Stock markets are having one of their best years in history. Most averages are up over 50% from their lows in March. As usual, the gains have not been spread around equally. Some of the Dividend Aristocrats have been left behind and represent superior opportunities for value investors.
Dividend Aristocrats are companies in the S&P 500 which have minimum track records of 25 consecutive annual increases for their dividends. However, this elite group has shrunk in the last year. All banks are being removed after dividend cuts. This year, General Electric (GE), Pfizer (PFE) and Masco (MAS) have cut dividends which will take them off the list by next year. But those remaining in the group represent excellent values, many have been left behind in the market surge this year. These were the kind of stocks recommended by top analysts when the markets were at their lows (so much for listening to the "experts" for investment advice) last March. Now many of these companies represent good values.
Eli Lilly (LLY) is a stock I have owned for many years. The last decade was an excellent period for their stock but followed by a terrible time in this decade. Early in this decade the stock was over 100, today it has fallen to 35. Meanwhile their dividend has consistently been raised. Next year's increase should be announced early in 2010 which could take it over $2. At the beginning of this decade, its Prozac lost patent protection but Lilly went forward. Zyprexa, its top selling drug today, will lose patent protection in a few years. However, they've acquired ImClone (IMCL) to become a bio tech and cancer powerhouse. They have many drugs working their way through the pipeline. EPS is forecasted at $4.30 this year and is expected to rise to $4.65 next year. Selling near their low price in this decade, with a 6% yield and a long time Dividend Aristocrat should make Lilly an investment candidate for value investors.
Exxon Mobil (XOM), a Dow stock and new Dividend Aristocrat, is the largest oil company in the world. It's made up of Exxon and Mobil, the two largest companies spun off after Standard Oil was broken up in 1911. The stock has roughly doubled in the this decade, but has not performed well in recent years. The price of 73 is where it was 3 years ago. Their successful 100 year track record along with prospects for future growth should make Exxon a good investment for the long run. EPS is depressed this year after the large decline in oil prices, but next year Exxon is forecasted to earn $5.87. The $1.68 dividend is well covered.
Wal-Mart (WMT), another Dow stock, is one more company so large that everybody knows their business. The stock has been flat in the last decade, trading in the 45-60 zone. Their growth keeps Wal-Mart moving forward allowing them to raise dividends yearly. Growth from expanding their chain of stores, especially in China, should enable them to keep increasing dividends. The stock trades at 52 with a $1.09 dividend. Earnings are forecasted at $3.59 in 2009 and $3.90 next year.
These are just three Dividend Aristocrats. The remainder generally have excellent tracks records which have let them continue increasing dividends even through the credit crises. Dividend Aristocrats deserve more attention for value investors.
Disclosure: Long LLY