Most Dividend Aristocrats (with a minimum of 25 consecutive annual dividend increases) are not in the Dow. Below are 12 of the remaining 36 companies, diverse companies which are typically expanding in foreign markets with enormous potential because of large populations. Like Dow Dividend Aristocrats, they have strong financials with excellent long term records. Most have been operating for a century or longer. When yields on short term investments are minimal, these stocks with greater yields are attractive investments.
Automatic Data Proc (NASDAQ:ADP) 42.41____3.4%
Eli Lilly (NYSE:LLY)...........34.11____5.8%
Kimberley Clark (NYSE:KMB).....62.83____4.2%
Pitney Bowes (NYSE:PBI)........23.13____6.4%
VF Corp (NYSE:VFC).............79.25____3.1%
Prices as of June 16, 2010
Selected companies are highlighted below:
Pitney Bowes has had muted growth in this decade. Dividends were increased annually which enabled PBI to become a Dividend Aristocrat. The dividend only rose from $1.14 in 2000 to $1.46 this year. PBI is known for its postage meter business but has also expanded into internet and management services for client companies around the world. EPS is forecasted at $2.40 in 2010 and $2.50 next year, more than enough for future dividend increases.
Lilly's yield is high because of the risk associated with maintaining and increasing the dividend going forward. Internal growth from current drugs will help compensate for lost sales when key patents expire. They have a pipeline of drugs waiting for final approval. To remain a Dividend Aristocrat, they must increase the dividend in Q3 or Q4 so that 2009 will be another record year. Next year would be higher if the increased rate is paid in all quarters.
VFC is well known for its Wrangler and Lee jeans, 2 of its biggest brands. In recent years VFC expanded into lines of Outdoor & Action Sports clothes such as The North Face and Vans. This is their 38th consecutive year of higher dividends, but most increases have been modest. Because of their low payout ratio in 2006, they almost doubled the dividend to bring it up to 40-45% of EPS. Since then, VFC has returned to its policy of modest increases. With strong finances and growing product lines, VFC should raise dividends for many years. In the last 10 years their stock has the best record in this group, rising from 30 to 80.
PPG sells protective coatings to auto companies (among other companies), so 2009 was a bad year. Nevertheless they raised the annual dividend. Their stock has gained over the last 10 years and is only 20% below the record high made in 2008. Kimberley Clark has an attractive yield which is well covered. Their biggest problem is perception, they are viewed as a boring paper company. However they are expanding their well known brands around the world and should benefit from rapidly growing markets.
These companies are growing earnings to extend their streaks of higher annual dividends (which continued through the credit crisis). They are quality stocks that have stood the test of time, committed to dividend growth, offer excellent yields and are available for value conscious investors. The Dow today is a little below where it was 10 years ago, demonstrating the importance of dividend yields and a commitment to growing dividends.
Disclosure: Long LLY, PBI, VFC