It is a well-documented fact that a significant portion of the historical equity returns are a result of reinvested dividends. In Triumph of the Optimists: 101 Years of Global Investment Returns (2002), the authors looked at equity returns from capital gains and dividends from 1900 to 2000. They determined that performance in any given year was driven by capital appreciation, but long-term returns were largely the result of reinvested dividends.

Here are several companies looking to increase their long-term returns by raising their cash dividends:

Intel (INTC) is the world’s largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products. November 16th, the company raised its quarterly dividend 12.5% to $0.1575/share. Paul Otellini, Intel president and CEO commented “With one of the highest dividend yields in the technology industry, the dividend increase is another sign of our confidence in business prospects going forward.” The yield based on the new payout is 3.26%.

Lancaster Colony (LANC) manufactures and markets consumer products in two  segments: Specialty Foods, and Glassware and Candles. November 16th the company increased its dividend 5.3% to $0.30/share. The payable is payable December 31, 2009 to shareholders of record on December 10, 2009. The ex-dividend date is December 8. LANC is a Dividend Achiever and has increased its dividend for 47 consecutive years. The yield based on the new payout is 2.41%.

Brown-Forman (BF.A) on November 16 raised its dividend 4.3% to $0.30/share. Stockholders of record on December 7, 2009 will receive the cash dividend on January 4, 2010. This is Brown-Forman’s 64th consecutive year of quarterly dividends and the 26th consecutive year it has increased the annual dividend. The yield based on the new payout is 2.23%.

Sysco (SYY) is the largest U.S. marketer and distributor of foodservice products. November 17th the company boosted its dividend to $0.25/share. The dividend is payable on January 22, 2010, to common shareholders of record at the close of business on December 31, 2009. The ex-dividend date is December 29, 2009. LANC is a Dividend Achiever and has increased its dividend for 39 consecutive years. The yield based on the new payout is 3.66%.

Royal Gold (RGLD) is the largest U.S.-based company engaged in the acquisition and management of precious metal royalty interests. November 18th the company increased its quarterly dividend 13% to $0.09/share. The dividend is payable January 15, 2010, to shareholders of record at the close of business on January 4, 2010. The ex-dividend date is December 31, 2009. The yield based on the new payout is 0.68%.

PennantPark (PNNT) specializes in direct and mezzanine investments in middle-market companies. November 18th the company raised its quarterly dividend 4.2% to $0.25/share.The dividend is payable on January 4, 2010 to stockholders of record as of December 24, 2009. The ex-dividend date is December 22. The yield based on the new payout is 11.96%.

Harsco (HSC) is a industrial service provider and manufacturer has operations in steel
mill services and access services, as well as construction. November 19th the company boosted it quarterly dividend for the 16th consecutive year to $0.205/share. The dividend is payable February 16, 2010 to Harsco stockholders of record as of January 15, 2010. The ex-dividend date is January 13. The dividend yield on the new payout is 2.5%. LANC is a Dividend Achiever and has increased its dividend for 19 consecutive years. The yield based on the new payout is 2.52%.

NSTAR (NST) was created through the 1999 merger of BEC Energy and Commonwealth Energy System. November 19th the company increased its quarterly dividend 6.7% to $0.40/share.The payable February 1, 2010 to shareholders of record as of January 8, 2010. The ex-dividend date is January 6. The yield based on the new payout is 4.98%.

Laclede Group (LG) distributes natural gas on a retail basis in St. Louis and nearby suburban areas. November 19th the company raised its quarterly dividend to $0.395/share. The dividend will be payable on January 4, 2010, to shareholders of record on December 11, 2009. The ex-dividend date is December 9, 2009. Yield on the dividend is 5%. The yield based on the new payout is 5.00%.

Bob Evans Farms (BOBE) owned and operated 571 Bob Evans Restaurants & 132 Mimi’s Cafes. November 19th the company announced a 12.5% increase in the quarterly cash dividend to $0.18/share. The dividend is payable on Dec. 15 to stockholders of record at the close of business on Dec. 4. The yield based on the new payout is 2.83%.

Nike (NKE) is the world’s leading designer and marketer of high-quality athletic
footwear, athletic apparel, and accessories. November 19th, the company increased its quarterly dividend 8% to $0.27/share. The dividend is payable on January 4, 2010 to shareholders of record at the close of business on December 7, 2009. The yield based on the new payout is 1.70%.

When looking for stocks with growing dividends, longevity of consecutive increases is important.  For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: Long INTC, SYY. See a list of all my income holdings here.

(Photo Credit)

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2. 4 Stocks With Higher Dividends
3. 9 Stocks Increasing Their Dividends
4. Dividend Stocks: Lowering Risk By Increasing Dividends
5. 10 Companies Increasing Dividends and Long-Term Returns

We all want to succeed in everything that we do, including investing in the stock market. Though I have no analytical data to back it up, I am convinced that most people will lose money in the stock market over their lifetime. So why do so few people succeed at investing? Could it be that an individual’s desire to succeed be a significant reason for their failure.

When discussing investing with various people I come in contact with, the conversation always follows a similar track. Usually, one of these:

1. The person will mention a few stocks they did well with, then upon probing will admit overall they were down and they are looking for a new strategy to follow.
2. The person will make a broad statement like ‘I’ve pulled everything out of the market it is just too risky.’ When pressed they admit to losing money not only this time but at other times when they abruptly exited the market.
3. The person will concede that after significant losses they turned their money over to a professional.

Obviously, there are some success stories, and some of them are even believable.  Due to the 2008 market downturn, most people are now comfortable admitting losses because they know they are not alone. When you are losing 10% a year while the market is going up 20% a year, its harder to fess-up since you feel you are the only one losing money.

Why do so few people succeed at investing?

All the pieces to answer this question were presented above. People want to succeed, but don’t know how. So they try to follow someone (or something) that appears to be succeeding. A friend at work, or a talking head on a business show mentions a stock or strategy that is out performing the market, and the investor jumps on board. Unfortunately, he or she is late to the party and the run-up either stalls or reverses. Fearful of a greater loss the investor sells out and moves to the next hot stock or strategy. Eventually, they permanently exit the market  or turn their money over to a professional that may, or may not, improve on their performance.

A Winning Investment Strategy

People do make money in the market, but it is not by following the talking heads or a tip from a friend. Long-term success in the market is based on a sound fundamental investing strategy that the investor is so confident in, that he or she will follow it in both bull and bear markets. For me, this is a value-based dividend growth strategy. My goal is to generate a higher dividend income than the previous month through the purchase of select dividend growth stocks. Here are some of the things I look for in an investment:

I. Long History Of Consecutive Dividend Increases

One indication that a company will continue to increase their dividends in the future, is a long history of consecutive dividend increases. Companies such as Dover Corp. (DOV) [Analysis], Genuine Parts Co. (GPC) [Analysis], Procter & Gamble Co. (PG) [Analysis], Emerson Electric (EMR) [Analysis] and 3M Company (MMM) [Analysis] have all increased their dividends for more than 50 years.

II. Strong Free Cash Flow

Just because a company has a history of increasing its dividend each year, does not mean it will continue to do so in the future.  We can’t know what management is thinking, but we can look at the financial statements for clues of the sustainability of the dividend payment.  Dividends are paid with cash, so the first place I look is at the company’s ratio of dividends to free cash flow (free cash flow payout). As a general rule, I prefer a number less than 70%. Companies such as United Technologies Corp. (UTX) [Analysis], Nucor Corp. (NUE) [Analysis] and Aflac Inc. (AFL) [Analysis] all have free cash flow payouts of 30% or less.

III. Low Debt To Total Capital Invested

The ability to generate enough cash to cover the dividend is only one part of the cash puzzle. One must ask, ‘Is the cash already spoken for?’ One of the larger uses for cash is in servicing debt. As a measure of debt levels, I prefer a company to limit its debt to total capital to no more than 45%.  Many companies, such as Johnson & Johnson (JNJ) [Analysis], Coca Cola Co. (KO) [Analysis], Chevron Corp. (CVX) and Automatic Data Processing Inc. (ADP) [Analysis], operate at levels below 35% of debt to total capital.

IV. Excellent Dividend Fundamentals

Not to over-state the obvious, but the company needs to be a good dividend investment. Put another way its dividend, over time, should significantly out-perform “safer” investments to compensate the investor for the equity risk. Companies such as Abbott Laboratories (ABT) [Analysis], McDonald’s Corporation (MCD) [Analysis] and Eli Lilly and Company (LLY) [Analysis] all have excellent key dividend metrics.

V. Trading At A Fair Value

Once we find everything we are looking for in a great dividend stock, there is one final question – ‘Is the stock trading at a fair value?’ Given the emotional nature of the market, a stock can be fairly priced today, over-valued tomorrow and under-valued the next day. You need to know what you are willing to pay for a stock going in. This is the area I will sometimes compromise in by paying a little more for great dividend fundamentals, but I know my limit prior to placing a buy order.

A great football coach once said ‘It’s not the will to win that matters – everyone has that. It’s the will to prepare to win that matters.’ Investing success doesn’t just happen, we must pursue it and engage it.

Full Disclosure: Long ADP, AFL, CVX, EMR, GPC, JNJ, KO, MMM, NUE, PG, UTX. See a list of all my income holdings here.

(Photo Credit)

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4. Elite Dividend Stocks
5. Intel Corp (INTC): A Winning Strategy

This article originally appeared on The DIV-Net November 9, 2009.

Linked here is a detailed quantitative analysis of McDonald’s Corporation (MCD). Below are some highlights from the above linked analysis:

Company Description: McDonald’s Corporation is the largest fast-food restaurant company in the world. Its restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

MCD is trading at a discount to 1.), 2.) and 3.) above. The stock is trading at a 13.2% discount to its calculated fair value of $71.11. MCD earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

MCD earned one Star in this section for 3.) above. The stock earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 33 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

MCD earned a Star in this section for its NPV MMA Diff. of the $18,427. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as MCD has. If MCD grows its dividend at 16.9% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. MCD earned a check for the Key Metric ‘Years to >MMA’ since its 2 years is less than the 5 year target.

Other: MCD is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.

Conclusion: MCD earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks MCD as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $209.72 before MCD’s NPV MMA Differential decreased to the $500 that I like to see for a stock with 33 years of consecutive dividend increases. At that price the stock would yield 0.98%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.5%. This dividend growth rate is significantly less than the 16.9% used in this analysis, thus providing a margin of safety. MCD has a risk rating of 1.50 which classifies it as a low risk stock.

MCD is a stock that I have liked for many years. It has shown strong dividend growth over the last 10 years.  However, its debt level and free cash flow payout have crept up to levels above what I am comfortable with. Although the stock is trading well below my buy price of $71.11, I will wait for MCD’s dividend fundamentals to improve before adding to my position. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in MCD (2.8% of my Income Portfolio). What are your thoughts on MCD?

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2. Stock Analysis: Intel Corporation (INTC) Attractively Priced
3. Stock Analysis: Chevron Corporation (CVX)
4. Stock Analysis: Kimberly-Clark Corporation (KMB)
5. Stock Analysis: BB&T Corporation (BBT)

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it’s where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Below are the carnivals that I participated in this week, along with a link to my article:

• Festival of Stocks published: Courier Corp. (CRRC) Dividend Stock Analysis
• Carnival of Personal Finance published: Dividend Stocks: A Disciplined Approach
• Carnival of Money Hacks published: 10 Stocks Taking Their Dividends Up A Notch
• Carnival of Financial Planning published: 10 Stocks Taking Their Dividends Up A Notch

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• Dividends4Life presented Stock Analysis: McDonald’s Corporation (MCD)
• The Dividend Guy presented Keeping Investing Through Thick and Thin
• Barel Karsan presented The Right P/E For The S&P 500
• Dividend Growth Investor presented Consolidated Edison (ED) Stock Analysis

Articles From DIV-Net Members

• The Dividend Guy presented Why I Allocate Part of My Portfolio to Small-Caps
• Dividend Growth Investor presented Where are the original Dividend Aristocrats now?
• Barel Karsan presented Earnings Revert To The Mean
• Dividend Tree presented Waste Management Inc – Stock Analysis for Dividend Growth Portfolio
• Buy Value presented Book Review: Corporate Financial Analysis
• moneygardener presented ADP dividend up 3%
• Stock Market Prognosticator presented How To Destroy Value
• Disciplined Approach to Investing presented Money Market Cash: Fuel For The Fire
• Living Off Dividends & Passive Income presented Gold breaks $1,100: Does It Matter?
• Old School Value presented 2009 Forbes Best Small Companies Part 1
• Triaging My Way To Financial Success presented Dividend Income Milestone I
• Everyday Finance presented New Gold Miners “Juniors” ETF Launches: As Volatile as it Gets
• BuyLikeBuffett.com presented Solid Buys
• 40percent 20years presented Weekly Tips #14
• Value Investing Pro presented The 1929 Stock Market Crash
• EPIC INVESTOR presented A Place for the Shiny Metal in a Value Investor’s Portfolio

Other Articles

• SmartMoney presented 3 Stocks With Reliable 3% Dividends
• Philadelphia Inquirer presented How the economic meltdown is rewriting the rules of investment
• U.S. News & World Report presented 4 Reasons Your Retirement Is at Risk
• MSN Money presented Here comes the big tax squeeze
• Forbes presented How To Profit From Other Investors’ Mistakes

There are some really good articles here, please take time and read a few of them.

(Photo: Sachin Ghodke)

Related Posts:

1. Weekly Links: October 4, 2009

Each month I update the Pocket Change Portfolio (PCP). The table below reconciles the PCP from beginning of period to end of period for October 2009, Year-To-Date (2009) and Life-To-Date. The Portfolio Returns line provides the calculated return for the three displayed periods.

Online Cash Receipts are the collected earnings from my online endeavors. Most of which is advertising on the my various blogs. The year-to-date $30.00 Online Expenses relates to registering 3 domains (DividendsValue.com, Dividends4Life.com and TheDiv-Net.com). October Dividends include $4.21 from Vanguard Long-Term Bond ETF (BLV), $9.02 from The Coca-Cola Company (KO), $11.20 from Genuine Parts Co. (GPC), and $9.60 from Sysco Corp. (SYY). The Interest Income line is interest earned on cash balances in an ING account I set up for the PCP. The Gain/(Loss) line is for market changes to the PCP (realized and unrealized).

The portfolio was down slightly in October, but is up for the year and since its inception. Online earnings in October once again surpassed the $2,000 mark for the second time. A large portion of the increase is related to the strong interest in D4L-Premium Services. The premium service continues grow each month. The subscriber retention rate is stays between 85-90%. Traffic on Dividend Value was at record levels in the month of October.

During the month of October, I purchased 26 shares of Emerson Electric Co. (EMR). This will provide me $34.32 in annual earnings at the current dividend rate. Including EMR, my annual PCP dividend income is now $432.62 at the current dividend rates. I ended the month with $2,964.06 in cash, enough to purchase my 11th and 12th PCP stock in November. Through October I have purchased eight stocks this year, including six in consecutive months since May 2009. I continue to believe the current cash balance and recent earnings will support the purchase of one stock each month.

My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-December.

(Photo: sanja gjenero)

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We all are looking for the perfect dividend stock. In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.

Though they are not perfect, the stocks below did recently reward their investors with higher cash dividends:

Wynn Resorts (WYNN) is involved in the design, development, financing and construction of gaming projects in Las Vegas and Macau. November 9th the company declared a special cash dividend of $4.00/share. This dividend will be payable on December 3, 2009, to stockholders of record on November 19, 2009. The stock will begin to trade ex-dividend on November 17, 2009. The company’s Board of Directors also approved the commencement of a regular cash dividend program, beginning in 2010. This regular cash dividend will be $0.20 per share of common stock for the first quarter of 2010. The yield based on the new payout is 1.22%.

Baxter (BAX) is a global medical products and services company. November 10th the company increased its quarterly dividend 12% to $0.29/share. The dividend is payable on January 5, 2010, to shareholders of record as of the close of business on December 10, 2009. The ex-dividend date is December 8. The yield based on the new payout is 2.02%.

ADP (ADP) provides a broad range of data processing services. November 10th the company increased its quarterly dividend 3% to $0.34/share. The dividend is payable on January 1, 2010 to shareholders of record at December 11, 2009. The ex-dividend date is December 9. ADP is a Dividend Aristocrat and has increased its dividend for 34 years. The yield based on the new payout is 3.15%.

Tennant (TNC) designs, manufactures, and markets cleaning solutions. November 10th the company raised its quarterly dividend 8% to $0.14/share. The dividend is payable on December 15, 2009, to shareholders of record November 30, 2009. The ex-dividend date is November 26. The yield based on the new payout is 1.90%.

Cliffs Natural Resources (CLF) is a mining company produces iron ore pellets and supplies metallurgical coal to the steelmaking industry primarily in North America. November 10th the company boosted its quarterly dividend more than 100% to $0.0875/share. The dividend is payable on Dec. 1, 2009, to shareholders of record as of the close of business on Nov. 20, 2009. The yield based on the new payout is 0.90%.

DeVry (DV) offers career-oriented degree programs, preparatory coursework for the CPA and CFA exams, and medical, veterinary, and nursing education. November 11th the company increased its dividend 25% to $0.20/share. Payable semi-annually, the next dividend payment of $0.10/share will be made on Jan. 7, 2010, to common stockholders of record as of Dec. 11, 2009. DV also announced that its board of directors authorized a third share repurchase program of $50 million to commence upon completion of the existing $50 million program. The yield based on the new payout is 0.37%.

Span-America Medical (SPAN) manufactures and distributes a variety of polyurethane foam products for the medical and custom products markets. November 11th the company raised its quarterly dividend 11% to $0.10/share. The dividend is payable December 4, 2009, to shareholders of record on November 20, 2009. The yield based on the new payout is 2.47%.

MDU Resources (MDU) is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production. November 12th the company increased the quarterly dividend to $0.1575/share. The dividends are payable January 1, 2010 to stockholders of record December 10, 2009. The ex-dividend date is December 4, 2009. MDU is a Dividend Achiever and has increased its dividend for 18 consecutive years. The yield based on the new payout is 2.87%.

AmerisourceBergen (ABC) is a distributor of pharmaceutical products and related health care services. November 12 the company raised it’s quarterly dividend 33% to $0.08/share. The dividend will be payable December 7, 2009, to stockholders of record at the close of business on November 23, 2009. The yield based on the new payout is 1.33%.

The first step for a stock to become a perfect dividend stock is to raise its dividends each and every year. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: Long ADP.  See a list of all my income holdings here.

(Photo Credit)

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Recently, I looked at the sample D4L-Dashboard report on the Overview and Subscribe page and was amazed at all the changes and improvements that have occurred since that report was posted.  I knew then it was time to update the Sample Report. Below are some of the enhancements that have occurred since the first report was posted:

Column

Tier – Added a tier column. The three tiers that are currently defined are as follows, Tier 1: Four and five Star stocks that are trading below my calculated fair value with a yield above my preset minimum. These are the stocks I categorize as “buy” stocks. Tier 2: Four Star stocks that are trading less than 5% above my calculated fair value with a yield above my preset minimum. These are my “wonderful stocks at a fair price.” Tier 3 stocks are like Tier 2, but instead of 5% above calculated fair value the percentage defaults to 10% and can be changed.

Symbol – Added a light green shading if the stock would have been a buy other than having a “-” in the note column. Light yellow is a Tier 2 buy when the maximum tier is set to 1.

Stars – Color codes now indicate a change in Stars from the prior week. An increase in Stars will show as green, a decrease will show as red and no change will continue show as white.

Note – Added a new Debt/fcf flag in this column. Debt/fcf is an alert when the sum of the Debt and FCF columns are > 100% or FCF is a negative number.

Days – Added note for stocks On The Shelf due to not raising their dividends that displays estimated month and year when the dividend declaration will occur that ensures a year over year flat dividend. At that time, the stock is a strong candidate for a sell.

Other enhancements include:

• Added an Allocation section that includes my income ETF/CEF holdings along with their % Port and % Inc weightings.
• Greatly expanded the Commentary section.

The D4L Premium Services are designed for the serious dividend investor. If you have not yet subscribed, please see the Overview and Subscribe page for more information on the benefits of these services, sample reports, pricing and subscription information. The premium section can always be accessed via the Premium menu option on the top-left of the menu bar above.

Related Posts:

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4. Asset Allocation Model
5. Stock Analysis: MCD

Driven by computers that cost more than the average person will earn in their lifetime the investment markets move at light speed. To keep pace hedge funds, mutual funds, institutional investors and multi-billion dollar money managers spend large sums of money on high-tech tools to give them an edge. Throw in some illegal insider trading from big names in the industry and it leaves you wondering what chance does a small individual investor have?

Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules. In a recent Wall Street Journal article, Jason Zweig noted that:

From the point of view of an investor, all this frantic trading is just noise. In 1976, the great financial analyst Benjamin Graham declared that “the stock market resembles a huge laundry in which institutions take in large blocks of each other’s washing … without rhyme or reason.” Mr. Graham died that year, but today he would laugh at the speed of the spin cycle. He would then ignore the momentary vibrations in a company’s stock price and go right back to analyzing the value of its business.

As an investor, you are free to choose your own time horizon. If other people want to try earning a few fractions of a penny a few thousand times a day, you should wish them well — and refuse to join them.

Contrary to what many are now saying, buy-and-hold and investing in quality blue chip stocks is not dead. Consider the following stocks:

Abbott Laboratories (ABT) is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics. The company has a strong new product pipeline, with possible significant launches in both the medical device and pharmaceutical areas. ABT has increased its dividend for the last 37 years and the stock is currently yielding 3.10%. See the most recent Analysis.

Emerson Electric Co. (EMR) primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. The company has a strong competitive position in several major product categories. EMR has increased its dividend for the last 52 years and the stock is currently yielding 3.20%. See the most recent Analysis.

Johnson & Johnson (JNJ) engages in the manufacture and sale of various products in the health care field worldwide. The company enjoys competitive advantages and has products that are largely immune from economic cycles. JNJ has increased its dividend for the last 47 years and the stock is currently yielding 3.20%. See the most recent Analysis.

3M Co. (MMM) is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications. The company has a leading position in many of the markets it serves and a strong balance sheet with a relatively little debt. MMM has increased its dividend for the last 51 years and the stock is currently yielding 2.71%. See the most recent Analysis.

PepsiCo, Inc. (PEP) is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The company enjoys relatively stable end markets, strong cash flows, leading global market positions and trend-setting product innovations. PEP has increased its dividend for the last 37 years and the stock is currently yielding 2.87%. See the most recent Analysis.

SYSCO Corporation (SYY), through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. The company operates in a relatively stable industry, in which it has the largest market share. SYY has increased its dividend for the last 39 years and the stock is currently yielding 3.57%. See the most recent Analysis.

Wal-Mart Stores, Inc. (WMT) is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam’s Club, and International. The company enjoys dominant market share positions, price leadership and strong cash flows. WMT has increased its dividend for the last 35 years and the stock is currently yielding 2.13%. See the most recent Analysis.

If your goal is to build an ever-increasing revenue stream from income investments, the above seven dividend stocks will give your income a boost over time. The key is to wait for the right entry point and let time take care of the rest.

Full Disclosure: Long ABT, EMR, JNJ, MMM, PEP, SYY, WMT. See a list of all my income holdings here.

(Photo Credit)

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This article originally appeared on The DIV-Net November 2, 2009.

Linked here is a detailed quantitative analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis:

Company Description: Johnson & Johnson engages in the manufacture and sale of various products in the health care field worldwide.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

JNJ is trading at a discount to 1.) and 3.) above. The stock is trading at a 5.3% discount to its calculated fair value of $62.33. JNJ earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

JNJ earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45% and earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 47 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

JNJ earned a Star in this section for its NPV MMA Diff. of the $935. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as JNJ has. If the stock grows its dividend at 7.5% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. JNJ earned a check for the Key Metric ‘Years to >MMA’ since its 3 years is less than the 5 year target.

Other: JNJ is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.

Conclusion: JNJ earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks JNJ as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $70.95 before JNJ’s NPV MMA Differential fell to the $500 that I like to see for a stock with 47 years of consecutive dividend increases. At that price the stock would yield 2.72%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.7%. This dividend growth rate is less than the 7.5% used in this analysis, thus providing a margin of safety. JNJ has a risk rating of 1.00 which classifies it as a low risk stock.

As noted in the “10 Best U.S. Dividend Stocks“, JNJ has a history of making good decisions and executing on them. The stock is currently trading below my buy price of $62.33 and it is one that I will continue to accumulate as my allocation allows. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in JNJ (4.4% of my Income Portfolio). What are your thoughts on JNJ?

Related Posts:

1. Chubb Corp. (CB) Dividend Stock Analysis
2. Johnson & Johnson (JNJ) Dividend Stock Analysis
3. Stock Analysis: Johnson & Johnson (JNJ) Still Buying At This Price
4. Stock Analysis: Johnson Controls (JCI)
5. Stock Analysis: Johnson & Johnson (JNJ)

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it’s where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• Dividends4Life presented Stock Analysis: Johnson & Johnson (JNJ)
• The Dividend Guy presented Broker Options for Canadian Investors
• Barel Karsan presented Earnings Revert To The Mean
• Dividend Tree presented Kimberly-Clark : Stock Analysis for Dividend Portfolio
• Dividend Growth Investor presented Grouping Dividends for Current Income
• Buying Value presented Book Review : Benjamin Graham on Investing

Articles From DIV-Net Members

• The Dividend Guy presented Dividend Stock and ETF Holdings
• Dividend Growth Investor presented The Dividend Investment Journey
• Barel Karsan presented Don’t Be Fooled By High P/E Values
• Dividend Tree presented Kelloggs Company– Stock Analysis for Dividend Portfolio
• the moneygardener presented Telus fails to raise dividend
• The Div Guy presented Top 20 Stock Holdings
• Disciplined Approach to Investing presented Dividend Aristocrats Performance Update
• Old School Value presented Warren Buffett’s BNI Intrinsic Value Calculation
• Triaging My Way To Financial Success presented Mail Bag: CML Healthcare (CLC.UN)
• Everyday Finance presented Why do Pharmas Call Themselves Biotechs? You May be Surprised
• 40percent 20years presented The main disadvantage of Dividend Investing
• Value Investing Pro presented 4 Warren Buffett Quotes On Burlington-Northern Acquisition
• EPIC INVESTOR presented Dividend Discount Model in Action — LLY Stock Analysis

Other Articles

• Motley Fool presented These Dividend Stocks Won’t Let You Down
• ModernGraham presented 10 Dividend Companies for the Enterprising Investor
• Seeking Alpha presented The Top 4 Healthcare Dividend Stocks: Covered Call Trades
• SmartMoney presented 3 Stocks With Dividends and Growth Potential
• Stockerblog presented 290 Stocks That Pay Dividends Monthly

There are some really good articles here, please take time and read a few of them.
(Photo: Sachin Ghodke)

Related Posts:

1. Weekly Links: October 4, 2009