor of propane gas in the United States. The company raised its quarterly distribution by 76.25 cents/unit, which is an 8.10% increase over the Q1 2011 distribution. AmeriGas Partners has boosted distributions for 8 years in a row. Yield: 7.20%

The Williams Companies, Inc. (WMB), through its subsidiaries, engages in finding, producing, gathering, processing, and transporting natural gas primarily in the United States. The company increased its quarterly distribution by 3.50% to 25.875 cents/share.The company has raised distributions for 9 years in a row. Yield: 3.60%

TransMontaigne Partners L.P. (TLP) operates as a terminaling and transportation company. It provides integrated terminaling, storage, transportation, and related services for customers engaged in the distribution and marketing of light refined petroleum products, heavy refined petroleum products, crude oil, chemicals, fertilizers, and other liquid products. This master limited partnership raised quarterly distributions to 63 cents/unit, which represented a 3.30% increase over the distribution paid in Q1 2011. TransMontaigne Partners has boosted distributions for 7 years in a row. Yield: 7.30%

In order to generate sustainable dividend income, I try to avoid cyclical dividend achiever. For example ONEOK (OKE) cut its dividend payment in 1989 to from 16 cents/share to 7.50 cents/share. The distribution was not restored until 1998. It is normal for a company with a long streak of dividend increases to pause them, and that would make the stock a hold, but would not necessarily mean it is a sell.

Full disclosure: Long EPD, OKS, FDO, D, MHP

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Unilever (UL) for International Dividend Diversification

noreply@blogger.com (D) — Fri, 20 Jan 2012 01:00:00 PST

Unilever PLC (UL) provides fast-moving consumer goods in Asia, Africa, Europe, and the Americas. This international dividend achiever has paid uninterrupted dividends on its common stock since 1937 and increased payments to common shareholders every year since 1999.

The most recent dividend increase was in June 2011, when the Board of Directors approved an 8.20 % increase in the quarterly dividend to 22.50 euro cents/share. Unilever’s largest competitors include Procter & Gamble (PG), Kraft (KFT) and Nestle (NSRGY).

Over the past decade this dividend growth stock has delivered an annualized total return of 10.30% to its shareholders.

The company has managed to deliver a 15.50% annual increase in EPS since 2001. Analysts expect Unilever to earn $2.20 per share in 2011 and $2.40 per share in 2012. In comparison Unilever earned $1.94 /share in 2010.

A large portion of the company’s revenues come from Emerging markets, where sales growth is expected to continue at a high single digit to a low double digit rate of increase. The company has also been able to pass on increases in prices of raw materials onto consumers, who purchase its branded products globally. The risk behind this strategy is if Unilever increases prices to rapidly, sales volumes might suffer as a result. Typically however, while the market for food and personal consumer products is highly competitive, demand is stable and relatively immune from economic stress. The company’s strategic plans have revealed that it expects long-term sales growth of 3%- 5% per year.

The company’s Return on Equty has followed an upward trend from 20.30% in 2001 to 33.20% in 2010. Overall, despite volatility, this indicator has remained at high levels 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 11.20% per year since 2001, which is in line with the growth in EPS. With international dividend achievers, it is important to look at the trend in distributions in their base currencies. Despite the fact that the annual dividend payment appears volatile in US dollars, the growth in distributions in UK pounds has shown a consistent upward trend in distributions.

An 11% growth in distributions translates into the dividend payment doubling almost every six and a half years. If we look at historical data, going as far back as 1988 we see that Unilever has actually managed to double its dividend almost every seven and a half years on average.

The dividend payout ratio has been on the decline over the past decade. It fell from a high of 80% in 2001 to 57.60% in 2010. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Unilever is a company that is headquartered in the UK and the Netherlands. In this analysis I am concentrating on the British based, American Depositary Receipts. Unilever operates as a single business entity. However, there are two owners: Unilever (NV) and Unilever (PLC) which are the two parent companies of the Unilever Group, having separate legal identities and separate stock exchange listings for their shares. You can find Unilever shares trading on NYSE as (UN) or (UL) representing NV and PLC respectively. By investing in the UK shares, I am avoiding foreign withholding of my dividends.

Currently Unilever is attractively valued at 15.90 times earnings, has a sustainable dividend payout and yields 3.60%. I would consider adding to my position in the stock on dips.

Full Disclosure: Long UL, KFT, NSRGY and PG

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Eleven Dividend Kings, Raising dividends for 50+ years

noreply@blogger.com (D) — Wed, 18 Jan 2012 01:00:00 PST

There are several lists that dividend investors use in order to find investment ideas. The dividend achievers and the dividend champions lists are just two starting points. The lists focus mostly on companies raising distributions for over 10 for the achievers and over 25 years for the champions. There are eleven companies however, which have each managed to increase distributions for over half a century. This is no small accomplishment, given the fact that the past half a century included several recessions, oil price shocks, high inflation and interest rates and several wars.

The companies with the longest record of annual dividend increases include:

Diebold Incorporated (DBD) provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. The company has raised distributions for 58 years in a row. The ten year dividend growth rate is 5.80% per annum. Yield: 3.70% (analysis)

American States Water Company (AWR), engages in the purchase, production, distribution, and sale of water in California as well as in the distribution of electricity in San Bernardino Mountain communities. The company has raised distributions for 57 years in a row. The ten year dividend growth rate is 2.40% per annum. Yield: 3.20%

Dover Corporation (DOV) and its subsidiaries manufacture industrial products and components, as well as provide related services and consumables in the United States and internationally. The company operates through four segments: Industrial Products, Engineered Systems, Fluid Management, and Electronic Technologies. The company has raised distributions for 56 years in a row. The ten year dividend growth rate is 8.50% per annum. Yield: 2.10% (analysis)

Northwest Natural Gas Company (NWN) stores and distributes natural gas primarily in Oregon, Washington, and California. The company operates in two segments, Local Gas Distribution and Gas Storage. The company has raised distributions for 56 years in a row. The ten year dividend growth rate is 3.50% per annum. Yield: 3.80%

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. The company operates in four segments: Automotive Parts Group, Industrial Parts Group, Office Products Group, and Electrical/Electronic Materials Group. The company has raised distributions for 55 years in a row. The ten year dividend growth rate is 4.80% per annum. Yield: 2.80% (analysis)

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company operates in three global business units (GBUs): Beauty and Grooming, Health and Well-Being, and Household Care. The company has raised distributions for 55 years in a row. The ten year dividend growth rate is 10.90% per annum. Yield: (analysis)

Emerson Electric Co. (EMR), a diversified global technology company, engages in designing and supplying product technology, as well as delivering engineering services and solutions to various industrial, commercial, and consumer markets worldwide. The company has raised distributions for 55 years in a row. The ten year dividend growth rate is 6.40% per annum. Yield: 3.20% (analysis)

3M Company (MMM) , together with subsidiaries, operates as a diversified technology company worldwide. The company has raised distributions for 53 years in a row. The ten year dividend growth rate is 6.20% per annum. Yield: 2.60% (analysis)

Cincinnati Financial Corporation (CINF), through its subsidiaries, operates in the property casualty insurance business in the United States. It operates in four segments: Commercial Lines Property Casualty Insurance, Personal Lines Property Casualty Insurance, Life Insurance, and Investment. The company has raised distributions for 51 years in a row. The ten year dividend growth rate is 8% per annum. Yield: 5.10% (analysis)

Vectren Corporation (VVC) provides energy delivery services to residential, commercial, and industrial and other customers in Indiana and west central Ohio. The company has raised distributions for 52 years in a row. The ten year dividend growth rate is 3.00% per annum. Yield: 4.80%

Parker Hannifin Corporation (PH) manufactures fluid power systems, electromechanical controls, and related components. The company has raised distributions for 54 years in a row. The ten year dividend growth rate is 11.5% per annum. Yield: 1.80%

Two other companies which could join the dividend kings list include Coca-Cola (KO) and Johnson & Johnson (JNJ), which have raised distributions for 49 years in a row.

The purpose of this list is not to provide an investment recommendation, although some of the companies above are attractively valued and fit my entry criteria. The purpose is to deliver a list of stocks which investors could use to analyze the business fundamental behind each of the companies above, which have enabled them to raise distributions for over 50 years in a row

Full Disclosure: Long PG, MMM, EMR, KO, CINF,

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Eight Dividend Increases for Long-Term Investors

noreply@blogger.com (D) — Mon, 16 Jan 2012 01:00:00 PST

Warren Buffett describes the stock market’s short term fluctuations as a voting machine, by tallying up which firms are popular and which are not. However, in the long-term the market is a weighting machine, where the fundamental strength of the companies is being evaluated. What truly matters in the long run is how well will the company execute its long term strategy in order to keep generating the rising earnings to pay higher distributions over time. As a long term investor I keep a close eye on the long-term performance of the companies I own stock in. I do however ignore daily noise about market fluctuations, news about the economy or even the recent news about Europe. I keep focusing on the long term picture and sticking to my retirement strategy of buying dividend stocks with rising distributions.

The long-term holders of the following eight companies got one step closer to financial independence, after their investments announced plans to increase distributions:

Genesis Energy, L.P. (GEL), together with its subsidiaries, operates in the midstream segment of the oil and gas industry in the Gulf Coast area of the United States. The master limited partnership raised its quarterly distributions by 2.90% to 44 cents/unit. Genesis Energy has increased distributions for 8 years in a row. Yield: 6.10%

Plains All American Pipeline, L.P. (PAA) engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquefied petroleum gas and other natural gas-related petroleum products (LPG) in the United States and Canada. It operates in three segments: Transportation, Facilities, and Supply and Logistics. The master limited partnership raised its quarterly distributions by 3% to $1.025/unit. Plains All American Pipeline has increased distributions for 11 years in a row. Yield: 5.60%

Pentair, Inc. (PNR) operates as a diversified industrial manufacturing company worldwide. The company raised its quarterly dividend by 10% to 22 cents/share. This dividend champion has increased distributions for 37 years in a row. The ten year dividend growth rate is 8.60% per year. Yield: 2.40%

Shaw Communications Inc. (SJR), a diversified communications company, provides broadband cable television, Internet, digital phone, telecommunications, and satellite direct-to-home services primarily in Canada and the United States. The company raised its monthly dividend by 5.40% to 8.08 CAD cents/share. Shaw Communications has increased distributions for 10 years in a row. Yield: 4.90%

Alliant Energy Corporation (LNT) operates in electric and gas utility businesses in the United States. The company raised its quarterly dividend by 5.90% to 45 cents/share. Alliant Energy has increased distributions for ten years in a row. Unfortunately for long-term holders, the current dividend is still below the record 50 cents/share paid in 2002. Yield: 4.20%

Omega Healthcare Investors, Inc. (OHI) operates as a real estate investment trust (REIT) in the United States. The company invests in healthcare facilities, principally long-term healthcare facilities in the United States. The company raised its quarterly dividend by 2.50% to 41 cents/share. This increase represents a 10.80% increase over the Q1 2011 distribution. Omega Healthcare Investors has increased distributions for ten years in a row. Unfortunately for long-term holders, the current dividend is still below the record 70 cents/share paid in 1999. Yield: 8.20%

Watsco, Inc. (WSO), together with its subsidiaries, distributes air conditioning, heating and refrigeration equipment, and related parts and supplies in the United States. The company raised its quarterly dividend by 8.80% to 62 cents/share. Watsco has increased distributions for 12 years in a row. Yield: 3.70%

Robbins & Myers, Inc. (RBN), together with its subsidiaries, engages in the design, manufacture, and marketing of engineered, application-critical equipment and systems for the energy, industrial, chemical, and pharmaceutical markets worldwide. The company raised its quarterly dividend by 11.10% to 5 cents/share. Robbins & Myers has increased distributions for 6 years in a row. Yield: 0.40%

Full Disclosure: None

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General Dynamics (GD) Dividend Stock Analysis

noreply@blogger.com (D) — Fri, 13 Jan 2012 01:00:00 PST

General Dynamics Corporation (GD) provides business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology products and services worldwide. This dividend achiever has paid uninterrupted dividends on its common stock since 1979 and increased payments to common shareholders every year for 20 consecutive years. Most recently, Warren Buffett's Berkshire Hathaway initiated a stake in General Dynamics.

The most recent dividend increase was in March 2011, when the Board of Directors approved a 11.90 % increase in the quarterly dividend to 47 cents/share. General Dynamics’s largest competitors include Boeing (BA), Lockheed Martin (LMT) and Textron (TXT).

Over the past decade this dividend growth stock has delivered an annualized total return of 4.40% to its shareholders.

The company has managed to deliver a 12.70% annual increase in EPS since 2001. Analysts expect General Dynamics to earn $7.22 per share in 2011 and $7.59 per share in 2012. In comparison General Dynamics earned $6.82 /share in 2010. The company has been able to buyback 0.60% of its shares outstanding every year on average over the past decade.

General Dynamic’s largest customer is the US Government, which accounts for 40% of global military spending. Given the challenging political climate, there is a high level of uncertainty behind future increases in defense spending coming out of the US. This being said, the company does have other customers in other markets and also other divisions such as the Aerospace one that is producing Gulfstream Jets. Demand in the Aerospace division will be fueled by new product introductions and demand from emerging markets. The major obstacles behind General Dynamics include inability to win any major defense contracts, major cuts in military budgets as well as a slowdown in commercial aviation.

The company’s Return on Equty has remained in a tight range between 17.50% and 22.50% 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 12.90% per year since 2001, which is in line with the growth in EPS.

A 13% growth in distributions translates into the dividend payment doubling almost every fie and a half years. If we look at historical data, going as far back as 1974 we see that General Dynamics has actually managed to double its dividend almost every six years on average.

The dividend payout ratio has remained in arrange between 21% and 25%. 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 General Dynamics is attractively valued at 9.50 times earnings, has a sustainable dividend payout and yields 2.80%.

Full Disclosure: None

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Top Dividend Stocks to own in 2012

noreply@blogger.com (D) — Wed, 11 Jan 2012 01:00:00 PST

The new year has just began, and there are many analysts making bold predictions. These predictions vary from cautiously optimistic about the markets and the world economy to overly pessimistic about Europe, Financial Crisis and inflation.

Unfortunately, I cannot predict the future. I do know however, that investors become successful only after they find a niche that gives them an edge in their quest for long term wealth accumulation. My niche is dividend growth stocks. These companies have managed to boost earnings and dividends for many decades, through recessions, wars, oil embargoes and double digit inflationary periods. The companies I invest in typically provide consumers in every continent with products or services they use on a daily basis. No matter what happens with the economy, people will still do grocery shopping, and spend on basic needs. This makes the business model for most of the stocks I focus on very defensive in its core.

Some of the best companies to own in 2012, make great acquisitions that I plan to hold for several decades. I mostly sell only when one of these three events occurs. The one prediction I will make is that the following companies will boost their dividends in 2012, as they have previously done for years before.

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company has raised distributions for 49 years in a row. The 10 year annual dividend growth rate is 13%/year. The last dividend increase was 5.60% to 57 cents/share. Analysts are expecting that Johnson & Johnson will earn $5.24/share in 2012. I expect that the quarterly dividend will exceed 61 cents/share in 2012. Yield: 3.50% (analysis)

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company has raised distributions for 55 years in a row. The 10 year annual dividend growth rate is 10.90%/year. The last dividend increase was 9% to 52.50 cents/share. Analysts are expecting that Procter & Gamble will earn $4.20/share in 2012. I expect that the quarterly dividend will be increased to 57 cents/share in 2012. Yield: 3.20% (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a foodservice retailer worldwide. The company has raised distributions for 35 years in a row. The 10 year annual dividend growth rate is 26.50%/year. The last dividend increase was 14.75% to 70 cents/share. Analysts are expecting that McDonald's will earn $5.73/share in 2012. I expect that the quarterly dividend will reach 77 cents/share in 2012. Yield: 2.80% (analysis)

PepsiCo, Inc. (PEP) engages in the manufacture, marketing, and sale of foods, snacks, and carbonated and non-carbonated beverages worldwide. The company has raised distributions for 39 years in a row. The 10 year annual dividend growth rate is 13%/year. The last dividend increase was 7.30% to 51.50 cents/share. Analysts are expecting that PepsiCo will earn $4.65/share in 2012. I expect that the quarterly dividend will reach 55 cents/share in 2012. Yield: 3.20% (analysis)

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised distributions for 48 years in a row. The 10 year annual dividend growth rate is 12.40%/year. The last dividend increase was 9.40% to 58 cents/share. Analysts are expecting that Colgate Palmolive will earn $5.52/share in 2012. I expect that the quarterly dividend will be raised to 64 cents/share in 2012. Yield: 2.60%(analysis)

Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. The company has raised distributions for 39 years in a row. The 10 year annual dividend growth rate is 8.80%/year. The last dividend increase was 9.10% to 48 cents/share. Analysts are expecting that Abbott will earn $5.03/share in 2012. I expect that the quarterly dividend will be raised to 52 cents/share sometime in 2012. Yield: 3.40% (analysis)

Kimberly-Clark Corporation (KMB), together with its subsidiaries, engages in the manufacture and marketing of health care products worldwide. The company has raised distributions for 39 years in a row. The 10 year annual dividend growth rate is 9.20%/year. The last dividend increase was 6.10% to 70 cents/share. Analysts are expecting that Kimberly-Clark will earn $5.25/share in 2012. I expect that the quarterly dividend will be raised to 74 cents/share sometime in 2012. Yield: 3.90% (analysis)

3M Company (MMM), together with subsidiaries, operates as a diversified technology company worldwide. The company has raised distributions for 53 years in a row. The 10 year annual dividend growth rate is 6.10%/year. The last dividend increase was 4.80% to 55 cents/share. Analysts are expecting that 3M will earn $6.33/share in 2012. I expect that the quarterly dividend will be raised to 57.50 cents/share sometime in 2012. Yield: 2.60% (analysis)

Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets. This MLP has raised distributions for years in a row. The 10 year annual distribution growth rate is 10.90%/year. Kinder Morgan raised its quarterly distributions by 4.50% to $1.16/unit in 2011. I expect that the distribution will grow to $1.21/unit by the end of 2012. Yield: 5.60% (analysis)

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company has raised distributions since the spin-off from Altria Group in 2008. The last dividend increase was 20.30% to 77 cents/share. Analysts are expecting that Philip Morris International will earn $5.22/share in 2012. I expect that the quarterly distribution will reach 85 cents/share in 2012. Yield: 3.90% (analysis)

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company has raised distributions for 37 years in a row. The 10 year annual dividend growth rate is 17.80%/year. The last dividend increase was 20.70% to 36.50 cents/share. Analysts are expecting that Wal-Mart will earn $4.93/share in 2012. I expect that the company will hike the quarterly distribution to 41 cents/share by the end of 2012. Yield: 2.50% (analysis)

The following companies should do well no matter what happens with the global economy in 2012. While they are defensive, they also have a growth kick that would enable them to generate the rising earnings stream to pay for the dividend increases in 2012 and beyond. Their diversified income streams, spread out globally, as well as the recurring nature of their products or services make them great long term holdings for any serious dividend investor. With an average yield of % ,and strong expected dividend growth, these stocks are a good list to add to a dividend portfolio.

Full Disclosure: Long all stocks listed above

Relevant Articles:

- Dividend Growth Stocks – The best kept secret on Wall Street

- The Dividend Edge

- Six Dividend Stocks to Hold Forever

- Why Dividend Growth Stocks Rock?

My Dividend Retirement Plan

noreply@blogger.com (D) — Mon, 09 Jan 2012 01:00:00 PST

I invest in dividend stocks, in order to generate a sufficient income stream, that would meet and exceed my expenses in retirement. Retirement to me is the point where my dividend income exceeds my expenses, which means that I no longer have to work for money. I am a big proponent of value investing, which is why I would only consider myself financially independent whenever the dividend income stream generated by my portfolio exceeds 1.5 times my annual expenses.

In order to get there, there are several simple, but crucial principles I need to follow.

The first principle in building wealth through dividend paying stocks is to spend less than what you earn. I have consistently managed to save approximately half of my after-tax income every month. In addition, any bonus or raise received has been designated to my dividend growth portfolio. It also doesn’t hurt to try looking for additional income opportunities, which are dependent on my skillset. By investing as much as possible, I can grow my portfolio and the income stream it produces very quickly. In addition, by spending half of my salary for example and keeping expenses low, I would only need 50% less than what I currently make in terms of dividend income. In addition, regular saving helps me to consistently add to my portfolio. This regular dollar cost averaging over time into positions that are attractively priced, creates another layer of safety.

The second principle is to invest your money very conservatively. I invest my money as if I would lose my job and I would have to depend on my portfolio income for my sole purpose of survival. As a result I do not chase hot stocks or try to outsmart the market through frequent trading or market timing. I have designated a simple strategy, which fits my personality and which works for me. Since I have designated the strategy, and since I have had years of experience in the markets, I know when to look for an investment opportunity. I do continuously try to learn as much as possible about markets, investing and other strategies, in order to find ways to improve.

The third principle is somewhat similar to the second. It is all about designing an investment strategy and sticking to it for most of the part. My strategy entails:

1) Stocks that have a 10 year record of consistent dividend raises
2) P/E ratios of less than 20
3) Dividend payout ratios of less than 60%. For MLPs, REITs and Utilities I evaluate each opportunity on an individual basis
4) Dividend yield exceeding 2.50%, although I do change this requirement depending on the dividend yield on the S&P 500
5) Quality characteristics such as wide moat, strong competitive advantages, strong brand names, rising earnings, decreasing number of shares etc

While I mostly stick to my strategy, I sometimes do deviate from it. I have purchased companies yielding less than 2.50%, or ones which have had less than 10 years of consistent dividend increases. I have not purchased stocks whose P/E ratio was above 20 times earnings however. Valuation is paramount in my investment decision. I typically expect that the distributions from my dividend portfolio would grow organically by about 6% per year. In comparison, dividends on Dow Jones Industrials Average grew by over 5% per year between 1920 and 2005. The rising dividend stream will maintain purchasing power of my income stream by protecting it from inflation. The types of companies I invest in include such blue chips like Johnson & Johnson (JNJ) or PepsiCo (PEP).

The fourth principle involved selling underperforming shares. While I take a great amount of time analyzing companies and making sure they are priced right before I purchase them, I realize that things could change and that I should not be married to a stock that does not deliver results. In a previous article I mentioned that typically sell dividend stocks only after three events have occurred. One of these events includes dividend cuts. If a company whose stock I own lowers or eliminates dividend payment, I immediately sell and reinvest the proceeds into an investment from a similar sector that is priced attractively. For example, when I sold British Petroleum (BP) in 2010, I immediately purchased shares of Royal Dutch Shell (RDS/B). As a result, I was able to replace the dividend income to a certain extent, and still had exposure to the Energy sector.

The fifth principle is all about diversification. I try to maintain a diversified income portfolio, which has over 40 individual securities in it. The portfolio is not equally weighted, as it has been built over a long period of time. It includes a fair amount of underweight positions, which were accumulated when they were attractively valued, but are no longer fairly valued. Examples include Family Dollar (FDO) and Yum! Brands (YUM). The reason behind diversification is to ensure that the income stream is not severely affected when one or two of the stocks I own cut distributions. A dividend cut in a portfolio of less than 10 stocks will severely affect the income stream. A dividend cut in a portfolio of over 30 stocks will not affect the dividend income. In an equally weighted portfolio, even if the dividend is completely eliminated in one or two components, the total income can still grow if the other components grow distributions and if the sold stocks are replaced strategically.

The sixth principle of my wealth accumulation strategy is strategically reinvesting dividends. While I plan that my dividend growth portfolio will generate organic dividend growth of 6% per year, by reinvesting dividends, I can generate a much higher total growth in portfolio distribution income over time. Basically I am turbocharging my total dividend income by purchasing shares which rise dividend payments, then reinvesting these dividend payments and also adding new capital to the portfolio every single month. I typically wait for the amount of dividends and the amount of new capital to reach $1000 before I purchase a new or additional position in a given company. I do not automatically reinvest dividends, because I do not want to purchase additional shares in a company that overvalued.

In summary, by saving money, investing them in blue chip dividend growth stocks and reinvesting dividends and new capital, I plan to generate enough dividends to make me financially independent. I follow the six principles in my wealth accumulation and dividend income generation. My dividend income is getting closer to 40% - 45% of my expenses, after following these guidelines for a several years. In a few short years, my dividend income should be able to exceed my monthly expenses, without having to endure a lower standard of living.

Full Disclosure: Long FDO, RDS/B, JNJ, PEP

Relevant Articles:

- Living off dividends in retirement

- How to Build a Retirement Dividend Portfolio with only $1000/month?

- Margin of Safety in Dividends

- How to create a bulletproof dividend portfolio

We are not in a Dividend Bubble

noreply@blogger.com (D) — Fri, 06 Jan 2012 01:00:00 PST

I recently read an article titled “ Are we Witnessing a Dividend Bubble?”. While catchy titles like Dividend Bubbles and comparisons to the Nifty Fifty from the 1970's can attract readers, there is little substantive evidence to prove that we are in an actual dividend bubble. Back in 2008 I myself wrote an article where I predicted that record low interest rates might lead to a Dividend Bubble.

The Nifty Fifty was a group of one decision growth stocks, which money managers bought indiscriminately regardless of valuation. When the US economy entered a recession in 1973, the rosy earnings expectations for the high multiple Nifty Fifty turned gloomy. As a result, share prices fell sharply. The contraction was more severe for the Nifty Fifty stocks, many of which did not return to their highest stock price levels for many years.

Dividend stocks are a buy and hold for the long term type investment. Making an assumption about “dividend bubbles” based on relative outperformance in a period of less than one year does not sound convincing. While the Nifty Fifty were also considered a buy and hold type of stocks in the 1970's, the major difference is that dividend stocks are actually undervalued. In addition, few investors actually appreciate the value that dividend stocks offer to investors. Bubbles are characterized by irrational exuberance and chasing of assets regardless of their underlying fundamentals. Given the fact that only few investors appear optimistic about dividend stocks, and that fundamentals appear sound, it is premature to talk about a bubble in dividend stocks.

Given the low interest rates on US Treasuries and Certificates of Deposit (CDs), many market pundits are claiming that investors are purchasing income stocks in an effort to get higher yields on their nest eggs. These investors are supposed to be least sophisticated, and therefore these market pundits are claiming that the “smart money” should do the opposite by ignoring income stocks. While this could be true in some isolated instances, few investors typically hold large amounts of cash in fixed income instruments. Their assets are typically invested in stock and bond mutual funds. In addition, few investors simply purchase income stocks without doing any research. Given the fact that dividend stocks in general offer greater possibility for higher returns in comparison to fixed income, investors who are selling bonds and buying income stocks might be actually doing the right thing for their money. The only scenario where investors who purchase 10 or 30 year US Treasuries will generate a higher return than stocks will be if we have a Japan style deflation for the next two decades.

In my investing, I screen the dividend champions and dividend achievers lists for bargains several times a month. There are usually some overpriced stocks, many fairly priced stocks and a few that are undervalued. On average however, most dividend stocks exhibit similar characteristics to equities in general. Equities are trading at their lowest valuations in many years. Corporate balance sheets are flush with cash, and corporations are earning record amounts. As a result M&A activity is increasing, as are dividends and share buybacks.

Dividend investors typically apply a set of qualitative and quantitative criteria, before committing any funds to investments. As a result, even if a company like PepsiCo (PEP) has a wide-moat and will probably keep raising distributions for the next few decades, it should not be bought when P/E is over 20.

In conclusion, while it might seem that investors are paying more attention to dividend stocks, this has not led to any overvaluation in stock prices. On the contrary, many dividend paying corporations are flush with cash, and can afford paying higher distributions in the future. Most of these dividend stocks are attractively priced at the moment and offer a better risk/reward than fixed income securities. Given this information, there is no evidence to suggest that we are in a Dividend Bubble.

Relevant Articles:

- The next bubble in the making.

- Buy and hold dividend investing is not dead

- My Bullish Case: Stocks are cheap

- Why I am a dividend growth investor?

- Are dividend stocks a separate asset class?

Dividend Growth Portfolio - Q4 2011 Update

noreply@blogger.com (D) — Wed, 04 Jan 2012 01:00:00 PST

Back in September 2011, I was invited to participate in the Dividend Growth Portfolio project. This project combines the best stock picks from several bloggers that focus exclusively on dividend stocks. The complete portfolio could be seen from this page.

Each blogger selected three stocks that they viewed as attractively priced. I selected McDonal's (MCD), Chevron (CVX) and Enterprise Product Partners (EPD). You could read more about the reasoning behind these selections in this article.

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a foodservice retailer worldwide. It franchises and operates McDonald’s restaurants worldwide. This dividend aristocrat has raised distributions for 35 years in a row. In 2011, McDonald's increased quarterly dividends by 14.70% to 70 cents/share. Over the past decade, the company has managed to boost distributions by 26.50% per year. In 2010, McDonald's earned $4.58/share. Analysts expect earnings to reach $5.73/share by 2012. The stock currently is attractively valued and yields 2.80%. (analysis)

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products, and petrochemicals in North America. The master limited partnership has raised distributions for 14 years in a row. In 2011, Enterprise Products Partners increased quarterly distributions by 5.10% to 61.30 cents/unit. Over the past decade, the company has managed to boost distributions by 8.30% per year. This MLPs has a sustainable distribution and yields 5.40%. (analysis)

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. This dividend achiever has raised distributions for 24 years in a row. In 2011, Chevron increased quarterly dividends by 12.50% to 81cents/share. Over the past decade, the company has managed to boost distributions by 8.10% per year. In 2010, Chevron earned $9.48/share. Analysts expect earnings to reach $13.04/share by 2012. The stock currently is attractively valued and yields 3.10%. (analysis)

The rest of the selections can be seen from the table below. Prices were depressed in late September, which is why this portfolio is making money right now.

You could read the reasoning behind the other stock selections from the articles below:

Dividend Mantra: Introducing The Dividend Growth Index

The Dividend Guy Blog: Dividend Growth Index

Dividend Monk’s Three Picks for the Dividend Growth Index

Dividend Ninja: Introducing the Dividend Growth Index

Passive Income Earner: Introducing the Dividend Growth Index

My Own Advisor: Introducing the Dividend Growth Index

The Wealthy Canadian: The Dividend Growth Index

Full Disclosure: Long MCD, CVX, EPD

Relevant Articles:

- Dividend Growth Portfolio Project

- Dividend Growth Portfolio

- Best Dividend Stocks for 2011

- Dividend Aristocrats List for 2012

Best Dividend Stocks for 2012

noreply@blogger.com (D) — Tue, 03 Jan 2012 01:00:00 PST

Back in 2010 I was invited to participate in a stock picking competition. The objective was to identify the best four stocks for 2011. You can read the reasons behind my four selections in this article. The four stocks I selected included:

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. This dividend aristocrat has raised distributions for 55 years in a row. Over the past decade, Procter & Gamble has managed to boost dividends by 10.90% per year. Analysts are expecting further increases in EPS over the next two years to $4.57/share, which represents a 16.30% expected growth. The stocks yields 3.20% and is attractively valued at the moment. Check my analysis of the stock.

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. This dividend aristocrat has raised distributions for 49 years in a row. There are only eleven companies in the world, which have managed to accomplish this task. Over the past decade, Johnson & Johnson has managed to boost dividends by 13% per year. Analysts are expecting further increases in EPS over the next two years to $5.24/share. The stocks yields 3.50% and is attractively valued at the moment. Check my analysis of the stock.

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company was spun off from Altria Group (MO) in 2008, and has continued its predecessor’s tradition of raising dividends every year ever since. I like the company’s strong presence outside the US, and the fact that it has the ability to grow through acquisitions as well as by capitalizing on the rising populations in the emerging markets. Analysts are expecting further increases in EPS over the next two years to $5.21/share.The stock yields 3.90%. Check my analysis of Phillip Morris International.

PepsiCo, Inc. (PEP) engages in the manufacture, marketing, and sale of foods, snacks, and carbonated and non-carbonated beverages worldwide. This dividend aristocrat has raised distributions for 39 years in a row. Over the past decade, PepsiCo has managed to boost dividends by 13% per year. Analysts are expecting further increases in EPS over the next two years to $4.66/share. The stocks yields 3.10% and is more attractively valued at the moment relative to arch rival Coca Cola (KO). Check my analysis of PepsiCo.

Overall the four picks delivered a total return of 15.40% in 2011. In comparison, the S&P 500 returned 1.90% in 2011, all of which was due to dividends.

I believe that the stocks I selected to be great long-term holdings for many decades to come. The companies identified above are riding multi-decade consumer trends, and have strong brands that customers are willing to pay a premium for. In addition, the products that these companies produce would likely still be purchased by consumers for several decades into the future. Rapid shifts in consumer preferences are unlikely. In other words, if you like drinking Pepsi, you would keep drinking Pepsi. As a result, I would consider these stocks to also be the best dividend stocks for 2012 as well.

The performance of the other bloggers in the competition in 2011 is listed below:

Dividend Growth Investor + 15.36%

Million Dollar Journey +3.12%

Intelligent Speculator -4.90%

Money Smarts Blog -9.55%

Where Does My Money Go -17.04%

My Traders Journal -19%

The Financial Blogger -21.73%

The Wild Investor -33.34%

Beat The Index -44.08%

Overall, I have performed very well in this competition, where I participated in 2009, 2010 and 2011. My total returns for 2009 were 26.48% and 26.08% for 2010. In comparison, S&P 500 delivered total returns of 26.35% in 2009 and 14.60% in 2010. In essence, the four picks I selected in each of the three years have outperformed the S&P 500. Whether the four picks outlined in this article outperform in 2012 is yet to be determined. Stay tuned for my next update in early April 2012.

Full Disclosure: Long PG, JNJ, PM, PEP

Relevant Articles:

- Best Dividend Stocks for 2011

- Dividend Aristocrats List for 2012

- How to invest like a Dividend Billionaire

- 2010’s Top Dividend Plays

This article was featured on Carnival of Personal Finance – “Ask the Right Questions” Edition

Becton, Dickinson and Company (BDX) Dividend Stock Analysis 2011

noreply@blogger.com (D) — Fri, 30 Dec 2011 01:00:00 PST

Becton, Dickinson and Company (BDX), a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. This dividend champion has paid uninterrupted dividends on its common stock since 1926 and increased payments to common shareholders every year for 39 consecutive years.

The most recent dividend increase was in November 2011, when the Board of Directors approved a 10 % increase in the quarterly dividend to 45 cents/share. Becton Dickinson’s largest competitors include Medtronic (MDT), Baxter International (BAX) and Boston Scientific (BSC).

Over the past decade this dividend growth stock has delivered an annualized total return of 8.70% to its shareholders.

Despite soft economic outlook, the company 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 over half of its sales from international operations, which is expected to increase as it grows its presence in emerging markets. The company is also active on the acquisition front as well as in investing heavily in research and development (R&D).

The company has managed to deliver a 13.50% annual increase in EPS since 2002. Analysts expect Becton Dickinson to earn $5.84 per share in 2011 and $6.45 per share in 2012. In comparison Becton Dickinson earned $5.59 /share in 2011. The company has been able to buyback 1.10% of its shares outstanding every year on average over the past decade.

The company’s Return on Equty has expanded over the past few years, from 20% in 2002 to 24% 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 17.30% per year since 2001, which is much higher than the growth in EPS. Given the low dividend payout ratio however, Becton Dickinson can afford to raise distributions faster than earnings for at least one and a half to two decades.

A 17% growth in distributions translates into the dividend payment doubling almost every four years. If we look at historical data, going as far back as 1974 we see that Becton Dickinson has actually managed to double its dividend almost every six years on average.

The dividend payout ratio has increased from 21.80% in 2002 to 29.30% in 2011. Future increases in dividends above the rate of dividend increases could lead to further expansion in this indicator. 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 13.30 times earnings, has a sustainable dividend payout and yields 2.40%. I would consider initiating a position in the stock on dips below $72.

Full Disclosure: Long MDT

Relevant Articles:

- Ten Top High Dividend Growth Stocks for Long Term Returns

- Medtronic (MDT) Dividend Stock Analysis

- Lifecycle of the dividend investor

- Dividend Growth Stocks – The best kept secret on Wall Street

Tech Dividends on the Rise

noreply@blogger.com (D) — Wed, 28 Dec 2011 01:00:00 PST

The technology sector has typically been characterized by rapid product obsolescence and the tremendous amounts of capital necessary to invest in Research and development, in order to maintain the competitive edge. The positive sides of technology include that a simple idea such as a piece of software can be widely distributed for a nominal cost, once the product is finished. The fact that companies have to come up with new innovative products all the time, since the status quo of the existing ones is challenged all the time, has historically lead to volatility in earnings. With such volatility, most companies have had to reinvest most of their earnings back into the business. This has not resulted in future growth however, as some firms ended up betting everything on themselves, while their industry niche was going into extinction.

In addition, the most successfully technology companies have been able to continuously predict and capitalize on future trends. Given the fact that the technologies ten years from now will be different that the technologies from today, a bet on tech stocks seems more like a speculation, rather than an investment. Because of the factors listed above, few tech companies have a wide moat. Most, such as Google, Microsoft, Intel or Apple have a moat, which could last for a few years. But that is until there is some ground breaking technology change or disruption, which provides consumers with a better, slicker and more advanced piece of technology. Companies such as International Business Machines (IBM), which has successfully been able to adapt for decades are the exception, rather than the norm.

Nevertheless, some companies such as International Business Machines (IBM), Intel (INTC) and Microsoft (MSFT) have been able to generate rising earnings per share over the past decade. This has enabled them to initiate a dividend, and also to increase it over time. The following companies have been able to achieve a higher annual dividend for at least five years:

Automatic Data Processing, Inc. (ADP) provides business outsourcing solutions. The company operates in three segments: Employer Services, Professional Employer Organization (PEO) Services, and Dealer Services. This dividend aristocrat has managed to boost distributions for 37 years in a row. Yield: 3.10% (analysis)

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. This dividend achiever has paid distributions for one century, and managed to boost distributions every year for 16 years in a row. Yield: 1.60% (analysis)

Microsoft Corporation (MSFT) develops, licenses, and supports a range of software products and services for various computing devices worldwide. This software giant has managed to raise distributions for seven consecutive year. Yield: 3.10% (analysis)

Intel Corporation (INTC) engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. The worlds largest chipmaker has managed to boost dividend payouts to shareholders for eight years in a row. Yield: 3.60% (analysis)

AT&T Inc. (T), together with its subsidiaries, provides telecommunication services to consumers, businesses, and other service providers worldwide. This dividend aristocrat has boosted distributions for 27 years in a row. Yield: 5.90% (analysis)

Verizon Communications Inc. (VZ) provides communication services. The company operates through two segments, Domestic Wireless and Wireline. The telecom carrier has managed to boost distributions for seven consecutive years. Yield: 5.20%

Vodafone Group Public Limited Company (VOD) provides mobile telecommunication services worldwide. It offers mobile voice services to approximately 370 million customers; messaging services; mobile data services; fixed broadband services to approximately 6 million customers; and whole sale carrier services to approximately 40 African countries. This international dividend achiever yields 7.70%.

I am not a big fan of technology in general for my dividend portfolio. As a result, I am mostly underweight the sector. While I might miss out on some spectacular stories such as Apple (AAPL), the lack of wide moats make it difficult to commit a large portion of my portfolio to the sector. In addition, the low number of dividend achievers and aristocrats in the technology sector epitomizes the fickle nature of technology as a business in general.

Full Disclosure: Long ADP

Relevant Articles:

- Dividend Aristocrats List for 2012

- Has the time for Tech Dividends arrived?

- Dividends are Powering Up the Tech Sector

Margin of Safety in Dividends

noreply@blogger.com (D) — Wed, 21 Dec 2011 01:00:00 PST

Benjamin Graham is the father of value investing. His strategy was focused on purchasing securities where the price was much lower than the total liquidation value of the corporation. This concept of purchasing stocks with a margin of safety has made him, his investors and the investors of his followers billions of dollars in profits. The real profits from this powerful concept were realized by Warren Buffett, who purchased stock in wide-moat companies at a fraction of what their future value was going to be.

Dividend investing is a form of value investing, where investors do not realize all of their return all at once, but rather on regular and consistent intervals. Dividends provide a direct link between the financial performance of a company, and the returns of its shareholders. Sometimes the market does not recognize that certain firms are more valuable for extended periods of time, even if their earnings are higher and valuations are cheap. With dividends, value investors realize a return that puts them closer to realizing the intrinsic value of the stock, no matter what the market or the stock price does.

Not all dividend stocks are attractive bargains however, which is evidenced when applying certain quantitative and qualitative criteria. In addition, investors should analyze whether the dividend payment is sustainable. There has to be an adequate margin of safety in dividend coverage from earnings or cashlows, which would ensure prompt payment of distributions even if there was a temporary fluctuation in operating performance.

I typically look for a margin of safety in dividends in corporations to be 50%-60% or below. This means that the dividend payout ratio should not be over 60%, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. When a company pays out almost all of its earnings as dividends, that leaves little room for maneuvering if earnings decline. In addition, this leaves little for investing and growing the business. There are some exceptions, where investors need to look beyond dividend payout ratio in order to evaluate dividend sustainability for Real Estate Investment Trusts, Master Limited Partnerships or Business Development Corporations to name a few. For REITs, investors should look at Funds from Operations (FFO). FFO is defined as net income available to common stockholders, plus depreciation and amortization of real estate assets, reduced by gains on sales of investment properties and extraordinary items.

For example, in 2010 Realty Income (O) distributed $1.722/share in dividends, whereas earnings were $0.92/share. It’s FFO per share was $1.83/share however. Check my analysis of this REIT.

Some companies with safe dividends include:

Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance. The company earned $4.95/share in 2010, and its annual dividend is $1.32 /share. The dividend payout ratio is 26.70%. Yield: 3.10% (analysis)

Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. The company earned $2.86/share in 2011, and its annual dividend is $0.97/share. The dividend payout ratio is 33.90%. Yield: 2.70% (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a foodservice retailer worldwide. The company earned $4.58/share in 2010, and its annual dividend is $2.80 /share. The dividend payout ratio is 61.10%. Yield: 2.90% (analysis)

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company earned $4.18/share in 2010, and its annual dividend is $1.46/share. The dividend payout ratio is 34.90%. Yield: 2.50% (analysis)

Margin of safety in dividends is just one of the characteristics I look in a stock before analyzing it and eventually initiating or adding to my position in it. Nevertheless it is important to purchase shares in companies that can grow dividends and produce sustainable distributions for decades, while minimizing the risk of a dividend cut.

Full Disclosure: Long all stocks mentioned above

Relevant Articles:

- Seven wide-moat dividends stocks to consider

- 40 Value Stocks that Graham Would Buy

- Why Sustainable Dividends Matter

- Five Metrics of Successful Dividend Companies

I've been included in the latest edition of the Carnival of Personal Finance hosted at Money Cactus.

McCormick & Company (MKC) Dividend Stock Analysis 2011

noreply@blogger.com (D) — Mon, 19 Dec 2011 01:00:00 PST

McCormick & Company, Incorporated (MKC) engages in the manufacture, marketing, and distribution of flavor products and other specialty food products to the food industry worldwide. It operates in two segments, Consumer and Industrial. This dividend aristocrat has paid uninterrupted dividends on its common stock since 1925 and increased payments to common shareholders every year for 26 consecutive years.

The most recent dividend increase was in November 2011, when the Board of Directors approved a 10.70% increase in the quarterly dividend to 31 cents/share. McCormick’s largest competitors include J.M. Smucker (SJM), Ralcorp (RAH) and Tootsie Roll (TR).

Over the past decade this dividend growth stock has delivered an annualized total return of 9.50% to its shareholders.

The company has managed to deliver a 11.30% annual increase in EPS since 2001. Analysts expect McCormick to earn $2.78 per share in 2011 and $3.10 per share in 2012. In comparison McCormick earned $2.75 /share in 2010.

The company will be able to generate sales growth through acquisitions and joint venture, price increases, introductions of new products and expansion in its distribution channels. Recent acquisitions include a leading brand of Polish spices and has also formed a Joint Venture with Kohinoor in India. Major risks include inability to pass on price inflation to consumers as well as consumer’s switching to generic labels. While the company has a 50% market share in generic labels domestically, these products carry lower margins. McCormick has been able to maintain its position in branded spice products through constant innovation.

The company’s Return on Equty has decreased substantially over the past decade. This indicator seems to have bottomed out and is on the rebound as of recently. 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 11.20% per year since 2001, which in line with the growth in EPS.

An 11% growth in distributions translates into the dividend payment doubling every six and a half years. If we look at historical data, going as far back as 1988 we see that McCormick has actually managed to double its dividend almost every six years on average.

The dividend payout ratio has remained consistently below 45% 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.

Currently McCormick is attractively valued at 17.40 times earnings, has a sustainable dividend payout and yields 2.50%. I would consider adding to my position in the stock on dips.

Full Disclosure: Long MKC

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Five Dividend Hikes In the News

noreply@blogger.com (D) — Fri, 16 Dec 2011 01:00:00 PST

In the world of dividend investing, there is always a trade-off between dividend yield and dividend growth. Companies that typically spot above average yields, tend to increase distributions very slowly. Corporations which manage to increase distributions very quickly, typically tend to pay a low current yield. I believe that there is a place for both strategies in a dividend growth investor's portfolio. The high yielders provide a steady stream of distribution income today, which will likely have a hard time keeping up with inflation. The high dividend growth stocks pay low yields today, but provide a great opportunity for high yields on cost in the future coupled with strong potential for capital gains.

The Boards of Directors of five consistent dividend paying companies approveded higher dividend payments to their loyal shareholders. The following consistent dividend payers exhibited the above mentioned characteristics very closely:

Nucor Corporation (NUE), together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The company raised its quarterly dividend by 0.70% to 36.50 cents/share. This marked the 39th consecutive annual dividend increase for this dividend champion. Yield: 3.80% (analysis)

Realty Income Corporation (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. This real estate investment trust raised its monthly dividend to 14.55 cents/share. Realty Income is a dividend achiever, which has increased dividends for 17 years in a row. Yield: 5.20% (analysis)

Franklin Resources Inc. (BEN) is a publicly owned asset management holding company. It manages, through its subsidiary, separate client-focused equity, fixed income, and balanced portfolios. The company raised its quarterly dividend by 8% to 27 cents/share. This marked the 31st consecutive annual dividend increase for this dividend champion. Yield: 1.10%

ABM Industries Incorporated (ABM) , through its subsidiaries, provides facility services for commercial, industrial, institutional, and retail facilities primarily in the United States. It operates in four segments: Janitorial, Engineering, Parking, and Security. The company raised its quarterly dividend by 3.60% to 14.50 cents/share. This marked the 45th consecutive annual dividend increase for this dividend champion. Yield: 2.80%

Urstadt Biddle Properties, Inc. (UBP),is a real estate investment trust (REIT) which engages in the acquisition, ownership, and management of commercial real estate properties in the United States. The company raised its quarterly dividend by 1% to 24.75 cents/share. This marked the 18th consecutive annual dividend increase for this dividend achiever. Yield: 5.73%

Full Disclosure: Long NUE and O

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Dividend Investors – Do not forget about capital gains

noreply@blogger.com (D) — Wed, 14 Dec 2011 01:00:00 PST

When investing for income, many retirees focus on the dividend stream. Living off dividends in retirement is helpful in creating a consistent stream of income, which does not fluctuate as wildly as stock prices do. Focusing only on the distributions however, without giving much thought to anything beyond the juicy current yield could be dangerous.

Dividend investing is a process with several stages, in order to minimize risk of income reduction in retirement. The first stage should be selecting quality income candidates from a pool of securities which have certain characteristics that the dividend investor is looking for. For example, I tend to purchase companies which have consistently raised dividends for at least ten years in a row. As a result, I start my screen with the list of Dividend Achievers.

The second stage should be applying a set of entry criteria to the list of qualified candidates, in order to narrow it down to a more manageable list for further research. This set of criteria should reflect important points of the investor’s strategy, determined based off their experience in the markets and risk tolerance.

The next stage should be analyzing each security in detail. Given the wealth of data on the internet these days, many investors tend to focus on the quantitative side of analysis. While it is helpful to see the trends behind the data and it is fun to project past results, investors should not stop there. Evaluating qualitative characteristics such as branding, product mix, competitive advantages, strengths, weaknesses, opportunities, trends and industry factors should be an important part of the analysis toolset. Obtaining an understanding of the business by reading annual reports or research reports and news stories as well as observing the business operations in person would also add to the investment evaluation of the business.

While creating a diversified income stream is important, investors should also not forget about capital gains either. It is important to understand where the distributions are being derived from. There have been certain investments where investors have receiving a large portion of the distribution as a return of capital, rather than income. While the cashflow was high enogh to lure investors into the high yielding investment, the security was paying these distributions on a borrowed time. Once the capital base is depleted, investors would end up with no income and their security might be worthless.

One such security are US oil and gas royalty trusts. Most of these pass-through entities tend to pay high current distributions every month out of their royalty interests in Oil and Gas fields. As these fields get depleted however, there comes a time when there would be no longer any revenues and thus no profits to distribute to shareholders. A larger portion of the current distributions of these businesses represents a return of capital, which is logical given the fact that for every barrel of oil equivalents pumped out of the ground, there is one less barrel to be pumped in the future. Once all the barrels in the reserve have been depleted, there will be no more oil to be produced and sold.

Examples include BP Prudhoe Bay Royalty Trust (BPT), Hugoton Royalty Trust (HGT)and San Juan Basin Royalty Trust (SJT).

Dividends typically account for 40% of annual total stock market returns. The remaining 60% come from capital gains. It is also important to not forget about capital gains because they ensure that over time your principal investment maintains and even grows its purchasing power over time. That is why selecting companies which have future prospects for growth is so important.

Companies, whose future growth is virtually unlimited include:

McDonald’s Corporation, together with its subsidiaries, operates as a foodservice retailer worldwide. (MCD). This dividend aristocrat has raised distributions for 35 years in a row. Over the past decade, the company has managed to boost dividends by 26.50% per year. Yield: 2.80% (analysis)

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. This dividend aristocrat has raised distributions for 49 years in a row. Over the past decade, the company has managed to boost dividends by 13% per year. Yield: 3.50% (analysis)

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. This dividend aristocrat has raised distributions for 55 years in a row. Over the past decade, the company has managed to boost dividends by 10.90% per year. Yield: 3.40% (analysis)

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverages worldwide. This dividend aristocrat has raised distributions for 49 years in a row. Over the past decade, the company has managed to boost dividends by 10% per year. Yield: 2.70% (analysis)

Unilever PLC (UL) provides fast-moving consumer goods in Asia, Africa, Europe, and the Americas. This international dividend aristocrat has raised distributions for 11 years in a row. Over the past decade, the company has managed to boost dividends by 9.20% per year. Yield: 3.70% (analysis)

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. This dividend aristocrat has raised distributions for 37 years in a row. Over the past decade, the company has managed to boost dividends by 17.80% per year. Yield: 2.80% (analysis)

Full disclosure: Long MCD, JNJ, PG, KO, UL, WMT

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