Dividend Aristocrats Strike Back

In a week that saw major US indexes fall to fresh multi year lows, there is a group of investors who still remain optimistic. No, this is not a scam touting penny stocks that would bring instant riches. It’s also not a post about some computerized technical analysis program that will turn stones into diamonds.

The strategy is called dividend growth investing, and it is the fundamental way of picking shareholder friendly stocks, which reward their owners with an increasing stream of dividend income. Some of the best dividend stocks are included in the Dividend Aristocrats index, which has outperformed the S&P 500 over the past 5, 3 and one years. Despite some setbacks in 2009 like the cuts from Pfizer (PFE) and State Street (STT), the number of solid companies increasing dividends keeps rising.

The Sherwin-Williams Company (SHW), which engages in the development, manufacture, distribution, and sale of paints, coatings, and related products, boosted its dividends for the thirty first consecutive year. The new dividend increase was rather modest, from 0.35 to 0.355/share and much smaller than the ten year average. Given the tough housing market however, I consider this dividend increase at a time when CEO’s are cutting dividends to preserve cash for projects that won’t yield much, a big dedication to long-term shareholders. The stock currently yields 3.10%. Check out my analysis of SHW.

Integrys Energy Group (TEG), which operates as a regulated electric and natural gas utility company in the United States and Canada, increased its quarterly dividends payment to $0.68/share, which marked the fifty first consecutive year of increased payouts. This utility company currently yields 7.00%.

Coca Cola (KO), which engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide, raised its quarterly dividend by 8% from $0.38 to $0.41 per common share. The company behind one of the worlds best known consumer brands has rewarded its shareholders with an uninterrupted streak of increased dividends for 47 years. One of Coke’s most prominent shareholders includes Warren Buffett, who owns 200 million shares his favorite soft drinks manufacturer. The stock currently yields 3.50%. Check out my analysis of Coke and Pepsi.

Abbott (ABT), which engages in the development, manufacture, and sale of health care products worldwide, increased the company's quarterly common dividend 11% to $0.40 per share. This marked the company’s 37th year of consecutive dividend increases. The stock currently yields 2.60%. Check out my analysis of ABT.

Albemarle Corporation (ALB) raised its quarterly dividend payments by 4.20% to $0.125/share. The company is a dividend achiever, which has increased its dividends for 14 consecutive years. The stock currently yields 2.40%.

ITT Corporation (ITT) raised its quarterly dividends by 22% to $0.2125/share. The stock currently yields 1.70%.

The Andersons, Inc. (ANDE) raised its quarterly dividends by 3% to 0.0875/share. The stock currently yields 2.40%.

Rogers Communications (RCI) increased the annual dividend rate from $1.00 to $1.16 per share. The stock currently yields 4.70%.

Comcast (CMCSA) raised their dividend 8% to $0.0675 per share quarterly. The stock currently yields 2.10%.

XTO Energy (XTO) increased its quarterly cash dividend by 4.20% to 12.5 cents per share. the stock currently yields 1.605.

Public Service Enterprise Group (PEG) announced a 3.1% increase in its quarterly dividend from $0.3225 to $0.3325 per share. This utility stock currently yields 4.50%.

Tim Hortons Inc.(THI) boosted its quarterly dividend by 11.1% to $0.10. The stock currently yields 1.30%.

Disclosure: Author is long SHW and KO.

Comments

[market ace:]

If you call these aristocrat dividend stocks you are a joke. There are many many much better dividend stocks out there compared to your pathetic list.

Feb 23 10:33 AM

[Marcap:]

I see no advantage in purchasing shares of any company simply because they pay a dividend, especially when their share prices are already so greatly inflated beyond book value. After all, what advantage would there be in receiving a 3 or 4% dividend when the stock could easily drop 50% or more at any time.

One lesson that many investors fail to learn, is that when companies raise dividends, more often than not, it is merely in an attempt to try and help support their falling share prices, rather than to distribute profits.

In Sherwin-Williams case for example, its current liabilities exceed its current assets, and that usually spells trouble for any company. So raising its dividend was anything but a good idea, at least from an investor perspective.

Feb 23 11:00 AM

[kewgardens:]

Would you be kind enough to give us some of your favorites.


On Feb 23 10:33 AM market ace wrote:

> If you call these aristocrat dividend stocks you are a joke. There
> are many many much better dividend stocks out there compared to your
> pathetic list.

Feb 23 02:31 PM

[Universal H...:]

God help us...


On Feb 23 10:33 AM market ace wrote:

> If you call these aristocrat dividend stocks you are a joke. There
> are many many much better dividend stocks out there compared to your
> pathetic list.

Feb 23 07:59 PM

[weiwentg:]

My favorites at this time are Coke and Abbott. I think these two have the best competitive advantages. If you buy a dividend stock which has no or narrow competitive advantages, I think there's a good chance it will cut its dividend.

Feb 23 08:46 PM

[Dividend Gr...:]

Market Ace,

ABT,KO, TEG and SHW are indeed dividend aristocrats. They are amoung the few that have consistently raised dividends every year for more than a quarter of a century. That's not a small achievement

Marcap,

It is true that some companies raise dividends when they cannot afford to. But most companies that have raised their payments for more than a decade and can keep doing that are sending fundamentally strong signals. If you can keep raising your dividend in a recession, you must have a wide moat business. If you check the dividend aristocrats list in 2009, there have been 12 increases and only 2 cuts. The business models of most aristocrats and achievers are pretty anticyclical. You don't get to raise dividends for more than 25 years just by accident.
In a bear market, when your stock loses 50%, but your dividend check is the same and even gets increased, what do you care?

Dividends have accounted for the majority of total returns over the past few decades. Stock prices go up and down and few if any investors could take advantage of market timing. Thus a simple buy and hold with a dividend reinvestment could do miracles for you no matter where the stock market goes. As long as your dividend is stable and/or going up.






On Feb 23 10:33 AM market ace wrote:

> If you call these aristocrat dividend stocks you are a joke. There
> are many many much better dividend stocks out there compared to your
> pathetic list.

Feb 24 03:14 AM

[axelrod608:]

Dividend "yields" less than inflation and which are also taxable just don't sound like a good deal to me, especially when you add the stock price risk.

I've been collecting 10% - 30% yields on Canadian Royalty Trusts and American MLP's for years. Now they're beaten down, but at least after adjusting for inflation, currency exchange and taxes there's a profit.

Feb 24 09:54 AM

[Marcap:]

"ABT,KO, TEG and SHW are indeed dividend aristocrats. They are amoung the few that have consistently raised dividends every year for more than a quarter of a century. That's not a small achievement"

You are joking, right? Take Abbott Laboratories (ABT) for just one example. While Abbott's stated book value is $12.47 per share, remove the huge amount of stated Goodwill and other Intangible crap totaling more than $15.8B from its Balance Sheet, and net book value plunges to a mere $1.35 per share. Now if anyone thinks that paying $54.42 (current market) for a stock with a net book value of only $1.35 is justified simply because of a current 2.7% dividend, boy do I have a deal for them.

Feb 24 11:41 AM

[axelrod608:]

Here's a true dividend aristocrat - Harvest Energy (HTE) . Today it's selling under $5 and the monthly dividend is $C .30 Do the math. Even after adjusting for currency exchange and withholding tax, the yield is over 50%.

Moreover, it has better upside than SHW or KO. It was selling fo $20 - 25, so when oil prices go back up you have a 2X, 3X, maybe as much as 5X cap gain possibility.

Only if gas and oil go to zero do you lose.

Feb 24 01:36 PM

[Dividend Gr...:]

Marcap,

You are looking at only one side of the story - tangible book value. I look at stocks as an asset that generates cash flows. EPS has almost doubled since 1999. Revenues have increased from 13 bln to 29 bln.

You are not understanding ABT's business. Here is the description: This diversified life science company is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.

Intangibles such as patents are important for this company to innovate and sell new products and generate revenues. Once you have created a medical product like a drug, your variable cost is pretty small. How do you account for that in your valuation?

You are not going to make any $$$ no matter what the balance sheet says, unless the financial situation is directly monetized for you as a shareholder of ABT. Even if the company had $60/share in cash unless ABT distributes them back to you as a dividend, what good is it for the stock price?

Axelrod,

It is highly suspicious that HTE will keep paying out $.24/share every month. What would happen in 2011 when canadian trusts begin getting taxed less favorably?
Other trusts such as AAV, PGH and PWE have recently cut their distributions. If HTE maintains their distributions that's good for you. If

Anyways, I do like some MLPs, but I would caution you not to chase high yielding stocks. Look for sustainable dividend payments/distributions... Concentrating all of your portfolio in MLPs and Canadian Trusts is a recipe for disasterin the making. I am a big fan of diversification.




On Feb 24 11:41 AM Marcap wrote:

> "ABT,KO, TEG and SHW are indeed dividend aristocrats. They are amoung
> the few that have consistently raised dividends every year for more
> than a quarter of a century. That's not a small achievement"
>
> You are joking, right? Take Abbott Laboratories (seekingalpha.com/symbo...)
> for just one example. While Abbott's stated book value is $12.47
> per share, remove the huge amount of stated Goodwill and other Intangible
> crap totaling more than $15.8B from its Balance Sheet, and net book
> value plunges to a mere $1.35 per share. Now if anyone thinks that
> paying $54.42 (current market) for a stock with a net book value
> of only $1.35 is justified simply because of a current 2.7% dividend,
> boy do I have a deal for them.

Feb 25 04:06 AM