81 Dividend Growers to Consider

Standard & Poor's evaluated companies in the S&P 1500 as of June 15, 2009 that had the following characteristics.

• paid increasing annual cash dividends for the past ten years

• 2009 estimated coverage and 2010 ratio of at least 2-to-1 (based on street estimates divided by the current 12 month indicated dividend rate)

As S&P notes, and I strongly concur, this is not a buy list, but a starting point for investors who are interested in dividend growth stocks. Undoubtedly, the current economic environment has negatively impacted a number of companies and their dividend practices.

Full View

Source:

Standard & Poor's (.xls)

Comments

[BlueOkie:]

2009 estimated coverage and 2010 ratio of at least 2-to-1 (based on street estimates divided by the current 12 month indicated dividend rate)


I have no idea what this means

Jun 24 08:18 AM

[David I. Te...:]

Esstentially the dividend payout ratio is less than 50% based on 2009 and 2010 earnings estimates.


On Jun 24 08:18 AM BlueOkie wrote:

> 2009 estimated coverage and 2010 ratio of at least 2-to-1 (based
> on street estimates divided by the current 12 month indicated dividend
> rate)
>
>
> I have no idea what this means

Jun 24 08:41 AM

[David Van K...:]

If I counted right, 46 of the 81 companies listed pay less than 2.5% initial yield. In most instances, this is simply too little to be worthwhile as an income stock. I use a minimum 3% base requirement, some investors use an even higher figure. Safety and consistency are two very important points to consider when using a dividend growth strategy, but initial yield is probably the most fundamental of them all.

Jun 24 11:12 AM

[donzelion:]

While I share David's priorities (yield, safety, consistency), I do take modest positions in companies with slightly lower yields for the sake of sectoral diversification (e.g., some industries are allergic to dividends, others consistently overdo it - like financials up to '08, and I don't want my portfolio to consist entirely of mega-caps).

Jun 24 03:59 PM

[Living4Divi...:]

Hi - terrific article - I like the focus on dividend safety and dividend supportability (dividend coverage).

Question: The dividend coverage ratio is the classically used gold standard for predicting dividend safety. David - A while ago you published a terrific article that said ROE was a good predictor of dividend safety.

Because I am an income investor, I am very interested in dividend safety. David - In your opinion, which is better, ROE or coverage? Have you seen any studies to support a conclusion?

I

Jun 26 08:29 AM

[David I. Te...:]

I do not think ROE or coverage can be looked at on a standalone basis. ROE provides an investor with a GAAP looked at earnings return while coverage provides some insight into the quality of the company's actual "cash flow". An important aspect of dividend growth investing is it does provide a window into the cash flow quality of a company.


On Jun 26 08:29 AM Living4Dividends wrote:

> Hi - terrific article - I like the focus on dividend safety and dividend
> supportability (dividend coverage).
>
> Question: The dividend coverage ratio is the classically used gold
> standard for predicting dividend safety. David - A while ago you
> published a terrific article that said ROE was a good predictor of
> dividend safety.
>
> Because I am an income investor, I am very interested in dividend
> safety. David - In your opinion, which is better, ROE or coverage?
> Have you seen any studies to support a conclusion?
>
> I

Jun 27 10:43 AM

[No Free Cake:]

David, can you help a novice with some of these terms?

You said in an earlier comment in this thread that "Coverage" was essentially "Payout Ratio". I understand payout ratio as Dividends / Earnings.

You just said Coverage and ROE are both good to use because one uses cash and the other a GAAP look. Fair enough.

But, if it's important to have a cash and GAAP view, then how can Coverage be essentially the same as Payout Ratio? Isn't one GAAP oriented while the other cash?

Jun 28 07:34 PM