10 Dividend Stocks to Buy Now 22 comments
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Below is my list of the top ten dividend-paying stocks to consider for purchase. Keep in mind that these stocks are not the best, neither are they the greatest companies in the U.S. However, the companies listed below have a proven track record of increasing their dividend over an extended period of time. Dividend increases are the best reflection of management's commitment to the shareholder while attempting to grow the company or increase cashflow.
From bottom to top, my companies are:
10. Exxon Mobil (XOM): XOM has increased its dividend every year for the past 26 years. Additionally, the company is within 23% of its 52-week low with a dividend payout ratio of 41%.
9. Abbott Laboratories (ABT): ABT has increased its dividend every year for 36 years in a row. ABT is within 22% of the 52-week low with a dividend payout ratio of 41%. I previously wrote about ABT, displaying the altimeter for ABT on a long term basis.
8. McCormick & Co. (MKC): MKC has increased its dividend every year for 22 years. Also, MKC is within 20% of its 52-week low with dividend payout ratio of 42%.
7. Becton Dickinson (BDX): BDX has increased its dividend every year for 36 years in a row. BDX is within 19% of the 52-week low with a dividend payout ratio of 27%. I mentioned BDX on May 4, 2009, suggesting that this stock should be bought. On August 19, I reiterated my claim that BDX was worthy of consideration, especially after Warren Buffett himself jumped on board after our earlier posting.
6. Piedmont Natural Gas (PNY): PNY has increased its dividend every year for 29 years in a row. PNY is within 16% of the 52-week low with a dividend payout ratio of 69%.
5. Northwest Natural Gas (NWN): NWN has increased its dividend every year for 54 years in a row. NWN is within 16% of the 52-week low with a dividend payout ratio of 59%. I previously mentioned NWN on September 22 and again on October 3.
4. Bard Inc. (BCR): BCR has increased its dividend every year for 54 years in a row. BCR is within 14% of the 52-week low with a dividend payout ratio of 13%. On April 23, I mentioned that BCR has a very low debt level which allows the company to weather further economic declines. On August 26, after gaining 10.11% in four months, I recommended selling this stock.
3. Weyco Group (WEYS): WEYS has increased its dividend every year for 28 years in a row. WEYS is within 13% of the 52-week low with a dividend payout ratio of 54%. Weyco, the maker of Florsheim shoes, was featured on Dividend Inc. on July 6. Two negatives for this company are that its payout ratio is so high and the stock is not very liquid.
2. Cardinal Health (CAH): CAH has increased its dividend every year for 16 years in a row. CAH is within 10% of the 52-week low with a dividend payout ratio of 32%. CAH was featured on June 4 and is considered, in my opinion, to be one of the most underpriced healthcare stocks out there. The current low price of CAH is due to the spinoff of the CareFusion (CFN) unit. However, the upside projections of CAH are, at minimum, in the $40 range.
1. Wal-Mart (WMT): WMT has increased its dividend every year for 33 years in a row. WMT is within 8% of the 52-week low with a dividend payout ratio of 30%. WMT was first mentioned on June 18 when I pointed out the fact that with such an extended range bound price for the stock there has to be value accruing in the stock. A further examination of WMT was offered on September 19 and I determined that, on a price-to-dividend basis, WMT is poised in increase in value. One significant downside for this stock is the large increase in shares outstanding in the last few years.
Disclosure: Long NWN
Disclosure: Long NWN
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This article has 22 comments:
I just bought NWN (25%) and CEPH (25%) today. In addition, I'm holding BOH (50%)... a dividend achiever of 31 years. As outlined in my blog, I only hold a maximum of 5 stocks at a time, however I prefer to hold 3 stocks at a time.
At this point, it is a close race between CAH and WMT right now. CAH and other healthcare stocks, as an industry group, are severely underpriced. How I would fund my next transaction is by selling either my 25% in CEPH (considered a speculation) or half of my position in BOH. BOH is in the positive column for me right now, so the transactional costs are easily offset. Of course, I'm hoping for further declines in any one of the stocks above.
I tend to rotate in and out of gains versus the best alternative that is hitting a new low. I have already rotated in and out of CAH and BCR profitably (10% in less than 5 months each) this year. Last year and prior years were quite profitable using this approach as noted in my sell recommendation page. I was able to exceed the annual dividend yields by a wide margin while compounding the profits into new, less expensive alternatives.
My approach sounds inconsistent with the staid dividend approach but my battle scars have been relatively few since 2004.
Your thoughts are appreciated.
-Touc
On Oct 09 07:19 PM Dividend Growth Investor wrote:
> So are you planning on purchasing these stocks in the future? I noticed
> you only owned NWN...
Because of that, I would not consider several stocks on your list for a dividend strategy simply because their initial (current) yield is too low. I use a 3% minimum requirement (with occasional exceptions). So, for example, XOM would not be a candidate, because its yield is only 2.4%. Cardinal Health's is 2.6%. Bard's is less than 1%.
On the other hand, you seem to focus on growth and growth potential, and you rotate in and out of stocks. I don't suggest paying no attention to growth potential, but it is much less a factor in a focused dividend strategy--where the important factors are initial yield; record and likely continuation of dividend increases; overall financial health of the company (leading to sustainablility and increasability of the dividend); and buying at favorable valuations. Also, in contrast to your rotation approach, I don't churn my dividend stocks much at all--it's a long-term strategy based on increasing dividends and compounding them through re-investment.
Different strokes for different folks, I guess. Best of luck with your approach.
Dave
Also, since you are essentially swing trading, it would seem that a 10 year dividend history is less important than current yield.
Thanks for your ideas.
BD
I wouldn't invest in a dividend paying company unless I could say argue that they were the best or greatest companies I could find. And I wouldn't rotate in and out of my investments either. That seems to negate the power of dividend growth, but as you say:
"My approach sounds inconsistent with the staid dividend approach but my battle scars have been relatively few since 2004."
The important thing is finding a trading or investing style that works for you and suits your own personality.
Best of luck.
Thank you for reading and commenting on my article.
The virture of such a method to investing is that it eliminates much of the guesswork associated with the stocks of interest. Dividend Achievers and Dividend Aristocrats are both part of the the mix of stocks that I invest in. This leaves me with approximately 300 companies to focus on.
Additionally, I'm focused on relative values rather than absolute values. In the books Relative Dividend Yield by Anthony Spare and Dividends Don't Lie by Geraldine Weiss, the emphasis is on the importance of selling when a stock is at a historical high end of the range and to buy when a stock is at a historical low end of the range. I have pre-empted this process by buying at or near the low end of the range while not selling until a better alternative presents itself. This is in contrast to the idea of selling at some arbitrary point in the future. This concept is drawn out even further when we consided Edson Gould's altimeter which I have presented on my site with various stocks and the Dow Industrials.
Another issue that I've tried to deal with is the matter of the "long term." In my opinion, the long term has been maligned though discussions of what a person could make when investing. All examples of the long term exceed the investment time frame of each individual investor. This means that, in reality, the long term is probably a period of 10 to 15 years. Few people have the ability to 1) have a method that they'll stick to and 2) that can be applied over 30 to 100 years.
Even Warren Buffett is no longer the investor he was back in the 60's. Buffett's massive wealth doesn't allow him to get the same mileage out of his investments. In fact, the recent 10% yielding deals that he was able to work out with JPM and Goldman Sach demonstrates his inabilty to invest the way he really wants to. In a matter of 20-30 years Warren Buffett is no longer a player in the investment arena, albeit a stupendously wealthy non-participant.
Finally, the issue of seeking high current yield often masks the amount of time that you'll wait for the equivalent return from an equally undervalued stock with a low dividend yield. As mentioned before, the low yield might actually be, on a relative basis, a better value than a company with a high yield.
The tendancy is that a high yield acts like a fishhook, it draws you in with the lure of a high dividend yield and keeps you in with the anticipation of the next payment. This could be in direct contrast to the relative value component of the stock you're holding and more logical investment opportunities that are present at any given time.
Again, thanks for your contribution.
-Touc
Thanks for your thoughts on my work.
Since I don't control the title of the articles that are posted on Seeking Alpha, I have to take what they give me. Therefore, the exuberant title may be completely misleading. My Research Recommendations go to only those stocks that are compelling to me personally and that are within 10% of the 52-week low. However, this does not bar me from reviewing or buying any and all the companies that are approaching the 10% parameter.
As an example, my most recent research recommendation was NWN. As the stock was getting closer to the low I was ramping up the research. Data and analysis was coming from my site indicating that I was running the numbers. It wasn't until I had enough compelling factors to hold this stock for the "long term," if forced to, was I able to commit to issuing a research recommendation.
Although I have 10% as a parameter, your comments and evidence suggests that I widening the range to 20% as a means to cast my net wider. I have accounted for this fact on another investment blog that I'm currently co-authoring at New Low Observer www.newlowobserver.blo.... Based on your point, I may actually make the change from 10% to 20%. However, the current article was a response to Dividend4Life's seekingalpha.com/artic... request of my top ten dividend picks.
Regarding your comment that 10 year dividend history might not be so important if I'm swing trading. History means everything when investing in stocks. The purpose of investing with these stocks is to have a backstop provision in case I have to hold the stock longer than anticipated. By using this approach, I'm assuming that whenever I enter into a position, the stock price is going to fall. From this perspective, I better have plan to account for such a reality and likelihood. In this case, I must be compensated for the wait otherwise I'm not investing. I say this even though conventional wisdom suggests that I'm trading instead of investing.
As I've said numerous times before, this approach has provided outstanding results after transaction costs (in a tax deferred account) since 2004.
Thanks for your thoughtful comments Walt17. You may have made the difference in changing my mind on the 10% parameter.
-Touc
On Oct 10 10:21 AM Walt17 wrote:
> I find your methodology interesting. And am considering some of your
> points for incorporating into my own strategy. But it seems that
> some of your picks violate your rules. Specifically, "A stock is
> only considered a "Research Recommendation" when it has fallen within
> 10% of the 1-year low."
>
> Also, since you are essentially swing trading, it would seem that
> a 10 year dividend history is less important than current yield.
>
>
> Thanks for your ideas.
Keep it basic Califa!!! 3 stocks and all your money!!!That's how it works for me!!!
Is a wonderful feeling......Greetings from Calgary.
Your comment brought to mind M*'s Dividend Investor, something they started a few years ago. A bout 2 years ago, they divided their portfolio into 2, called "Harvest" and "Builder".
Harvest focuses on stocks currently paying a high yield, for those who are currently retired, or very close to it.
Builder invests in stocks that have a lower current yield, but can be reasonably expected to raise their dividend in years to come, so buy the time the investor is ready to retire and access the income stream, the return on cost should be quite attractive.
As you say, different strokes for different folks...*s*.
Thanks to you and the commenters for your articles and ideas.
I'm going on the data provided to me by Mergent's Dividend Achievers Summer edition 2009.
-Touc
On Oct 10 12:39 PM jrham wrote:
> I noticed you indicated that WMT has paid a dividend for 33 years.
> When did Sam Walton take Walmart public? I see to recall it was 1972.
On Oct 10 12:39 PM jrham wrote:
> I noticed you indicated that WMT has paid a dividend for 33 years.
> When did Sam Walton take Walmart public? I see to recall it was 1972.
Compared to the other nine, CAH might be the wildcard.
Totally correct that the current price is due to the CFN spinoff. Post-spin, CAH has traded between about $25 and about $28, so there’s a great discount to your $40 target price, but not to recent prices.
Mergent sometimes has an interesting way of calculating what constitutes a dividend increase, by the way. Based on both CAH’s website and Yahoo Finance, CAH held its dividend steady for all declarations from May 2001 through February 2003, then again from May 2003 through February 2005.
But the cumulative “carry-over” from the prior year gave shareholders a higher total dividend amount, so Mergent keeps CAH (and others like it) on their list. The money spends the same, of course, so no big complaint, but it’s not quite the same signal as actually declaring a higher regular quarterly dividend each year.
The good news is that post-spinoff, CAH management has made a strong commitment to dividend increases, including raising the payout ratio to 30% to from its current 20%.
I did quite a lot of research on CAH for an SA article right before the spin-off. Based on your analysis I might have been too cautious on the stock.
But I still think it might be the wildcard on your list.
CAH declarations held steady from May 2001 through February 2003. The dividend was increased on the May 2003 declaration, then stayed at that level through the February 2005 declaration. It was increased (doubled, in fact) on the May 2005 declaration, and an increase has been declared at least annually since then.
Over this cycle, we have seen so many big/stable companies cut their dividends that the selection methodology itself needs looking at. If you had come up with this list in Oct, 08...you would most likely have GE, Dow Chemicals, Textron, Motorola and Pfizer all on your list - they were most definitely at their 52 week low and had been providing stable/increasing dividends for years. As you might know, since then, each one of those companies has slashed their dividends.
Doing some "stress testing" or just simple analysis of how a company's business model may fare under adverse conditions can shed some light on what was to come for these companies. Something along those lines needs to be incorporated into any sort of dividend stock analysis.
For more analysis, check out my blog: youngandinvested.com
On Oct 10 01:58 PM mbkelly75 wrote:
> Not paid a dividend - but paying a RISING dividend. WMT has RAISED
> their dividend for 33 years. It is not quite the same thing as paying
> a dividend at all.
If you get a chance, take a look at the research and sell recommendations on my blog. Using my approach did not come up with the names of GE, Dow Chemicals, Textron, Motorola and Pfizer as prospective investment candidates. As noted on my research recommendation list, none of the stocks appeared as candidate to buy. In fact, I have been fairly outspoken about GE in particular as part of the due diligence that is necessary.
Your critical analysis my research recommendations will conclude that a history of dividend increases is only the first of many parameters in determining the quality of a stock. In that regard we are in perfect agreement.
Again, the list that I generated was solely for the purpose of responding to Dividend4Life article asking for my own list. Ordinarily, I do not provide a wholesale list of "buy" recommendations.
-Touc
On Oct 10 11:44 PM Shishir Nigam wrote:
> As I have commented on Dividend4Life's approach, I don't believe
> the approach to selecting dividend stocks should be merely to choose
> the ones with the longest history of dividend increases along with
> a conservative payout ratio.
>
> Over this cycle, we have seen so many big/stable companies cut their
> dividends that the selection methodology itself needs looking at.
> If you had come up with this list in Oct, 08...you would most likely
> have GE, Dow Chemicals, Textron, Motorola and Pfizer all on your
> list - they were most definitely at their 52 week low and had been
> providing stable/increasing dividends for years. As you might know,
> since then, each one of those companies has slashed their dividends.
>
>
> Doing some "stress testing" or just simple analysis of how a company's
> business model may fare under adverse conditions can shed some light
> on what was to come for these companies. Something along those lines
> needs to be incorporated into any sort of dividend stock analysis.
>
>
> For more analysis, check out my blog: youngandinvested.com