Three Dividend Aristocrats - PG, BDX, LEG

Procter & Gamble (PG), a Dow stock, is a 170 year old manufacturer of some of the most famous brands in the US. Typically the brands are #1 in their businesses and include: Head & Shoulders, Olay, Braun, Gillette, Crest, Oral-B, Dawn, Duracell, Tide, Bounty, Charmin, Pampers, etc. P&G has increased annual dividends for more than 50 years. This quality business has an excellent track record of growth for dividends & stock prices.

However, when markets had started their descent at the start of this decade, P&G plunged from 120 to the 50s, a house of bricks caved in on their business model. Since then they have rebounded and the stock price is above its highs one decade ago (adjusted for a 2-1 stock split). P&G has felt the effects of this recession with a decline in EPS for FY2009 (ending June 30) and another small earnings decline is estimated for next year. EPS should be $4.00 in FY2010 which will easily cover the $1.32 dividend along with a modest increase next year (to keep their track record of annual dividend increases intact).

Becton Dickinson (BDX) is a medical technology company manufacturing medical supplies, devices, laboratory equipment, and diagnostic products worldwide for over 110 years. They have an excellent track record of growing dividends and the stock has risen accordingly. 10 years ago the stock was under 10 and rose to 90. But the current recession hurt the stock, causing it to sink to 60. The stock held up well during the market sell-off by trading sideways in the 60s. Now it's 73 with a yield of almost 2% from the $1.32 dividend. EPS is expected to increase 2% to over $5.00 in 2009 and another increase of 10% is expected next year.

Legget Platt (LEG), founded in 1883, is another Dividend Aristocrat which has had a very tough time in the recession. They have 4 divisions, including one selling parts to car companies and another selling residential furnishings. Earnings have been hit so hard they don't cover the dividend. In Q4 of 2007 (just prior to the recession), LEG raised the quarterly dividend from 18¢ to 25¢. In Q3, 2009, they upped the rate by a penny even though they are not earning this rate. However, it will be sufficient to keep them in the group assuming the rate is maintained through 2010. EPS for 2009 is forecasted at 75¢ and is expected to increase to only $1.06 next year. Their dividend is at risk.

Masco (MAS), former Dividend Aristocrat, cut theirs early this year when earnings did not support the dividend. The stock is just under $20 and the 5+% yield tells the story, with high yield comes risk. Very venturesome investors might be interested in the high yield but many other investors will pass.

Dividend Aristocrats are an excellent source of ideas for very smart investment. However each one needs to be investigated before investing.

Disclosure: no positions

Comments

[JKS21:]

Not sure about the comparison of 120 high to the low 50s. The stock has never seen a high of 120, I am assuming the author is adjusting it for split. If so then do the same for the lows.

Nov 13 10:18 AM

[OHEngineer:]

P&G hit 118 intraday back in Jan 2000 and dropped to around 80 two weeks later with the botched Warner Lambert/American Home Products acquisition deal and dropped again to 53.25 intraday in March 2000 when the Dot coms started to wilt. The stock has split 2:1 since that time so the split adjusted range would have been 59 and 26.13. The stock traded in the mid 70's in November 2007.

Nov 13 01:58 PM

[JKS21:]

sorry, am i missing something ?

www.google.com/finance...

On Nov 13 01:58 PM OHEngineer wrote:

> P&G hit 118 intraday back in Jan 2000 and dropped to around 80
> two weeks later with the botched Warner Lambert/American Home Products
> acquisition deal and dropped again to 53.25 intraday in March 2000
> when the Dot coms started to wilt. The stock has split 2:1 since
> that time so the split adjusted range would have been 59 and 26.13.
> The stock traded in the mid 70's in November 2007.

Nov 13 05:15 PM

[merrelito:]

Here's a useful overview of the Dividend Aristocrats:

www.TopYields.nl/Top-d...

Nov 14 12:55 PM

[mbkelly75:]

This is a good article and the very last sentence makes the point perfectly. The Aristocrats, The Champions and the Achiever lists are great places to look for great stocks but all of them need more Due Diligence before making an investment. Here is a combined list to make it easier:
dividendsvalue.com/ana.../

As the website says about the list:
Not every stock listed here is a great dividend investment, but virtually all great dividend investments are on this list.
He is right and it is a great place to look for ideas and updated by the website owner more often than any of the lists themselves.

Nov 15 09:26 AM