Dividend Growth Stocks

3 Styles Of Successful Dividend Investing

2013-06-18T02:30:00.000-05:00

There are certainly many ways to categorize the different styles of investing in dividend stocks, including yield, risk, growth, etc. An investment strategy based on any of these could be successful, if implemented within the framework well-crafted plan. Over the years, I have found that most dividend investing styles fall into one of the three major categories listed below:

High Yield/Low Growth

I would classify dividend stocks with a yield over 5% and dividend growth less than 2% in this group. This is probably the most popular group, particularly among those new to income investing. It is human nature to want it now and lots of it, and high yield stocks appear to deliver that desire. However, there is often a reason the stock's yield is so high and many times the investor learns the hard way the yield is not always sustainable. Examples of stocks in the high yield/low growth group include:

PP&L Corporation (PPL)
Yield: 5.0% | Dividend Growth: 1.6%

Universal HealthRealty Income Trust (UHT)
Yield: 5.4% | Dividend Growth: 0.8%

Mercury General C Corp. (MCY)
Yield: 5.6% | Dividend Growth: 0.4%

Senior Housing Properties Trust (SNH)
Yield: 6.0% | Dividend Growth: 1.9%

Low Yield/High Growth

I would classify dividend stocks with a yield less than 2.5% and dividend growth greater than 7.5% in this group. Low yield and high growth dividend stocks are the other extreme of high yield and low growth stocks. Their long-term risk is associated with growing the yield-on-cost over time. If the dividend growth rate is cut, the investor's future earnings and yield will also be cut. Stocks in this group would include:

Becton, Dickinson and Co. (BDX)
Yield: 2.0% | Dividend Growth: 9.9%

J.M. Smucker Comp. (SJM)
Yield: 2.1% | Dividend Growth: 8.3%

Walgreen Co. (WAG)
Yield: 2.2% | Dividend Growth: 15.8%

Colgate-Palmolive Company (CL)
Yield: 2.3% | Dividend Growth: 9.5%

Moderate Yield/Moderate Growth

I would classify dividend stocks with a yield between 2.5% to 5% and a dividend growth rate between 2% to 7.5% in this group. This is a good compromise between the above too extremes. It is an approach focusing on a moderate yield and dividend growth rate. Keeping these two metrics at a reasonable level will help reduce the likelihood of either being cut. Companies in this group are your traditional dividend growth stocks, as seen from the list below:

Pepsico, Inc. (PEP)
Yield: 2.8% | Dividend Growth: 5.2%

Procter & Gamble (PG)
Yield: 3.1% | Dividend Growth: 7.0%

Johnson & Johnson (JNJ)
Yield: 3.1% | Dividend Growth: 7.3%

McDonald's Corporation (MCD)
Yield: 3.1% | Dividend Growth: 7.3%

In my personal investing strategy, I incorporate measured participation in each of the above groups. My primary focus is on the Moderate Yield/Moderate Growth stocks, believing that over time this group carriers the highest likelihood of success. The remaining two groups offer the potential for above average returns - as long as they continue to perform at the estimated level, which is often difficult to do over time.

Full Disclosure: Long MCD, JNJ, PG, PEP, UHT in my Dividend Growth Portfolio and long MCY, SNH in my High-Yield Portfolio. See a list of all my dividend growth holdings here.

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(Photo Credit)

Tags: [MCD] [JNJ] [PG] [PEP] [CL] [WAG] [PPL] [UHT] [MCY] [SNH] [BDX] [SJM]

Waste Management, Inc. (WM) Dividend Stock Analysis

2013-06-17T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of Waste Management, Inc. (WM). Below are some highlights from the above linked analysis:

Company Description: Waste Management Inc. is a Houston-based company that is the largest U.S. trash hauling/disposal concern.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

WM is trading at a premium to all four valuations above. Since WM's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 93.2% premium to its calculated fair value of $21.82. WM 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%

WM earned no Stars in this section. The company has paid a cash dividend to shareholders every year since 1998 and has increased its dividend payments for 10 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) or Treasury bond? 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

The NPV MMA Diff. of the $507 is below the $2,500 target I look for in a stock that has increased dividends as long as WM has. The stock's current yield of 3.46% exceeds the 2.71% estimated 20-year average MMA rate.

Memberships and Peers: WM is a member of the S&P 500. The company's peer group includes: Casella Waste Systems Inc. (CWST) with a 0.0% yield, Republic Services, Inc. (RSG) with a 2.7% yield, and Waste Connections Inc. (WCN) with a 1.0% yield.

Conclusion: WM did not earn any Stars in the Fair Value section, did not earn any Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of zero Star. This quantitatively ranks WM as a 0-Star Avoid stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $21.97 before WM's NPV MMA Differential increased to the $2,500 minimum that I look for in a stock with 10 years of consecutive dividend increases. At that price the stock would yield 6.6%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,500 NPV MMA Differential, the calculated rate is 9.2%. This dividend growth rate is higher than the 2.8% used in this analysis, thus providing no margin of safety. WM has a risk rating of 2.25 which classifies it as a Medium risk stock.

With nearly 300 landfills, WM is the 800 pound gorilla within the integrated waste services industry and enjoys substantial scale compared to its competitors. Its core business generates annuity-like cash flows by providing services to residential, commercial, and industrial customers. Cost savings from last year's restructuring should help operating margins. The company will likely continue to make niche acquisitions while pursuing debt reductions, share buybacks and increasing dividends.

WM's dividend fundamentals are not favorable. Its Free Cash Flow Payout is in excess of the 60% maximum that I look for and its Debt To Total Capital is in excess of my 45% maximum. In addition the stock is trading well above my calculated fair value price of $21.82. For now, WM is not a stock that I am considering for any of my income portfolios.

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 WM (0.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

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- Automatic Data Processing Inc. (ADP) Dividend Stock Analysis
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Tags: [WM] [CWST] [RSG] [WCN]

Weekly Links: June 16, 2013

2013-06-16T02:30:00.000-05:00

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:

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

- The Dividend Guy presented 6 Dividend Stocks to Buy in Order to Profit from the Stock Squeeze
- Disciplined Approach to Investing presented Where Does A Top Bond Manager Invest His Personal Funds?
- Financially Integrated presented Why I’m not selling my dividend stocks

The DIV-Net Featured Articles

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Warnings From Crumbling Dividend Stocks
In some ways, a basic look at a company's business model can indicate that a meaningful dividend growth record should prove unsustainable over the long term. Often enough, a company's dividend will cough and wheeze for an extended period of time before the company itself crumbles. A dividend freeze or cut is one of the best "canaries in the coalmine" that can indicate trouble for long-term investors in a particular company. But in the case of companies that...

David Einhorn Loves These Dividend Stocks
On May 15, a full range of professional fund managers released their quarterly statements. Today I look at the best dividend stock buys of David Einhorn. He is the head of Greenlight Capital and serves around $6.5 billion in assets. In total he has 38 stocks of which six were bought within the recent quarter. Below is a list of his 20 biggest transactions within the recent quarters. His biggest move was related to...

Undervalued Dividend Stocks Under $10
Looking to get more bang for your buck with stocks in the low price range? Their volatility can mean big percentage gains (or losses) for investors. With this in mind the stocks on this list are trading between $1-$10 with market caps above $90 million. We also looked for dividend yields north of 1%. Next, we screened our low price universe for undervaluations. Specifically, we looked for low price to sales ratios and price movements that lag EPS trends. Do you think these low priced stocks are undervalued...

Underpriced Rapid-Growth Dividend Stocks
Who doesn't love dividends? Most investors can agree that dividends are usually a big plus for owning a stock. We have found five dividend stocks that are underpriced (trading below the market P/E) and have safe dividends (all have a payout ratio of less than 40%). All five of the underpriced stocks below trade with price to earnings ratios of less than 15.5x, which is well below the market's near 20x P/E...

Now is the Time for Fortune-Building With Dividend Stocks
A lady named Grace Groner. Grace worked as a secretary at Abbott Laboratories (NYSE: ABT) for 43 years. She bought three shares of Abbott labs for $180 in 1935. When she died in 2010, these shares were worth $7 million — and generated $250,000 in income a year. I suspect not many have us have 75 years for an investment to compound — but don't let that stop you from buying dividends...

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

D4L-Premium Services Updated:
The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (June edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

(Photo: Sachin Ghodke)

May 2013 Pocket Change Portfolio Performance

2013-06-15T02:30:00.000-05:00

The Pocket Change Portfolio (PCP) was first introduced on September 13, 2008 as a real money dividend income portfolio funded by the "pocket change" earned from my various online endeavors. Each month I report on the portfolio's progress and dividends earned.

Dividends Received

Total dividends received during the month were $606.97, consisting of:

- $65.60 AbbVie Inc. (ABBV)
- $90.72 General Dynamics Corp. (GD)
- $48.19 National Retail Properties, Inc. (NNN)
- $69.09 Nucor Corporation (NUE)
- $73.71 Northwest Natural Gas Company (NWN)
- $73.45 People's United Financial Inc. (PBCT)
- $85.41 Procter & Gamble Co. (PG)
- $100.80 AT&T, Inc. (T)

Annualized Dividend Income

Including new purchases and dividend increases, my annual PCP dividend income is now $10,542.89 at the current dividend rates. This is up $239.81 from last month's $10,303.08 amount. The PCP has never experienced a monthly decline in annualized dividend income.

Portfolio Returns

- Year-to-date: 13.1%
- Life-to-date: 17.7% (annualized)

That's it for this month. The next PCP report will be mid-to-late July. Thanks for for reading!

Full Disclosure: Long all the aforementioned securities. See a list of all my dividend growth income holdings here.

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(Photo: Arcelia Vanasse)

Tags: [ABBV] [GD] [NNN] [NUE] [NWN] [PBCT] [PG] [T]

6 CEO's Showing Confidence With Increased Dividends

2013-06-14T02:30:00.000-05:00

A person’s character is determined by how they behave when no one else is looking and during difficult times. In much the same way, we can learn a lot about a company’s management when they face adversity. One metric I look at closely during a downturn is cash generation relative to earnings. The ability of a company to grow its dividend throughout the economic cycle is highly dependent on the management’s ability to generate cash in a downturn.

Below are several select companies with a management confident enough to increase their cash dividends:

National Fuel Gas Company (NFG) operates as a diversified energy company in the United States. June 13th the company increased its quarterly dividend 2.7% to $0.375 per share. The dividend is payable July 15, 2013, to shareholders of record at the close of business on June 28, 2013. The yield based on the new payout is 2.5%.

Alexandria Real Estate Equities, Inc. (ARE), a real estate investment trust (REIT), engages in the ownership, operation, management, development, acquisition, and redevelopment of properties for the life sciences industry. June 13th the company increased its quarterly dividend 8% to $0.65 per share. The dividend is payable July 15, 2013, to shareholders of record on June 28, 2013. The yield based on the new payout is 3.9%.

Target Corporation (TGT) operates general merchandise stores in the United States. June 12th the company increased its quarterly dividend 19% to $0.43 per share. The dividend is payable September 10, 2013 to shareholders of record at the close of business August 21, 2013. The yield based on the new payout is 2.5%.

Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. June 12th the company increased its quarterly dividend 15% to $0.60 per share. The dividend is payable August 20, 2013, to stockholders of record at the close of business, July 22, 2013. The yield based on the new payout is 2.9%.

Oil-Dri Corporation (ODC) of America engages in the mining, development, manufacture, and marketing of sorbent products in the United States and internationally. June 11th the company increased its quarterly dividend 6% to $0.19 per share. The dividend is payable August 30, 2013, to stockholders of record at the close of business on August 16, 2013. The yield based on the new payout is 2.8%.

Allied World Assurance Company Holdings, AG (AWH) provides property and casualty insurance and reinsurance solutions in Bermuda, the United States, Europe, Hong Kong, Labuan, and Singapore. June 7th the company increased its quarterly dividend 33% to $0.50 per share. The dividend is payable on July 3, 2013 to shareholders of record on June 25, 2013. The yield based on the new payout is 2.1%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: No position in the aforementioned securities. See a list of all my dividend growth holdings here.

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(Photo Credit)

Tags: [CAT] [TGT] [NFG] [ARE] [ODC] [AWH]

Realty Income Corp (O) Dividend Stock Analysis

2013-06-13T02:30:00.000-05:00

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

Company Description: Realty Income Corporation is an equity real estate investment trust that owns commercial retail real estate properties in the United States.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

O is trading at a premium to all four valuations above. The stock is trading at a 49.2% premium to its calculated fair value of $30.04. O 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%

O earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. O 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 1994 and has increased its dividend payments for 19 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) or Treasury bond? 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

O earned a Star in this section for its NPV MMA Diff. of the $1,616. This amount is in excess of the $1,600 target I look for in a stock that has increased dividends as long as O has. The stock's current yield of 4.85% exceeds the 2.71% estimated 20-year average MMA rate.

Memberships and Peers: O is and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: The DDR Corp. (DDR) with a 3.1% yield, National Retail Properties, Inc. (NNN) with a 4.4% yield and The Macerich Company (MAC) with a 3.7% yield.

Conclusion: O did not earn any Stars in the Fair Value section, earned two Stars 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 O as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $45.03 before O's NPV MMA Differential decreased to the $1,600 minimum that I look for in a stock with 19 years of consecutive dividend increases. At that price the stock would yield 4.8%.

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 4.1%. This dividend growth rate is the same as tre 4.1% used in this analysis, thus providing no margin of safety. O has a risk rating of 2.00 which classifies it as a Medium risk stock.

O follows a conservative strategy which has led to it being one of the best-positioned REITs with a capacity to make additional acquisitions. The company is well-manged has delivered consistent growth over time. Its current strategy to diversify into nonretail assets could add additional risk.

The company's debt to total capital of 41% is below my acceptable maximum. Its 81% free cash flow payout of 81% is well above my desired level. However, this is actually fairly conservative for a REIT sine they are required to payout 90% of their earnings as a dividends. The stock is currently trading at a 49.2% premium to my calculated fair value.

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 O (1.1% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

Related Articles:
- Becton, Dickinson and Co. (BDX) Dividend Stock Analysis
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- Pepsico, Inc. (PEP) Dividend Stock Analysis
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Tags: [O] [DDR] [NNN] [MAC]

8 Higher-Yielding Financial Services Stocks With Rising Dividends

2013-06-11T02:30:00.000-05:00

The Financial Services Sector includes insurance companies, banks, brokerages, mutual funds and other similar companies. Before the 2008-09 financial services meltdown, these stocks were the cornerstone on many income portfolios. The companies were flush with cash, their stocks provided relatively high yields, good dividend growth rates and carried very little perceived risk.

Unfortunately, things are not always as they seem. Under the surface banks were making questionable loans, while investment firms were creating and peddling exotic financial instruments. In effect, their CEO's were building houses of cards in a hurricane - it was destined to come tumbling down, and it did.

As a result, investors learned some very valuable, but expensive lessons. This should serve as a warning when investing in the Financial Services Sector - not a stop sign. Many of these companies are now in very lucrative positions.

With interest rates as low as they are, banks are enjoying decent spreads, not to mention all the new fees they are charging their customers. As more consumers take advantage of electronic banking, we are becoming more tied to our accounts. The pain threshold of changing banks is high, and they know it.

Have you ever filed an insurance claim and were satisfied with the outcome?

Insurance companies are the ultimate business. They charge premiums to protect you. Invest the premiums and earn a return, which is then reinvested. The money is theirs to keep if you don't file a claim. If you do file a claim, the insurance company will find ways to minimize what they actually pay you - then raise your rates for filing a claim.

You can complain about these companies, or invest in the industry and profit from them. I've chosen the latter.

This week, I screened my dividend growth stocks database for Financial Services companies with a yield at or above 3.5% and have increased their dividends for at least 14 consecutive years. The results are presented below:

Southside Bancshares Inc. (SBSI) owns Southside Bank, which primarily provides financial services to individuals, businesses, municipal entities, and non-profit organizations.
Years of Dividend Growth: 18 | Yield: 3.5%

Community Trust Bank Corp. (CTBI) owns and operates Community Trust Bank, Inc. of Pikeville, KY, which provides commercial banking services in Kentucky and West Virginia; and a trust company.
Years of Dividend Growth: 33 | Yield: 3.6%

Tompkins Financial (TMP) owns Tompkins Trust Co., The Bank of Castile, and The Mahopac National Bank, which provide banking services in upstate New York; and VIST Bank in Pennsylvania.
Years of Dividend Growth: 27 | Yield: 3.6%

Community Bank System (CBU) provides financial services in upstate New York, and in northeastern Pennsylvania as First Liberty Bank & Trust.
Years of Dividend Growth: 20 | Yield: 3.6%

Arrow Financial Corp. (AROW) owns Glens Falls National Bank & Trust Company and Saratoga National Bank & Trust Company, which offer commercial and consumer banking and financial products in U.S.
Years of Dividend Growth: 18 | Yield: 4.0%

People's United Financial Inc. (PBCT) provides a full range of banking and financial service products to individuals, corporations and municipal customers in the U.S. Northeast.
Years of Dividend Growth: 16 | Yield: 4.7%

Old Republic Intl (ORI) writes property and liability, mortgage guaranty, title and life, and disability insurance.
Years of Dividend Growth: 32 | Yield: 5.4%

Mercury General Corp. (MCY) is an insurance holding company that operates primarily in California and writes a full line of automobile coverage for all classifications of risk.
Years of Dividend Growth: 26 | Yield: 5.6%

As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.

My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 230+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.

Full Disclosure: Long CTBI, PBCT, in my Dividend Growth Portfolio and long MCY in my High-Yield Portfolio. See a list of all my dividend growth holdings here.

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(Photo: Adrian van Leen)

Tags: [SBSI] [CTBI] [TMP] [CBU] [AROW] [PBCT] [ORI] [MCY]

General Mills, Inc. (GIS) Dividend Stock Analysis

2013-06-10T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of General Mills, Inc. (GIS). Below are some highlights from the above linked analysis:

Company Description: General Mills, Inc. is a major producer of packaged consumer food products, including Big G cereals and Betty Crocker desserts/baking mixes.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

GIS is trading at a premium to all four valuations above. Since GIS's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 9.4% premium to its calculated fair value of $44.77. GIS 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%

GIS earned one Star in this section for 1.) 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 company has paid a cash dividend to shareholders every year since 1898 and has increased its dividend payments for 10 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) or Treasury bond? 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

GIS earned a Star in this section for its NPV MMA Diff. of the $2,704. This amount is in excess of the $2,500 target I look for in a stock that has increased dividends as long as GIS has. The stock's current yield of 3.1% exceeds the 2.71% estimated 20-year average MMA rate.

Memberships and Peers: GIS is a member of the S&P 500. The company's peer group includes: Kellogg Company (K) with a 2.7% yield, Campbell Soup Company (CPB) with a 2.4% yield and The Hershey Company (HSY) with a 1.9% yield.

Conclusion: GIS did not earn any Stars 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 two Stars. This quantitatively ranks GIS as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $50.64 before GIS's NPV MMA Differential decreased to the $2,500 minimum that I look for in a stock with 10 years of consecutive dividend increases. At that price the stock would yield 3.0%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,500 NPV MMA Differential, the calculated rate is 10.2%. This dividend growth rate is lower than the 10.5% used in this analysis, thus providing a margin of safety. GIS has a risk rating of 1.75 which classifies it as a Medium risk stock.

GIS operates in relatively stable end markets and has good brand strength, which should offer some protection from less expensive products. However, erratic commodity prices have weighed on the performance of companies in the industry.

The company generates consistent free cash flows and its payout of 43% is well below my maximum of 70%. GIS's debt to total capital of 53% is slightly above my desired maximum of 45%. With a desirabe current yield in excess of 3%, the company has been on my radar. It is currently trading above my calculated fair value of $44.77. That for now will keep me watching and not buying.

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 GIS (0.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

Related Articles:
- John Wiley & Sons (JW-A) Dividend Stock Analysis
- Johnson & Johnson (JNJ) Dividend Stock Analysis
- T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis
- Occidental Petroleum Corporation (OXY) Dividend Stock Analysis
- More Stock Analysis

Tags: [GIS] [K] [CPB] [HSY]

Weekly Links: June 9, 2013

2013-06-09T02:30:00.000-05:00

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

- The Dividend Guy presented American Capital Agency Corp – When The Dividend Yield is Bigger Than My Understanding of the Company
- Dividend Monk presented Coca Cola: Fairly Valued in Low $40′s for 2013
- Dividend Mantra presented Dividend Income Update - May 2013

The DIV-Net Featured Articles

Articles from D4L-News:

Favorite International Dividend Growth Stocks
Europe is still on fire. The economy is in a triple-dip recession and the European member states cut spending. The unemployment is high but every economic depression could be a solid basis for future engagements in the stock market. Today I scout for some dividend growth opportunities outside the U.S. I screened my database of stocks with a consecutive dividend increase of at least five years by foreign stocks. Here are my favorite stocks...

Billionaire Ken Fisher Boosts His Stake in These Dividend Stocks
Billionaire Ken Fisher’s Fisher Asset Management has filed its quarterly 13F disclosure with the SEC, presenting its portfolio of equity holdings as of the end of the March quarter. The portfolio’s top positions continue to include large-cap, dividend-paying stocks such as Pfizer, Johnson & Johnson, Cisco Systems, General Electric, and Wells Fargo. During the quarter, Fisher also significantly boosted his stake in Apple and several other positions that pay attractive dividend yields. Fisher boosted his position in...

Undervalued Dividend Stocks
Looking for dividend stocks with upside potential? The following stock list is built around this idea. We collected dividend stocks (yields above 1%) with market caps above $50 million that appear significantly undervalued to analyst target price. And because target prices are notoriously inflated, we only used the most pessimistic (the lowest) target prices, and for stocks with sufficient analyst coverage we only screened for stocks with 5 or more analyst ratings. Seven stocks made the cut...

Big Yields In Small Places
In search for strong yields, many investors have tilted their portfolios towards the high dividends and long track records of the market's largest firms. Conversely, some of the best opportunities for dividend hunters could lie within the smaller side of the stock market. Generally, when investors look towards small-cap stocks, they do so from a vantage point of growth and capital appreciation. After all, the iShares Russell 2000 Index (ARCA:IWM) has been a top long-term performer over the last few decades. Additionally, there have been many academic studies that show that small-caps outperform larger ones over the years. Given the potential for outperformance and juicy yields, investors should consider the small-cap space for dividend payers...

Dividend Stocks for an Overheated Market
The stock market has been on an absolute tear this year, and the bullishness surrounding the market continues to build. However, Bernanke's comments on Wednesday hit the market hard. If the jitters surrounding higher interest rates continue to spook the markets, a pullback could be coming. As such, we look at three stocks that make good investments even if we head into a pullback in the markets. One of the major components of any sound buy-and-hold stock portfolio should be...

Click Here More Dividend News

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

D4L-Premium Services Updated:
The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (June edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

(Photo: Sachin Ghodke)

Dividend Income Progress Update - May 2013

2013-06-08T02:30:00.000-05:00

Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in May, extending the streak to 35 consecutive months of increases after June 2010's decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 64 of the last 66 months.

My goals were defined in this December 1, 2007 Investing Goals post and last updated in my 2013 Investing Goals post. Below is an updated version of the table found in the original post.

Description	Dividend Income Annualized	Yield on Cost
2027 Goal	110,000	n/a
2017 Goal	30,000	n/a
2013 Goal	25,000	n/a
December/2012	21,650	4.47%
Purchases YTD	2,298	-0.05%
Div. Changes YTD	881	0.06%
Sales YTD	-1,176	0.04%
May/2013	23,653	4.52%
Purchases	542	-0.01%
Div. Changes	259	0.05%
Sales	-204	0.00%
April/2013	23,056	4.48%

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 $597, and Yield on Cost (YOC) increased 0.04%. This month's changes were a net of new purchases, dividend changes and sales during the month. Let's examine each of the these categories:

Purchases: Purchases this month increased my annual dividend income by $542 and decreased yield on cost 0.01%. As noted in earlier updates, I generally expect YOC to drop in most months since new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset the decline.

Dividend Changes: The $259 increase in annual dividend income and 0.05% increase in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):

- $63 Raytheon Co. (RTN) $0.50q>$0.55q
- $63 U.S. Preferred Stock Index (PFF) $0.1554m>$0.1729m
- $48 General Dynamics Corp. (GD) $0.51q>$0.56q
- $13 ALPS Alerian MLP ETF (AMLP) $0.261q>$0.264q
- $66 Procter & Gamble Co. (PG) $0.562q>$0.6015q
- $6 People's United Financial Inc. (PBCT) $0.16q>$0.1625q

Sales: During May, I sold 22% of my PFF shares at a gain. PFF's dividend has been extremely volatile and does not fit well in my Dividend Growth Portfolio. I plan to continue trimming my position in the future

That's it for this time. The next monthly progress update will be early July.

Full Disclosure: Long all the aforementioned securities. See a list of all my dividend growth holdings here.

Related Articles
- 9 Stocks Delivering The Dividend Dream
- 10 Quality Dividend Stocks Trading Below Their Fair Value
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- Mid-Year 2012 Top And Bottom Performing Dividend Stocks

(Photo: sanja gjenero)

Tags: [RTN] [PFF][GD] [AMLP] [PG] [PBCT]

9 Dividend Stocks Providing A Growing Income

2013-06-07T02:30:00.000-05:00

How much money will you need for retirement? This a very difficult question to answer. There are many factors and assumptions that go into estimating the income that will be needed in retirement. However, one certainty is that if you only invest in fixed income instruments, you will need more than if your investments provide you a growing income.

Below are several companies that are providing their shareholders a growing income with higher cash dividends:

Concurrent Computer Corporation (CCUR) provides software, hardware, and professional services for the video market in North America, the Asia Pacific, Europe, and South America. June 6th the company increased its quarterly dividend 100% to $0.12 per share. The dividend is payable June 28, 2013 to shareholders of record at the close of business on June 17, 2013. The yield based on the new payout is 6.7%.

Universal Health Realty Income Trust (UHT) operates as a real estate investment trust (REIT) in the United States. June 5th the company increased its quarterly dividend 0.8% to $0.625 per share. The dividend is payable June 28, 2013 to shareholders of record as of June 17, 2013. The yield based on the new payout is 5.5%.

Helmerich & Payne, Inc. (HP) engages in the contract drilling of oil and gas wells. June 5th the company increased its quarterly dividend 233% to $0.50 per share. The dividend is payable on August 30, 2013 to shareholders of record at the close of business on August 15, 2013. The yield based on the new payout is 3.2%.

Acme United Corporation (ACU) supplies cutting, measuring, and first aid products to the school, home, office, hardware, sporting goods, and industrial markets. June 4th the company increased its quarterly dividend 14% to $0.08 per share. The dividend is payable July 3, 2013 to stockholders of record on the close of business on June 15, 2013. The yield based on the new payout is 2.5%.

Newcastle Investment Corp. (NCT) operates as a real estate investment and finance company in the United States. June 3rd the company increased its quarterly dividend 64.8% to $0.17 per share. The dividend is payable July 31, 2013 to shareholders of record on June 13, 2013. The yield based on the new payout is 12.9%.

DuPont Fabros Technology, Inc. (DFT), a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. June 3rd the company increased its quarterly dividend 25% to $0.25 per share. The dividend is payable July 15, 2013 to shareholders of record as of July 5, 2013. The yield based on the new payout is 4.1%.

Cracker Barrel Old Country Store, Inc. (CBRL) develops and operates the Cracker Barrel Old Country Store restaurant and retail concept in the United States. Its restaurants provide breakfast, lunch, and dinner. June 3rd the company increased its quarterly dividend 50% to $0.75 per share. The dividend is payable August 5, 2013 to shareholders of record as of July 19, 2013. The yield based on the new payout is 3.1%.

Neenah Paper, Inc. (NP) produces technical products and fine papers worldwide. May 30th the company increased its quarterly dividend 33% to $0.20 per share. The dividend is payable September 3, 2013 to shareholders of record as of August 16, 2013. The yield based on the new payout is 2.5%.

American Realty Capital Properties, Inc. (ARCP) owns and acquires single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other creditworthy tenants. May 30th the company increased its monthly dividend 1.1% to $0.07583 per share. The dividend is payable June 15, 2013 to stockholders of record at the close of business on June 8, 2013. The yield based on the new payout is 5.9%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long UHT in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

Related Posts
- A Simple Approach To Earn More Than 4% In Dividends
- 5 Basic Materials Stocks With Growing 3%+ Dividends
- What To Do When A Stock Fails To Raise Its Dividend
- A Diversified Approach To International Dividends
- 9 High-Yield Dividend Achievers With 25 Years of Increases

(Photo Credit)

Tags: [UHT] [HP] [CBRL] [NCT] [CCUR] [ACU] [DFT] [NP] [ARCP]

Becton, Dickinson and Co. (BDX) Dividend Stock Analysis

2013-06-06T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of Becton, Dickinson and Co. (BDX). Below are some highlights from the above linked analysis:

Company Description: Becton, Dickinson and Co. provides a wide range of medical devices and diagnostic products used in hospitals, doctors' offices, research labs and other settings.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

BDX is trading at a discount to only 3.) above. The stock is trading at a 22.5% premium to its calculated fair value of $82.26. BDX 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%

BDX earned two Stars in this section for 1.) 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. BDX 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 40 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) or Treasury bond? 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

BDX earned a Star in this section for its NPV MMA Diff. of the $774. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as BDX has. If BDX grows its dividend at 9.9% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. BDX earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

Memberships and Peers: BDX is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The CR Bard Inc. (BCR) with a .80% yield, Baxter International Inc. (BAX) with a 2.8% yield and Medtronic, Inc. (MDT) with a 2.0% yield.

Conclusion: BDX did not earn any Stars in the Fair Value section, earned two Stars 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 BDX as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $118.05 before BDX's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 40 years of consecutive dividend increases. At that price the stock would yield 1.7%.

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 8.4%. This dividend growth rate is lower than the 9.9% used in this analysis, thus providing a margin of safety. BDX has a risk rating of 1.75 which classifies it as a Medium risk stock.

In spite of operating in the competitive medical equipment market, BDX has enjoyed more favorable demand and pricing than others in the industry. The company’s needle and surgical business has provided investors with robust returns for years. Strong global demand for the company's safety, diabetes care and disease-testing products should be sustainable in the foreseeable future.

The majority of BDX's sales are coming from international markets. This trend should continue based on continued growth in emerging markets. Soft demand in the United States and Europe along with the medical excise tax and pricing pressure, could delay the company's full recovery until 2014.

When BDX was last reviewed it was trading at a discount to my calculated fair value and had a modest yield of 2.4%. The stock is now trading at a premium to my calculated fair value of $82.26 and its current yield has decreased to under 2.0%. For now, BDX is not a serious contender for any of my income portfolios.

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 BDX (0.0% of my Dividend Growth Portfolio) and was long MDT in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

Related Articles:
- Automatic Data Processing Inc. (ADP) Dividend Stock Analysis
- Pepsico, Inc. (PEP) Dividend Stock Analysis
- John Wiley & Sons (JW-A) Dividend Stock Analysis
- Johnson & Johnson (JNJ) Dividend Stock Analysis
- More Stock Analysis

Tags: [BDX] [BCR] [BAX] [MDT]

5 Quality Dividend Stocks To Take The Emotion Out Of Investing

2013-06-04T02:30:00.000-05:00

Deep-down in my soul, I am a contrarian. The significant market run-up this year has converted most of the great dividend stock buys into 'ok' buys (at best). Sure the increase in your portfolio's value leaves you with a warm and fuzzy feeling, but as a long-term investor, I would much rather buy stocks at a deep discount. Once again, it appears investors' emotions are driving the market.

To that end, a November 2009 article in Forbes discussing investor emotions caught my attention. The salient takeaway from the article was:

The assumption that investors are rational agents is bunk. We are not rational. We're human. Even the most brilliant investor can be swayed by emotions into making irrational decisions that result in financial loss.

This is quite easy to illustrate looking at the stock market this year. Logic had very little to do with movements in most stocks. Knowing this, there are some things that long-term buy-and-hold investors can do to profit from from these irrational moves in the market.

I. Dollar Cost Average In

When the market is rallying, we generally should be buying fewer shares than when it is declining. Our emotions left unchecked will lead us to do the opposite of what we should be doing. Investors are often compelled to buy when the market is rallying, then sell when it is declining. So how do we guard against this?

Dollar cost averaging [DCA] is one way. DCA is a strategy of investing equal dollar amounts on a regular basis over specific time periods. For example, you might choose to invest $2,000 each month in your income portfolio, no matter what the market is doing. This will lead to more shares being purchased when prices are low and fewer shares purchased when prices are high. The overall effect is to lower the total average cost per share of the investment, over time.

II. Keep A Watch List Of Great Stocks

Unfortunately, great stocks that perform well over an extended period are noticed by the market and will often carry a premium that makes them difficult for a value-based investor to purchase. Consider these dividend stocks from year-end to the end of May 2013 (on a dividend adjusted basis):

AbbVie Inc. (ABBV) Up 29.4% (Yield: 3.7%)
Genuine Parts Company (GPC) Up 28.0% (Yield: 2.8%)
Kimberly-Clark Corporation (KMB) Up 22.6% (Yield: 3.3%)
Johnson & Johnson (JNJ) Up 23.9% (Yield: 3.1%)
Procter & Gamble Co. (PG) Up 20.6% (Yield: 3.1%)

Are these stocks 20%-30% intrinsically more valuable at the end of May 2013 compared to the end of December 2012? I don't think so. We as investors must understand valuation and be prepared to act.

III. Have a Plan and Follow It

You need to have an investment plan. More importantly you must have full confidence in your investment plan. Otherwise, you will be a slave to emotion which will lead to very undesirable results in your portfolio.

Long-term buy-and-hold dividend investors look at bear markets as their friends. It is a wonderful time to add quality companies at great prices and increase our average yield.

Full Disclosure: Long ABBV, GPC, KMB, JNJ, PG in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

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- 6 High-Yield REITs With Growing Dividends

(Photo Credit)

Tags: [ABBV] [GPC] [KMB] [JNJ] [PG]

Coca-Cola Company (KO) Dividend Stock Analysis

2013-06-03T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of Coca-Cola Company (KO). Below are some highlights from the above linked analysis:

Company Description: The Coca-Cola Company is the world's largest soft drink company, KO also has a sizable fruit juice business.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

KO is trading at a premium to all four valuations above. The stock is trading at a 12.4% premium to its calculated fair value of $38.25. KO 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%

KO earned one Star in this section for 3.) above. KO 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 1893 and has increased its dividend payments for 51 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) or Treasury bond? 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

KO earned a Star in this section for its NPV MMA Diff. of the $957. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as KO has. If KO grows its dividend at 8.0% per year, it will take 1 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. KO earned a check for the Key Metric 'Years to >MMA' since its 1 years is less than the 5 year target.

Memberships and Peers: KO is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Dr. Pepper Snapple Group (DPS) with a 3.1% yield, Pepsico, Inc (PEP) with a 2.7% yield and Fomento Economico ADR (FMX) with a 1.2% yield.

Conclusion: KO did not earn any Stars 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 two Stars. This quantitatively ranks KO as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $54.76 before KO's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 51 years of consecutive dividend increases. At that price the stock would yield 2.1%.

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 lower than the 8.0% used in this analysis, thus providing a margin of safety. KO has a risk rating of 1.50 which classifies it as a Low risk stock.

Coca-Cola is one of the most recognizable names in the world. KO is able to deliver products to more than 200 countries around the globe through an extensive direct distribution network that has few peers. Its world presence, particularly in faster-growing emerging markets, will be relied on to compensate for declining consumption of carbonated beverages in the North American market.

The company has accelerated its refranchising of the U.S. bottling system by announcing in April partnerships with five U.S. bottling partners. These transactions will likely close in 2014 and should improve margins since the bottling business has significantly lower operating margins than the concentrate business.

At 60%, KO's free cash flow payout is above the 60% I look for and its debt to total capital at 52% is above my 45% threshold. Both have increased since my last review. However, KO remains a desirable stock and I will continue to give it consideration when it is trading near my calculated fair value price of $38.25.

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 KO (2.4% of my Dividend Growth Portfolio) and also long PEP. See a list of all my dividend growth holdings here.

Related Articles:
- T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis
- Occidental Petroleum Corporation (OXY) Dividend Stock Analysis
- Nike, Inc. (NKE) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- More Stock Analysis

Tags: [KO] [DPS] [PEP] [FMX]

Weekly Links: June 2, 2013

2013-06-02T02:30:00.000-05:00

The Wealth Builder Carnival published: 13 Dividend Stocks Delivering What's Important

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

- The Dividend Guy presented Stock Squeeze! Look For All The Money You Can Invest in The Stock Market
- Disciplined Approach to Investing presented The Consequences Of Leveraged Investments Is Unfolding
- Hello Suckers presented Dividend paying stocks worth adding to portfolio

The DIV-Net Featured Articles

Articles from D4L-News:

High Dividend Growth Stocks With Yields Above 4%
In this article, I present 4 stocks that may very well fulfil the needs (returns/dividend growth, etc.) of the dividend investor. The stocks here are suitable for being held for the long-term and in my opinion, should be a part of any dividend investor's portfolio, not just for the dividends but also for their stability, their strong financials, their leading position in their individual industries and their various other qualities...

Buy Income On The Dip, The Next Pullback Is Around The Corner
Against the backdrop of a corrective phase for stocks that could trim 3% to 5% off their year-to-date gains, investors will see an opportunity for very attractive entry points to select high-yield names. Keep an eye on these three names for when the time is right...

Stocks with Dividends You Can Depend On
Re-investing dividends in order to achieve market-beating returns will only work if the payouts continue, and that means that the company has to have a sustainable free cash flow, with plenty of room for sudden financial shocks or a resistance to the general economic situation, such as...

Unusual Sources Of High Yield Income
It’s important to mix up your income holdings and find stocks in non-related businesses. Having a portfolio of all utilities works … until we get an industry-specific problem, and then they could all decline. Your portfolio needs a mix of sectors to be truly diversified. Fortunately, we can use our Portfolio Grader tool to find stocks that will help you add some new flavors while still cashing sizable dividend checks...

Dividend Stocks at Reasonable Prices
FOBOR. Its stands for FOrced Buyers Of Risk. What it means essentially is that due to aggressive monetary policies by central banks, investors have basically been forced out of fixed income assets like bonds and into riskier assets like stocks. FOBORs are reluctant stock investors, so most prefer the lowest beta, most stable dividend stocks out there since they are used to the safety of bonds. This move has driven stock prices in many "boring" stocks to record highs. While low beta dividend stocks are becoming harder to find at a reasonable price, there are still some pockets of value out there...

Click Here More Dividend News

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

D4L-Premium Services Updated:
The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (June edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

(Photo: Sachin Ghodke)

4 Stocks Paying Higher Cash Dividends

2013-05-31T02:30:00.000-05:00

We have all heard it… Stodgy, for old people, yawn, boring! These have all been used to describe dividend growth stocks. As a dividend growth investor, I sometimes think our strategy is the most misunderstood. It seems everyone understands a traders mentality and a high-yield mentality. Periodically, it is good to remind ourselves that dividend growth stocks provides us with excellent long-term leverage and a growing income.

Below are some companies that understand the importance of growing their cash dividends:

Neenah Paper, Inc. (NP) produces technical products and fine papers worldwide. May 30th the company increased its quarterly dividend 33% to $0.20 per share. The dividend is payable September 3, 2013 to shareholders of record as of August 16, 2013. The yield based on the new payout is 2.6%.

Eastern Insurance Holdings, Inc. (EIHI) provides workers compensation insurance and reinsurance products in the United States. May 30th the company increased its quarterly dividend 22% to $0.11 per share. The dividend is payable June 28, 2013 to shareholders of record at the close of business on June 14, 2013. The yield based on the new payout is 2.4%.

Post Properties, Inc. (PPS) is an independent real estate investment trust that develops, owns, and manages multi-family apartment communities. May 23rd the company increased its quarterly dividend 32% to $0.33 per share. The dividend is payable on July 15, 2013 to all common shareholders of record as of June 28, 2013. The yield based on the new payout is 2.7%.

Portland General Electric Company (POR), an integrated electric utility, engages in the generation, purchase, transmission, distribution, and retail sale of electricity in the state of Oregon. May 22nd the company increased its quarterly dividend 1.9% to $0.275 per share. The dividend is payable July 15, 2013, to shareholders of record at the close of business on June 25, 2013. The yield based on the new payout is 3.5%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: No position in the aforementioned securities. See a list of all my dividend growth holdings here.

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(Photo Credit)

Tags: [NP] [PPS] [POR] [EIHI]

Automatic Data Processing Inc. (ADP) Dividend Stock Analysis

2013-05-30T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of Automatic Data Processing Inc. (ADP). Below are some highlights from the above linked analysis:

Company Description: Automatic Data Processing Inc., one of the world's largest independent computing services companies, provides a broad range of data processing services.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

ADP is trading at a premium to all four valuations above. The stock is trading at a 59.7% premium to its calculated fair value of $43.73. ADP 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%

ADP earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. ADP 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 1974 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) or Treasury bond? 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

ADP earned a Star in this section for its NPV MMA Diff. of the $657. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as ADP has. If ADP grows its dividend at 7.3% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. ADP earned a check for the Key Metric 'Years to >MMA' since its 2 years is less than the 5 year target.

Memberships and Peers: ADP is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Paychex, Inc. (PAYX) with a 3.5% yield, Insperity, Inc. (NSP) with a 2.3% yield and Convergys Corporation (CVG) with a 1.3% yield.

Conclusion: ADP did not earn any Stars in the Fair Value section, earned two Stars 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 ADP as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $76.93 before ADP's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 37 years of consecutive dividend increases. At that price the stock would yield 2.2%.

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 6.3%. This dividend growth rate is lower than the 7.3% used in this analysis, thus providing a margin of safety. ADP has a risk rating of 1.75 which classifies it as a Medium risk stock.

As the industry leader ADP enjoys advantages of scale, a respected brand and protected by high customer switching costs. The company should see its market grow since payroll outsourcing is currently under-utilized. Significant growth opportunities exist as ADP moves toward a total HR service provider beyond its core payroll product. Near-term, weakness in Europe, particularly the auto market, and low interest rates will limit ADP's margins.

Financially, the company has a strong balance sheet, with no debt, and a recurring revenue stream generating steady cash flows. However, it is trading significantly above calculated fair value of $43.76, so for now I will wait before increasing my position.

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 ADP (0.6% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

Related Articles:
- John Wiley & Sons (JW-A) Dividend Stock Analysis
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- T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis
- Occidental Petroleum Corporation (OXY) Dividend Stock Analysis
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Tags: [ADP] [PAYX] [NSP] [CVG]

7 Select High-Yield S&P 500 Dividend Stocks

2013-05-28T02:30:00.000-05:00

The S&P 500 Index is owned and maintained by Standard & Poor's, a division of McGraw-Hill. The index was first published in 1957 and is the second most recognized index in the U.S. behind only the Dow Jones Industrial Average. Stocks included in the S&P 500 are large publicly companies that trade on either the New York Stock Exchange or the NASDAQ.

Most of the stocks are U.S. based companies. However, there are a few companies with headquarters incorporated outside of the U.S. For many investors, the S&P 500 represents the U.S. stock market and this index is used as a benchmark for many portfolios.

Not all stocks in the index pay dividends, but many of the best known dividend growth stocks are part of the index. The dividend Aristocrats is a subset of the S&P 500 and is limited to stocks that have increased their dividend for 25 or more years.

This week week, I screened my dividend growth stocks database for stocks that are members of the S&P 500, have a yield of 4% or more and have increased their dividend for 10 or more consecutive years. The results are presented below:

Consolidated Edison, Inc. (ED) is an electric and gas utility holding company the serves parts of New York, New Jersey and Pennsylvania. ED is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1885 and has increased its dividend payments for 40 consecutive years. Yield: 4.2%

AGL Resources Inc. (GAS) is an energy services holding company that provides natural gas to about 4.5 million customers, mostly in Illinois and Georgia, and operates several non-utility businesses. GAS is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.The company has paid a cash dividend to shareholders every year since 1939 and has increased its dividend payments for 11 consecutive years. Yield: 4.4%

Southern Company (SO) is an Atlanta-based energy holding company and is one of the largest producers of electricity in the U.S. SO is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 12 consecutive years. Yield: 4.5%

PP&L Corporation (PPL) is a holding company for electric utilities in Pennsylvania and Kentucky also owns utilities in the U.K. PPL is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1946 and has increased its dividend payments for 12 consecutive years. Yield: 4.8%

People's United Financial Inc. (PBCT) provides a full range of banking and financial service products to individuals, corporations and municipal customers in the U.S. Northeast. PBCT is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1993 and has increased its dividend payments for 16 consecutive years. Yield: 4.7%

Lockheed Martin Corp. (LMT), the world's largest military weapons manufacturer, is also a significant supplier to NASA and other non-defense government agencies. LMT receives about 93% of its revenues from global defense sales. LMT is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1995 and has increased its dividend payments for 11 consecutive years. Yield: 4.3%

AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). T is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 30 consecutive years. Yield: 4.9%

As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.

My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 230+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.

Full Disclosure: Long ED, PBCT, LMT, T in my Dividend Growth Portfolio and long SO in my High-Yield Portfolio. See a list of all my dividend growth holdings here.

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(Photo: Steve Woods)

Tags: [ED] [GAS] [SO] [PPL] [PBCT] [LMT] [T]

Pepsico, Inc. (PEP) Dividend Stock Analysis

2013-05-27T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of Pepsico, Inc. (PEP). Below are some highlights from the above linked analysis:

Company Description: PepsiCo, Inc. is a major international producer of branded beverage and snack food products.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

PEP is trading at a premium to all four valuations above. Since PEP's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 36.8% premium to its calculated fair value of $60.67. PEP 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%

PEP earned two Stars in this section for 1.) 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. PEP 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 1952 and has increased its dividend payments for 41 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) or Treasury bond? 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

The NPV MMA Diff. of the $479 is below the $500 target I look for in a stock that has increased dividends as long as PEP has. If PEP grows its dividend at 5.2% per year, it will take 1 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. PEP earned a check for the Key Metric 'Years to >MMA' since its 1 years is less than the 5 year target.

Memberships and Peers: PEP is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The Coca-Cola Company (KO) with a 2.6% yield, Dr Pepper Snapple Group, Inc. (DPS) with a 3.1% yield and Fomento Econ (FMX) with a 1.2% yield.

Conclusion: PEP did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks PEP as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $81.80 before PEP's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 41 years of consecutive dividend increases. At that price the stock would yield 2.7%.

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 5.3%. This dividend growth rate is below the 5.2% used in this analysis, thus providing no margin of safety. PEP has a risk rating of 1.75 which classifies it as a Medium risk stock.

PEP enjoys relatively stable end markets, predictable cash flows and leading global market positions. The U.S. soft drink consumption improved in 2012 and should continue to improve in 2013. Long-term the company will have to focus on international markets for growth. The company's diverse portfolio can mitigate the impact of poor conditions in any one of its markets. PEP's direct store delivery system allows it to leverage its impressive portfolio of brands.

My concerns are PEP's debt as a percent of total capital and its valuation. Since I last reviewed PEP, debt as a percent of total capital is up one point to 57%, while free cash flow payout fell from 60% to a reasonable 49%. PEP is trading above my calculated fair value of $60.67, so for now, I will monitor the stock closely and wait before adding to my position.

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 PEP (2.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

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Tags: [PEP] [KO] [DPS] [FMX]

Weekly Links: May 26, 2013

2013-05-26T02:30:00.000-05:00

The Wealth Builder Carnival published: 7 Dividend Stocks Sending More Cash To Shareholders

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

- Dividend Growth Investor presented Are we in a REIT bubble?
- The Dividend Guy presented Can Disney’s Wonderful Realm Please Investors As Well as My Kids?
- Hello Suckers presented An ultimate dividend payer

The DIV-Net Featured Articles

Articles from D4L-News:

Mid-Cap Dividend Stocks Yielding Over 6%
The stock screen was meant to identify companies that are paying out dividends at a sustainable rate, at least at first glance. A payout ratio of below the industry average would give a preliminary indication that the dividends are manageable when compared with other companies with high yields. I also looked for companies whose price has not changed that much in the past four weeks. This way, we may identify companies that have missed some of the recent run and uncover potentially underpriced stocks. Prospect Capital Corporation was found but I have recently highlighted the stock so I will not duplicate that here. That leaves us with four stocks that we will look at here...

Dividend Stocks For The Next 20 Years
While none of us have a crystal ball, I will attempt to show how 8 stocks that currently pay a dividend could potentially become the dividend winners over the next 20 years. It might or might not replicate what was shown in the previous article, but I believe these 8 stocks have the absolute potential of doing very nicely. Ironically, 6 of the 8 stocks are held in the Team Alpha Retirement Portfolio already. 8 Stocks That Could Be The Dividend Winners Of The Future...

These Dividend Stocks Are Undervalued
One quantitative screen, which investors can run to identify potential undervalued stocks is to look for low PEG ratios, a metric which is calculated by combining the P/E multiple and the consensus earnings growth rate. Analysts aren't always correct, of course, so it's important to combine looking at the PEG ratio with additional analysis. We decided to also screen stocks which are "cheap" by this measure for their dividend yield in order to potentially identify interesting names, which investors can research further. Using data from Fidelity, here are five stocks with a market capitalization of $1 billion or more, PEG ratios of 0.9 or lower, and dividend yields of 3% or higher...

Dividend Stocks With Really Cheap Price Ratios
Dividends are great, not only because you get cash in your pockets. It’s also a symbol for the ability of a company to share its profits with the shareholders of the company. Dividends are good but they are better when the company is cheaply priced. This month, I started a screen serial of the cheapest stocks from several major sectors. Today, I observe financial stocks with a large market capitalization (over USD10 billion) and a positive dividend yield.Here are my favorite stocks...

Solid Energy Dividend Stocks
In today's low-yield environment investors are scrambling to make up the paltry income found in bonds and are increasingly looking to higher-yielding stocks. In some cases investors are taking on too much risk for the reward of a few extra dollars of income. However, in the case of these three stocks to follow, investors can get their desired income by investing in companies with a secure future. That's why these three stocks are some the best dividend payers in the energy sector today...

Click Here More Dividend News

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

D4L-Premium Services Updated:
The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (May edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

(Photo: Sachin Ghodke)

April 2013 Pocket Change Portfolio Performance

2013-05-25T02:30:00.000-05:00

Dividends Received

Total dividends received during the month were $1,022.68, consisting of:

- $23.49 Automatic Data Processing, Inc. (ADP)
- $142.56 ConocoPhillips (COP)
- $135.45 Community Trust Bancorp Inc. (CTBI)
- $74.18 Genuine Parts Company (GPC)
- $51.68 Illinois Tool Works Inc. (ITW)
- $56.70 Kimberly-Clark Corporation (KMB)
- $68.88 The Coca-Cola Company (KO)
- $48.14 Leggett & Platt, Incorporated (LEG)
- $34.50 Lockheed Martin Corporation (LMT)
- $54.08 Medtronic, Inc. (MDT)
- $11.04 Owens & Minor Inc. (OMI)
- $51.60 Pepsico, Inc. (PEP)
- $99.20 Piedmont Natural Gas Co. Inc. (PNY)
- $21.28 Sysco Corporation (SYY)
- $133.92 Universal Health Realty Income Trust (UHT)
- $15.98 Wal-Mart Stores Inc. (WMT)

Annualized Dividend Income

Including new purchases and dividend increases, my annual PCP dividend income is now $10,303.08 at the current dividend rates. This is up $373.72 from last month's $9,929.36 amount. The PCP has never experienced a monthly decline in annualized dividend income.

Portfolio Returns

- Year-to-date: 16.0%
- Life-to-date: 19.4% (annualized)

That's it for this month. The next PCP report will be mid-to-late June. Thanks for for reading!

Full Disclosure: Long all the aforementioned securities. See a list of all my dividend growth income holdings here.

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(Photo: Arcelia Vanasse)

Tags: [ADP] [COP] [CTBI] [GPC] [ITW] [KMB] [KO] [LEG] [LMT] [MDT] [OMI] [PEP] [PNY] [SYY] [UHT] [WMT]

6 Confident and Secure Companies Boosting Dividends

2013-05-24T02:30:00.000-05:00

If income investing were as simple as picking the stock with the highest yield, everyone would be an expert. Most assume (rightfully so) that yield is heavily influenced by risk, but much more goes into determining yield. The industry the company operates in, legal considerations (REITs and MLPs), maturity and growth potential all have an effect on an individual stock's yield, along with the company's ability to grow its dividend.

Below are some companies that understand the importance of growing their cash dividends:

Extra Space Storage, Inc. (EXR) operates as a real estate investment trust (REIT) in the United States. May 22nd the company increased its quarterly dividend 60% to $0.40 per share. The dividend is payable on June 28, 2013 to stockholders of record at the close of business on June 14, 2013. The yield based on the new payout is 3.7%.

JPMorgan Chase & Co. (JPM), a financial holding company, provides various financial services worldwide. May 21st the company increased its quarterly dividend 2.6% to $0.38 per share. The dividend is payable July 31, 2013, to stockholders of record at the close of business on July 5, 2013. The yield based on the new payout is 2.8%.

Xcel Energy Inc. (XEL) engages in the generation, purchase, transmission, distribution, and sale of electricity in the United States. May 21st the company increased its quarterly dividend 3.7% to $0.28 per share. The dividend is payable July 20, 2013, to shareholders of record on June 20, 2013. The yield based on the new payout is 3.7%.

American States Water Company (AWR) provides water, electric, and contracted services in the United States. May 21sth the company increased its quarterly dividend 14.1% to $0.405 per share. The dividend is payable September 3, 2013 to shareholders of record at the close of business on August 15, 2013. The yield based on the new payout is 2.9%.

Umpqua Holdings Corporation (UMPQ) operates as the holding company for Umpqua Bank and Umpqua Investments, Inc. that provide commercial, and retail banking and brokerage services to corporate, institutional, and individual customers in the United States. May 20th the company increased its quarterly dividend 50% to $0.15 per share. The dividend is payable July 15, 2013 to shareholders of record as of June 28, 2013. The yield based on the new payout is 4.3%.

Orchids Paper Products Company (TIS) engages in the manufacture and sale of tissue products for the at-home market in the United States. May 16th the company increased its quarterly dividend 16.7% to $0.35 per share. The dividend is payable June 21, 2013 to stockholders of record at the close of business on June 7, 2013. The yield based on the new payout is 4.3%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: No position in the aforementioned securities. See a list of all my dividend growth holdings here.

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(Photo Credit)

Tags: [JPM] [AWR] [EXR] [XEL] [UMPQ] [TIS]

John Wiley & Sons (JW-A) Dividend Stock Analysis

2013-05-23T02:30:00.000-05:00

Linked here is a detailed quantitative analysis of John Wiley & Sons (JW-A). Below are some highlights from the above linked analysis:

Company Description: John Wiley & Sons produces print and electronic products, providing content and solutions to customers worldwide.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

JW-A is trading at a discount to 1.) and 3.) above. Since JW-A's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 29.0% discount to its calculated fair value of $55. JW-A 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%

JW-A 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%. JW-A 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 1982 and has increased its dividend payments for 19 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) or Treasury bond? 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

JW-A earned a Star in this section for its NPV MMA Diff. of the $5,856. This amount is in excess of the $1,600 target I look for in a stock that has increased dividends as long as JW-A has. If JW-A grows its dividend at 15.4% per year, it will take 1 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. JW-A earned a check for the Key Metric 'Years to >MMA' since its 1 years is less than the 5 year target.

Memberships and Peers: JW-A is and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Pearson plc (PSO) with a 5.0% yield, Thomson Reuters Corporation (TRI) with a 3.8% yield and Meredith Corporation (MDP) with a 3.8% yield.

Conclusion: JW-A 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 JW-A as a 5-Star Very Strong stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $67.05 before JW-A's NPV MMA Differential decreased to the $1,600 minimum that I look for in a stock with 19 years of consecutive dividend increases. At that price the stock would yield 1.4%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,600 NPV MMA Differential, the calculated rate is 10.6%. This dividend growth rate is lower than the 15.4% used in this analysis, thus providing a significant margin of safety. JW-A has a risk rating of 1.75 which classifies it as a Medium risk stock.

The publishing industry has faced hard times over the last couple decades as consumer consumption has steadily moved to electronic mediums. JW-A has built an economic moat with its science, technology, medical and scholarly publishing units.

Its low free cash flow payout, low debt to total capital have always been a plus. However, its low current yield historically kept it from serious consideration. JW-A will likely increase its dividend in June. Trading at a 29% discount to its calculated fair value price of $55.00, it is a stock I am currently watching very closely.

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 JW-A (0.0% of my Dividend Growth Portfolio) and was long MDP in my High-Yield portfolio. See a list of all my dividend growth holdings here.

Related Articles:
- T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis
- Occidental Petroleum Corporation (OXY) Dividend Stock Analysis
- Nike, Inc. (NKE) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- More Stock Analysis

Tags: [JW-A] [PSO] [TRI] [MDP]

A Winning Investment Strategy

2013-05-21T02:30:00.000-05:00

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 is a significant reason for their failure.

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

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.
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.
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. As the result of the 2008 market downturn, many people are more 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 even when the market is declining with no bottom in sight. 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 Genuine Parts Co. (GPC), Procter & Gamble Co. (PG), Emerson Electric (EMR), 3M Company (MMM) and Coca-Cola Company (KO) 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 Microsoft Corporation (MSFT), International Business Machines Corp. (IBM) and Aflac Inc. (AFL) 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), Walgreen Co. (WAG), General Dynamics (GD) and ConocoPhillips Co. (COP), 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 Exxon Mobil Corporation (XOM), Occidental Petroleum Corporation (OXY) and Wal-Mart Stores, Inc. (WMT) all have at least two of these key dividend metrics: a strong dividend growth rate, longevity of dividend growth, consistent high growth and a short period to match the yield on the 20 year treasury.

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 GPC, PG, EMR, MMM, KO, MSFT, AFL, JNJ, GD, COP, XOM, WMT in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

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(Photo Credit)

Tags: [GPC] [PG] [EMR] [MMM] [KO] [MSFT] [IBM] [AFL] [JNJ] [WAG] [GD] [COP] [XOM] [OXY] [WMT]

Johnson & Johnson (JNJ) Dividend Stock Analysis

2013-05-20T02:30:00.000-05:00

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

Company Description: Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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 premium to all four valuations above. The stock is trading at a 47.4% premium to its calculated fair value of $58.16. JNJ 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%

JNJ earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. JNJ 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 51 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) or Treasury bond? 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 $1,137. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as JNJ has. The stock's current yield of 3.02% exceeds the 2.71% estimated 20-year average MMA rate.

Memberships and Peers: JNJ is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The AbbVie Inc. (ABBV) with a 3.5% yield, Eli Lilly & Co. (LLY) with a 3.5% yield and Bristol-Myers Squibb Company (BMY) with a 3.5% yield.

Conclusion: JNJ did not earn any Stars in the Fair Value section, earned two Stars 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 JNJ as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $117.37 before JNJ's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 51 years of consecutive dividend increases. At that price the stock would yield 2.2%.

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 4.2%. This dividend growth rate is below the 7.3% used in this analysis, thus providing a significant margin of safety. JNJ has a risk rating of 1.75 which classifies it as a Medium risk stock.

JNJ is uniquely situated in the Healthcare industry enjoying a diverse revenue base and an excellent research pipeline. The company's many advantages include: products that are largely immune from economic cycles, minimal reliance on any single product category (or customer), substantial financial resources and a significant global presence.

In June 2012, JNJ acquired Synthes (a Swiss company that makes skeletal fixation implants and instruments) for $19.7 billion. This deal should provide important operating synergies, drive gains in medical devices and is projected to be EPS accretive EPS by $0.10-$0.15 in 2013. In addition, new drugs such as Xarelto and Zytiga should provided needed growth in the pharmaceuticals sector.

JNJ is currently trading well above my calculated fair value of $58.16. Also, its free cash flow payout of 71% is slightly above my target maximum of 70%. As such, I will likely wait for a more opportune time before adding to my position.

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 (5.0% of my Dividend Growth Portfolio) and long in ABBV. See a list of all my dividend growth holdings here.

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Tags: [JNJ] [ABBV] [LLY] [BMY]