Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income rose in October, extending the streak to 8 months after February 2009’s decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 22 of the last 23 months.

My goals were defined in this December 1, 2007 Investing Goals post and updated in my 2009 Investing Goals post. Below is an updated version of the table found in the original post.

The above information covers the current month and year-to-date through the current month.

Click here for a Detailed Historical Progress Table.

For the month, annualized dividend income increased $169, and Yield on Cost (YOC) decreased (0.06%). This month’s changes were a net of new purchases, dividend changes and sales. Let’s examine each of the these categories:

Purchases: The $359 increase in annual dividend income and (0.04%) decrease in YOC related to the following purchases (yield at the time of purchase):

• $84 Emerson Electric Co. (EMR) 3.34%
• $77 Procter & Gamble Co. (PG) 3.04%
• $198 PowerShares Emerging Mkts Sovereign Debt (PCY) 6.15%

All the purchases, except PCY, lowered my YOC. As noted in earlier updates, I generally expect YOC to drop each month since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it.

Dividend Changes: The $37 decrease in annual dividend income and (0.04%) decrease in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):

• $3 Canadian National Railway Company (CNI) $0.217q>$0.236q 0.00%
• ($3) Vanguard Intermediate-Term Bond ETF (BIV) $3.46a>$3.41a 0.00%
• ($15) Vanguard Long-Term Bond ETF (BLV) $3.46a>$3.90a -0.01%
• ($6) iShares iBoxx $ Invest Grade Corp Bond (LQD) $5.79a>$5.72a -0.01%
• ($17) Eaton Vance Tax-Adv. Global Dividend Fund (ETO) $1.59m>$1.53m -0.02%
• $1 Realty Income Corp. (O) $0.14237m>0.14268m 0.00%

Sales: The ($153) decrease in annual dividend income and 0.02% increase in YOC related to the following sale:

• ($153) Vanguard REIT Index ETF (VNQ) 0.01%

In October I continued the process of trimming back my ETFs/CEFs income holdings with the sale of VNQ and have now sold all the ETFs that currently I plan to sell.  I will continue to evaluate the performance of the ones I continue to hold.

Based on year-to-date results, I am on target to meet or exceed my revised estimate of annualized dividend income on December 31, 2009 of $7,000. This is $1,000 below my original goal of $8,000.

That’s it for this time. The next monthly progress update will be early December.

(Photo: sanja gjenero)

Related Posts:

1. Weekly Links: October 4, 2009
2. D4L-PreScreen.xls Model – August 2009 Update
3. How Is Your Portfolio Doing This Year?
4. iStar Financial Inc. (SFI) Update
5. Dynamic Dividend Investing – Feb/08 Update

Investing in Dividend Stocks is a long-term strategy. Frequent buying and selling of dividend stocks can significantly increase your expenses and taxes, thus lowering your returns. A growing dividend is a strong indication of a company’s increasing intrinsic value. Great companies that increase dividends tend to have rising share prices over time. Holding only first-rate businesses protects your dividend streams and helps ensure you’ll also get steady price appreciation.

Below are four companies rewarding their shareholders with higher cash dividends:

Middlesex Water (MSEX) provides regulated water utility service in parts of New Jersey and Delaware; and also operates waste water systems. October 30th the company increased its quarterly dividend to $0.18/share. The dividend is payable December 1, 2009 to shareholders of record as of November 13, 2009. The ex-dividend date is November 11, 2009. MSEX is a Dividend Champion and has increased its dividend for 36 consecutive years. The yield based on the new payout is 4.62%.

Aaron’s (AAN) rents and sells residential and office furniture, consumer electronics and household appliances, and also manufactures furniture for rental and subsequent sale. November 4th the company raised its quarterly dividend 5.9% to $0.018/share. The dividend is payable January 4, 2010 to shareholders of record as of the close of business on December 1, 2009. The ex-dividend date is November 27. The yield based on the new payout is 0.27%.

Microchip (MCHP) supplies microcontrollers and analog and other semiconductor
products for a wide variety of high-volume embedded control applications. November 4th the company increased its quarter dividend to $0.34/share. The yield based on the new payout is 5.56%.

Universal Corp. (UVV) is the world’s largest independent leaf tobacco dealer. November 5th the company raised its quarterly dividend 2.2% to $0.47/share. The dividend is payable February 9, 2010, to common shareholders of record at the close of business on January 11, 2010. The yield based on the new payout is 4.33%.

Great companies that raise their dividends each and every year often make the best income investments. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned stocks. See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. 10 Stocks Taking Their Dividends Up A Notch
2. 9 Stocks Increasing Their Dividends
3. 10 Stocks Raising Their Dividends
4. Dividend Stocks: Lowering Risk By Increasing Dividends
5. Five Stocks Raising Their Dividends

Those that have read this space for any period of time are well aware of my enthusiasm for using dividend growth stocks as a vehicle for building long-term wealth and income. However, with that said, a successful investor must do more that just buy stocks that pay a growing dividend, or more that focusing on a single metric such as dividend yield. Not all dividend stocks are created equal – there is a discipline to selecting good dividend growth stocks.

Understand Your Goal

What is your portfolio trying to accomplish? As odd is it may seem, many investors never define this and their overall goal. Are you buying stocks like First Industrial Realty Trust, Inc (FR) with a 22% yield, Capstead Mortgage Corporation (CMO) with a 17% yield, Annaly Capital Management, Inc. (NLY) with a 16% yield or Apollo Investment Corp. (AINV) with a 12% yield? If your goal is short-term income these might work, and then again they might not.

Before buying buying any stock you should write down your investing goal and determine if purchasing that stock will bring you closer to your goal or take you further away. My goal is to generate an ever-increasing income stream from dividends. Thus, I will sacrifice some current income in favor of future growth and income stability.

Understand and Measure the Risk

No stock is 100% safe. Each stock has its own set of risks that need to be considered. The stocks listed above are considered high risk. In exchange for above average current income, you may encounter above average dividend cuts and/or loss of capital.

Gauging the relative risk of one stock compared to another is important when deciding which stock to buy or how much to weight a stock within your portfolio. I prefer lower risk stocks such as Johnson & Johnson (JNJ) [Analysis], Procter & Gamble Co. (PG) [Analysis]and Wal-Mart Stores, Inc. (WMT) [Analysis].

A Disciplined Approach

For me and my income portfolio, I have have chosen to follow a conservative and disciplined approach. This means I will seek out dividend stocks with a proven track record and good future prospects. These stocks will have a long history (10 or more years) of consecutive dividend increases, low debt, low free cash flow payout and excellent other dividend metrics. In addition, I will follow time proven valuation techniques to select an entry point that will provide a good value.

Stay The Coarse

There is always a temptation to stray from a disciplined approach of selecting good dividend stocks. Often I receive questions like, ‘AT&T Inc. (T) is making a fortune off the iPhone, why aren’t you buying it?’ or ‘Kraft Foods Inc. (K) is a great consumer staple, why aren’t you buying it?’ The short answer is that neither currently can pass the entry exam to gain access to my income portfolio.

It is easy to become caught up with the current hot stock that everyone loves. The key to success is to buy before everyone else falls in love with it. Selecting good dividend growth stocks is not difficult, being disciplined enough to do it is difficult for many investors.

Full Disclosure: Long JNJ, PG, WMT. See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. High-Yield Dividend Stocks: A Safer Approach
2. 10 Best U.S. Dividend Stocks
3. Three Dividend Stocks With A Perfect Risk Score
4. Warren Buffett’s Dividend Stocks
5. Dividend Stocks: Confident and Secure

This article originally appeared on The DIV-Net October 26, 2009.

Linked here is a detailed quantitative analysis of Courier Corp. (CRRC). Below are some highlights from the above linked analysis:

Company Description: Courier Corporation publishes, prints and sells books. Founded in 1824, Courier has two lines of business: full-service book manufacturing and specialty publishing.
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

CRRC is trading at a discount to 1.), 2.) and 3.) above. The stock is trading at a 40.2% discount to its calculated fair value of $25.24. CRRC 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%

CRRC 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 and it earned a Star as a result of its most recent Debt to Total Capital being less than 45%. 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 1950 and has increased its dividend payments for 16 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

CRRC earned a Star in this section for its NPV MMA Diff. of the $56,158. This amount is in excess of the $1,900 target I look for in a stock that has increased dividends as long as CRRC has. The stock’s current yield of 5.57% exceeds the 3.9% estimated 20-year average MMA rate.

Other: CRRC is a member of the Broad Dividend Achievers™ Index.

Conclusion: CRRC 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 CRRC as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $45.05 before CRRC’s NPV MMA Differential increased to the $1,900 that I like to see for a stock with 16 years of consecutive dividend increases. At that price the stock would yield 1.86%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,900 NPV MMA Differential, the calculated rate is 4.7%. This dividend growth rate is significantly less than the 15.0% used in this analysis, thus providing a margin of safety. CRRC has a risk rating of 1.50 which classifies it as a low risk stock.

In 2008, CRRC’s EPS was a loss of $0.03/share. For the trailing twelve months the loss has expanded to $0.17/share. Although the stock is trading well below my buy price of $25.24, concerns about is current business prevents me buying. 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 held no position in CRRC (0.0% of my Income Portfolio). What are your thoughts on CRRC?

Related Posts:

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2. Dover Corp. (DOV) Dividend Stock Analysis
3. Chubb Corp. (CB) Dividend Stock Analysis
4. Sysco Corp. (SYY) Dividend Stock Analysis
5. Brady Corp (BRC) Dividend Stock Analysis

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: Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
• Carnival of Personal Finance published: 8 Dividend Stocks With The Right Stuff
• Carnival of Money Hacks published: International Diversification Begins At Home
• Carnival of Financial Planning published: 3 Dividend Stocks Rewarding Their Shareholders

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

The DIV-Net Featured Articles

• Dividends4Life presented Stock Analysis: Courier Corp. (CRRC)
• The Dividend Guy presented Why Being Defensive is Important
• Barel Karsan presented Housing Cycles
• Dividend Tree presented Waste Management – Stock Analysis for Dividend Growth
• Dividend Growth Investor presented Forecasting Future Dividend Growth
• Buying Value presented Book Review: Corporate Financial Analysis

Articles From DIV-Net Members

• The Dividend Guy presented A Dividend Yield Screen with High Growth
• Dividend Growth Investor presented Five Dividend Stocks for long-term dividend growth
• Barel Karsan presented How Efficient Is Management?
• Dividend Tree presented Indian Economy – A Better Destination in Emerging Markets
• moneygardener presented Rogers results look good
• Stock Market Prognosticator presented Interesting Article
• Disciplined Approach to Investing presented Bullish Sentiment At Lowest Level Since July 16th
• Everyday Finance presented ETFs on the Move – Week Ended 25-Oct-2009
• 40percent 20years presented New Top List: Dividends Aristocrat!
• Value Investing Pro presented Walter Schloss Collection
• EPIC INVESTOR presented Professional Opinion-Givers Always Have Opinions
• Jonathan Goldberg presented BKS, Plus Some News

Other Articles

• MSN Money presented 6 Buffett picks for the long haul
• Yahoo Finance presented Bear Markets Do Wonders for Retirement
• Wall Street Journal presented Staying Calm in a World of Dark Pools, Dark Doings
• Forbes presented Why The Rich Are Renting
• Stockerblog presented Ken Fisher Interview – Part 5

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

October 31, 2009 marks my second full year of writing as Dividends4Life. It is hard to believe another year has passed. Like the first year, it has been a wonderful and eventful year. Looking back so much has changed since last year’s post. Below are some of the more notable changes:

A New Name and Site

This time last year my primary site was www.Dividends4Life.com, which was run on Blogger. I had some technical issues late last year which led me to create DividendsValue.com and move to a hosted environment running WordPress. On January 31, 2009 Dividends Value saw its first post. Eventually, I thought the old Dividends4Life site would dry up, but it didn’t happen. I continue to post material on it and a loyal group of core readers continue to stop by. As long as it has readers, I will continue to keep it up and running.

Launch of D4L-Premium Services

On July 9, 2009, Dividends Value began offering D4L-Premium Services as premium content for serious dividend investors. Basically, this is an inside look at the information I use to make income investment decisions on the 120+ companies I track. When I originally offered this service, I targeted 25-30 subscribers as the point that would make this viable to continue. It has surpassed all my expectations with over 70 subscribers and an overall retention rate of 90%. Click here for more information on the D4L-Premium Services.

Amazing Growth

As mentioned in Pocket Change Portfolio, I never expected Dividends4Life go anywhere and certainly didn’t expect the growth I have seen over the last two years. This time last year Dividends4Life had over 35,000 page loads per month and over 600 subscribers. Now one year later, Dividends Value in the month of October had over 100,000 page loads and around 1,500 RSS subscribers. October was an exceptional month and I don’t think it will be indicative of a sustainable run-rate going forward. I continue to be amazed and humbled at how far this site has come.

Thanks!

There have been so many people that helped me through these first two years, I couldn’t begin to mention them all, but I would like to offer a sincere and heart-felt thanks each of them.

Last, but by no means least, a special thanks to all of you who have faithfully read, commented and supported my sites over the last two years. I am truly excited about the upcoming year and all the great buying opportunities in the days to come.

Many thanks!
D4L

Related Posts:

1. Instant Access To Premium Services Now Available
2. Introducing The D4L Premium Alerts
3. New Premium Feature
4. D4L-Premium Services Affiliate Program

Throughout history there have always been great companies that stand head-and-shoulders above their peers and the competition. They are loved by their shareholders, hated by the competition and known by all. Just as all great companies have have something in common, great dividend companies also have something in common.

All great dividend companies have at least one characteristic in common – they consistently raise their dividends each year. Below are several companies stepping up with higher cash dividends:

SouthWest Water (SWWC) provides a range of services, including water production, treatment and distribution; wastewater collection and treatment; and utility billing and collection. October 23rd the company doubled its dividend to $0.05/share. The dividend is payable on November 20, 2009, to stockholders of record on November 4, 2009. The yield based on the new payout is 3.51%.

Torchmark (TMK) a financial services company that derives most of its earnings from life and health insurance operations. October 23rd the company raised its quarterly dividend to $0.15/share The dividend will be paid on February 1, 2010. The yield based on the new payout is 1.40%.

Inergy (NRGY) markets, sells and distributes propane to retail and wholesale customers. October 26th the company increased its quarterly cash distribution to $0.675/unit. The distribution will be paid on November 13, 2009, to unitholders of record as of November 6, 2009. The ex-dividend date is November 4, 2009. This represents the 32nd consecutive quarterly increase. The yield based on the new payout is 8.81%.

Bank of Marin Bancorp (BMRC) offers banking products and services via eight branches in Marin County, three in Sonoma County & a loan production office in San Francisco. October 26th the company raised its quarterly cash dividend of $0.15/share. The cash dividend is payable on November 13, 2009 to shareholders of record at the close of business on November 2, 2009. The yield based on the new payout is 1.79%.

Inergy Holdings, L.P. (NRGP) assets include incentive distribution rights in Inergy, LP, which operates a retail and wholesale propane supply, marketing and distribution business. October 26th the company boosted its distribution 9% to $0.85/unit. The distribution will be paid on November 13, 2009, to unitholders of record as of November 6, 2009. The yield based on the new payout is 7.00%.

American Financial Group (AFG) provides specialty and multi-line property and casualty insurance, and sells tax-deferred annuities. October 26th the company increased its quarterly dividend 6% to $0.1375/share. The yield based on the new payout is 2.08%.

Questar (STR) is engaged in gas and oil exploration, energy marketing, gas gathering, transportation and storage, and retail gas distribution. October 27th the company increased its quarterly dividend to $0.13/share. The dividend is payable Dec. 14, 2009, to shareholders of record on Nov. 20, 2009. The yield based on the new payout is 1.30%.

Brandywine Realty (BDN) is a real estate investment trust owns, manages or has ownership interests in office and industrial properties aggregating some 38 million square feet. October 28th the company bumped its quarterly $0.15/share. The yield based on the new payout is 6.10%.

Strayer Education (STRA) offers academic programs via traditional classroom and online courses. October 29th the company boosted its annual dividend 67% to $3.00. The yield based on the new payout is 1.43%.

APCapital (ACAP) provides medical professional liability insurance in the U.S. October 29th the company increased its quarterly dividend 9% to $0.09/share. The dividend is payable on December 31, 2009 to shareholders of record on December 11, 2009. The yield based on the new payout is 1.22%.

It is impossible to say with perfect assurance what company will become the next great dividend stock. However, I can say with a high degree of confidence that the next great one raised its dividend this year. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned stocks. See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. 4 Stocks With Higher Dividends
2. 15 Hot Dividend Increases
3. 9 Stocks Increasing Their Dividends
4. 10 Stocks Raising Their Dividends
5. Five Companies Willing and Capable To Raise Dividends

Adding a degree of risk to your income portfolio can not only keep things interesting, but potentially boost your returns. Obviously, this needs to be kept in check because many (most?) risky investments never pan out. So instead of a boost in return, the risky investments end up being a drag on your portfolio’s return.

Recently, at the bottom of unrelated Baron’s article was a short discussion of 3 high-yield telecom companies. Since I own one of the companies, follow another in my D4L-Dashboard and had looked at the third one in the past, the article piqued my interest.  Below is the relevant text from the article:

The outsized excitement for corporate debt over equities is by now familiar. Eleven dollars in net inflows have gone to bond mutual funds for every net dollar into equity funds over the past three months, says Strategas Group.

The securities of telecom companies AT&T (T), Verizon (VZ) and CenturyTel (CTL) illustrate this: Their stock-dividend yields are between 6.4% and 8.3% — higher than their bond yields by one to three percentage points. Morgan Stanley strategists suggest that the stocks are a better deal, given the dividend sustainability (itself implied by the skimpy bond yields).

CenturyLink (CTL) (formerly CenturyTel) has been one of my high-risk success stories. The company provides a range of telephone services in 25 states, with operations concentrated in Alabama, Arkansas, Louisiana, Missouri and Wisconsin. In June 2008, CTL announced plans to increase its annual dividend to $2.80, from $0.27 beginning in July and to accelerate its share repurchase plans. I was attracted to CTL’s relatively strong balance sheet and strong cash flows driven by the less-competitive nature of the mostly rural markets it serves. I purchased my first block of CTL in November 2008, with two additional blocks in early 2009. Though the company has not raised its dividend since the June 2008 increase, I am content with my nearly 10% yield on cost.  During the time I’ve held the stock, the shares have increased 19%.  Here is the Analysis I performed prior to the original purchase. I am currently over-allocated in the stock, so I am no longer buying.  Even when I freeze the dividend at $0.70/share, my calculations show CTL is trading at a 2% discount.

AT&T Inc. (T) (formerly SBC Communications) provides telephone and broadband service, and the company holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006. I have tracked this stock for some time drawn by its 6%+ yield. Its Debt To Total Capital of 44% and Free Cash Flow Payout of 49% are both excellent. Unfortunately, its dividend fundamentals have not been good enough to entice me to purchase it. By my calculations it is trading at a 29% premium.

Verizon Communications Inc. (VZ) offers wireline, wireless, and broadband services.  This is a company that I have looked at several times, but its financials  and the limited number of consecutive years it has increased its dividend has kept me from adding it to my watch list. By my calculations, VZ is trading at a 29% premium.

Based on the three company’s dividend fundamentals and valuations, CTL would be continue to be my first choice. As investors we should always remember that there is always a reason when a company sports a higher than average dividend. Care should be exercised to understand the reasons before investing.

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

(Photo: sean carpenter)

Related Posts:

1. High-Yield Dividend Stocks: A Safer Approach
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3. High-Quality Low-Risk Dividend Stocks
4. Stock Analysis: CenturyTel Inc (CTL) High Yield, Highly Discounted
5. Inverted Yield On Cost Curve

This article originally appeared on The DIV-Net October 19, 2009.

Linked here is a detailed quantitative analysis of Abbott Laboratories (ABT). Below are some highlights from the above linked analysis:

Company Description: Abbott Laboratories 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.
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

ABT is trading at a discount to 1.) and 3.) above. The stock is trading at a 21.9% premium to its calculated fair value of $42.18. ABT did not earn any Stars in this section.

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%

ABT 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 and another Star was earned as a result of its most recent Debt to Total Capital being less than 45%. The stock 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 1926 and has increased its dividend payments for 37 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

ABT earned a Star in this section for its NPV MMA Diff. of the $1,066. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as ABT has. If ABT grows its dividend at 8.4% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. ABT earned a check for the Key Metric ‘Years to >MMA’ since its 3 years is less than the 5 year target.

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

Conclusion: ABT did not earn any Stars 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 four Stars. This quantitatively ranks ABT as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $64.54 before ABT’s NPV MMA Differential decreased to the $500 minimum that I like to see for a stock with 37 years of consecutive dividend increases. At that price the stock would yield 2.48%.

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 6.2%. This dividend growth rate is less than the 8.4% used in this analysis, thus providing a slight margin of safety. ABT has a risk rating of 1.50 which classifies it as a low risk stock.

I consider ABT as one of the best pharmaceutical companies. The company has a relatively strong product pipeline, with potentially significant launches in both the medical device and pharmaceutical areas pending. The stock is trading at a 20%+ premium to its buy price of $42.18, so I will patiently wait for market pullbacks 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 ABT (1.3% of my Income Portfolio). What are your thoughts on ABT?

Related Posts:

1. Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
2. Genuine Parts Co. (GPC) Dividend Stock Analysis
3. Abbott Laboratories (ABT) Dividend Stock Analysis
4. Stock Analysis: Abbott Laboratories (ABT)
5. Stock Analysis: GE

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: Genuine Parts Co. (GPC) Dividend Stock Analysis
• Carnival of Personal Finance published: High-Yield Dividend Stocks: A Safer Approach
• Carnival of Financial Planning published: 3 Big Names, 3 Big Dividend Increases
• Carnival of Money Hacks published: Dividend Payout vs. Free Cash Flow Payout

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

The DIV-Net Featured Articles

• Dividends4Life presented Stock Analysis: Abbott Laboratories (ABT)
• The Dividend Guy presented What a Company Needs to be a Dividend Aristocrat
• Barel Karsan presented Earnings Revert To The Mean
• Dividend Tree presented Kellogg Company– Stock Analysis for Dividend Portfolio
• Dividend Growth Investor presented The Best Trades could be the ones not entered

Articles From DIV-Net Members

• The Dividend Guy presented Top 100 Investment Lessons I Have Learned – Part 1
• Dividend Growth Investor presented Is now the time to sell your dividend stocks?
• Barel Karsan presented Understand These Biases
• Dividend Tree presented Managing Trading Process for Income Generation
• Buy Value presented Sample Mortgage Details
• moneygardener presented Inter Pipeline raises distributions
• Disciplined Approach to Investing presented Tax and Spend
• Old School Value presented Investing Book Review: Quality of Earnings
• Triaging My Way To Financial Success presented Value Stimulus: Procter & Gamble
• Dividend Money presented Making A Case For Higher Commodity Prices
• Everyday Finance presented Stocks Gone Wild – Until Apple Covered Call Crashes the Party
• Value Investing Pro presented Joel Greenblatt Bloomberg 10-19-09
• EPIC INVESTOR presented Current Opportunities for the Defensive Investor

Other Articles

• TheStreet.com presented Dividend Stocks for the Week
• Forbes presented Freeport Shows Shareholders Some Respect
• Motley Fool presented You Should Buy Stocks Just Like This One
• Seeking Alpha Presented 18 High Dividend Canadian Stocks
• Globe and Mail presented Where to look for good dividends at good value

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