Best Of Breed Dividend Champions

 |  Includes: CB, HP, PH, XOM
by: Chris O'Donnell


Dividend Champions are companies who have grown their dividends for each of at least the past 25 years.

Investors who want a piece of this shareholder return should look for companies among this list that can continue their payout for the foreseeable future.

Below are 4 stocks that have the balance sheet and the business model to stay on the Dividend Champions list for many years to come.

Regular readers of Seeking Alpha's articles have no doubt come across David Fish and his work with dividend paying companies. Since late 2007, his publications on what he calls Dividend Champions have highlighted companies that have committed themselves to rewarding shareholders over the long haul, and have raised their payouts every year for at least the past quarter century. This is a major achievement, and can attract investors based solely on a metric like this. As of April 2014, 105 companies make up the list of Dividend Champions, with an average of almost 40 years of consecutive dividend raises. If a buyer wanted to take part in this impressive record of shareholder return, which stocks should they choose from the ones on this list? Below are four companies that, in spite of an already stellar history of dividends, are poised to continue pleasing shareholders for many more years to come. Their business strategy, competent management, and strong financial position make them able to grow and stay relevant in today's economy, and keep investors satisfied:

Name Yield (%) Payout Ratio
Helmerich & Payne (NYSE:HP) 2.4 35
Parker Hannifin (NYSE:PH) 1.6 29
Chubb Corp (NYSE:CB) 2.2 24
Exxon Mobil (NYSE:XOM) 2.7 38
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Helmerich & Payne

Helmerich & Payne is a company that operates within two industries: the development and operation of real estate and contract drilling of oil and gas wells. HP has been paying and raising its dividend for the past 42 years as its business progresses, and has many financial and operational factors that contribute to a continuation of this pattern for the foreseeable future. Helmerich & Payne currently sports a dividend yield of 2.4% at current prices, which is backed up with strong earnings power to maintain and complement this return. The company pays out only 35% of its earnings in the form of dividends, which means HP can continue its steady pattern of distribution raises even with little to no earnings growth down the road. This is unlikely, however, as the company achieved strong numbers during its most recent earnings report despite falling short of analyst expectations. Its U.S land operations, accounting for 83% of total revenue, saw an 8.2% uptick year over year. In addition to this performance, the company announced agreements with five oil exploration companies to build nine new FlexRigs, Helmerich & Payne's design for rigs that drill unconventional resource plays throughout the United States. This increases the company's rig backlog announced in 2014 to 44, which should give investors a clear picture of future income to grow HP's business and dividend payouts. These results, however, fell short of analyst expectations, which has pushed the stock down close to 5% since April 24 when they reported. Given the performance of the stock in the past, as well as the potentially questionable motives behind analyst numbers, this pullback could be an opportunity to build a position at a discount. The higher backlog, as well as a new CEO with 27 years of company experience taking the helm, should mean a strong performance for H&P going forward. Investors can buy into this name and look for meaningful earnings growth as well as a dividend that is now famous for being one of the most consistent and rewarding in the market.

Parker Hannifin

Parker Hannifin is a manufacturer of components used in construction equipment, aircraft parts, commercial transportation, and refrigeration. The company's success has long been tied to industrial production and manufacturing in the United States, which is a bullish sign going forward as the economy continues to, slowly but surely, improve and recover. As more data is released concerning the progress of U.S industrial production, Parker Hannifin's business segments that are tied closely to this data are poised to outperform as business and consumer confidence improves. In addition to the macro tailwinds PH has in its favor, the company also boasts a long and distinguished history of dividend raises, which should comfort investors who may be concerned about the cyclicality of Parker Hannifin's business. PH currently supports a dividend yield of 1.6%, which doesn't do much to impress investors at the moment with juicier yields elsewhere in the market. However, when considering Parker Hannifin's track record and financial position, this distribution starts to look more enticing. With a payout ratio of only 29% of earnings, Parker Hannifin has the financial stability to easily grow its payout no matter how its business segments do in the near term. Combine this with a 58 year track record of consecutive dividend increases, and it becomes very clear that this company has no problem rewarding shareholders regardless of the economic environment. With the United States on track for increased economic activity and an earnings picture to support more than double its current dividend, Parker Hannifin is a company that investors can count on for shareholder rewards for many years to come.

Chubb Corp

The Chubb Group of Insurance Companies is a company engaged in the property and casualty insurance business since 1882. The company is known for strong financial management and quality service, which was further shown on May 18 in the area of clean technology. The Colorado Cleantech Industries Association recently endorsed Chubb as a preferred provider of insurance for its members, which supports Chubb Corp's reputation as a quality insurance provider in the sector. This endorsement expands Chubb's exposure to cleantech companies, which is a rapidly growing sector in the United States. More endorsements like this in the future will only heighten Chubb's brand image in the future and give it access to more growing businesses in the area. Apart from this development, the company has already shown its superb financial position with 32 years of consecutive dividend raises, and earnings power to continue this pattern down the road. With $8.34 per share in earnings, Chubb Corp is easily able to pay out the $2.00 per share in dividends each year, and can even quadruple it with money to spare. A reputation for service and a hold on a fast growing industry can ensure Chubb Corp's significance to both customers and shareholders as it continues to reward investors as it has for the past 32 years.

Exxon Mobil

Exxon Mobil is an international energy company with a leading market share in the oil and natural gas market. The company makes money by discovering and acquiring reserves of natural resources, then refines and distributes these resources to its clients. To expand its production, Exxon is planning to drill in more extreme regions of the world to find resources, specifically in the Arctic regions of northern Canada. Although the risks associated with this project are high, a successful installation of this northern well could mean safer installations in other parts of the globe, and more reserves of energy contributing to Exxon's business. While investors wait for these wells to be implemented, they can be comforted with a dividend that has been raised for 32 consecutive years and is showing no signs of slowing down. Exxon Mobil currently pays out 38% of its earnings in the form of dividends, which amounts to a yield of 2.7% at current prices. With this level of financial flexibility, XOM will have no problem keeping shareholders happy with payout raises in the future, even if their energy business experiences volatility. This reputation for shareholder focus has attracted the likes of Warren Buffett, who has accumulated a $4 billion position as of the end of March. This 41.1 million share holding should be a vote of confidence for the company, because Buffett has a track record of amazing success, and can be counted on to invest in companies that are committed to shareholders over a long term horizon. If not, Buffett certainly has the power and the publicity to influence the board to adopt a friendlier attitude towards investors. Buyers of Exxon Mobil should know that they are taking on risk alongside a time tested financial legend, and are set to outperform just as Buffett has done for much of his career.


As the economic recovery continues, investors are beginning to shift back towards the long term qualities of stocks that make them attractive. The extreme volatility of stock prices over the past five years has made it very hard to deem what qualities of a stock make it truly valuable. However, if investors can look at the long term capabilities of a company, as well as its ability to reward shareholders, then they can take advantage of any volatility to own very valuable assets at a discounted price. The companies on David Fish's list of Dividend Champions have the track record and the stability needed to continue the payouts that have earned them this prestigious title. Many companies currently on the list may not be there 25 years from now, but the four stocks above have the history and the vision to continue their winning pattern, which gives them the highest chance of remaining on this list for as long as possible.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.