Dividend Champions Expansion Continues

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 |  Includes: ADI, CINF, CMLP, CNI, CPB, EGN, EPD, ETP, FDO, GPS, HON, IRET, KMP, NKE, OXY, SPLS, TEVA, XOM
by: David Fish

The Dividend Champions spreadsheet has been updated through 8/31/10

To download the latest version of the U.S. Dividend Champions spreadsheet or PDF, go here.

During the past month, I have been working on significant changes to improve the Dividend Champions listing, and those include expansion of the Contenders tab to include companies with streaks of 10-14 years of dividend growth and the addition of many more companies to the new Challengers tab. I'll discuss those changes below, but before I do so, I want to acknowledge the great work that has been done by Seeking Alpha Contributors Dividends4Life and Dividend Growth Investor. In addition to their in-depth analysis of dividend-paying companies, they have both posted weekly recaps of recent dividend increases since early 2008. By going back over those articles, I was able to find dozens of companies that could be added to the listings. I also browsed through the Top 10 Yields by Industry at The Online Investor site and will continue to go through other dividend listings in search of additional streaks. I'll discuss this month's changes in order of the tabs of the Dividend Champions spreadsheet (from left to right).

Dividend Champions Columns Added

I've added two new columns and deleted one of the old ones. The deleted column was used to list source(s) used to verify dividend streaks. I had found that more than 90% of the sources were press releases (designated as PR), with the remainder coming from annual reports (AR) or websites (WS). In general though, it was apparent that the streaks were easily verified by continued reference from one year to the next and that this column simply served little purpose. In place of that column, I have added a Quarterly Schedule column that may be of use to those seeking to spread out their holdings by Pay Dates throughout the typical quarter. I'm using a simple A-B-C system to designate the three months of each quarter. So, for example, A represents January, April, July, and October; B represents February, May, August, and November; C represents March, June, September, and December. The number that follows the appropriate letter is based on the Pay Date of the most recent increase. I hope that this will bring together companies that announced increases at different times of year. So, for example, both Cincinnati Financial (NASDAQ:CINF) and Family Dollar Stores (NYSE:FDO) are A15 companies, even though one increased its dividend in April, while the other will pay a higher rate in October. This column may help those trying to construct a portfolio that pays on various dates, such as a retirement portfolio. I'll discuss this in a separate article.

A second new column is the Sequence column, which appears to the right of the Number of Years column. This should provide some continuity between the Champions, Contenders, and Challengers and simply determines the order of the dividend streaks, from longest (#1) to shortest (currently #443), without having to sort the worksheets by number of years. Note that Pay Date is used as a “tie-breaker” for companies that have the same number of years. (A company that declared the increase earlier would have a slightly longer streak. Example: Energen (NYSE:EGN) is #90 while ExxonMobil (NYSE:XOM) is #93, even though both have 28-year streaks, since EGN paid an increase on 3/1/10, while XOM paid a higher amount on 6/10/10.) Companies can improve their “ranking” by declaring higher payouts, which will increase the number of years of increases and place them into a higher group, and the improvement will be that much better, the sooner it is done.

Only one new company joined the Champions listing this month, and that came not from having graduated from the Contenders list but as a result of the search for more Challengers. I'm not sure how it flew under the radar for so long, but Investors Real Estate Trust (NYSE:IRET) has increased its dividend every year since its first payout in 1971 and every quarter from 1988 until 2010, when the increases were frozen. IRET immediately becomes the lowest priced Champion (at $8.18), as well as having the highest yield in the group (at 8.39%) and the lowest percentage increase (at 0.29%), although that last figure was just the latest of the quarterly increases. Based in Minot, North Dakota, IRET owns and manages multi-family residential properties, as well as office, medical, industrial, and retail properties. In the fiscal year that ended in April, it only earned 2¢ per share, but FFO (Funds From Operations) was 69¢, just above its 68.6¢/per share annual dividend rate. (Five analysts' consensus calls for FFO to be 70¢ and 73¢, respectively in fiscal 2011 and 2012.) I also discovered on its web site that the company has a no-fee Distribution Reinvestment Plan that offers a 5% discount and accepts from $250-$3,000 per month (but there's no direct enrollment, so initial share(s) must be bought elsewhere).

Contenders Added to DivHistory Tab

After shifting all the companies with streaks of 10-14 years from the Challengers listing to the Contenders tab (and adding a few more that I discovered while searching for new streaks), I added the dividends paid from 1999 to 2009 to the DivHistory tab and calculated the 5- and 10-year Dividend Growth Rate, as well as the Acceleration/Deceleration (A/D) ratio. Note that I also renamed the Compound Annual Growth Rate, or CAGR, of the dividends since I felt that Dividend Growth Rate, or DGR, was a more appropriate term. (CAGR is somewhat generic and could also be used to express the growth in earnings, sales, returns, etc.) Also worth noting is the fact that some of the Contenders may have recorded their 10th year of higher dividends in 2009 or 2010, so they may not have a dividend figure for 1999 and, possibly, 2000, or they may even have had a decrease. Consequently, those companies will show “n/a” for the 10-year DGR and the A/D ratio.

Contenders Listing Expanded

As mentioned earlier, I shifted all companies with streaks of 10-14 years from the Challengers group and filled in the extra data. Overall, this listing expanded from 85 companies last month to 139 as of August 31. Prominent among the new members are Master Limited Partnerships (MLPs) such as Energy Transfer Partners (NYSE:ETP), Enterprise Products Partners (NYSE:EPD), Inergy LP (NRGY), and Kinder Morgan Energy Partners (NYSE:KMP). Also “moving up” from the Challengers listing were ADR (American Depository Receipt) companies like Canadian National Railway (NYSE:CNI) and Teva Pharmaceutical (NYSE:TEVA). Other new Contenders come from a wide variety of industries, providing many more opportunities for diversification. Overall, the 139 companies have an average streak of 15.8 years, yield 3.37%, and have most recent increases averaging 6.36%. (The 101 Champions average 38.5 years, a 3.33% yield, and average increases of 5.42%.)

Challengers Population Triples

After shifting about four dozen companies to the Contenders tab, just over 60 Challengers remained from last month, so the subsequent growth to over 200 companies with streaks of 5-9 years represents more than a tripling of that group. Like the Contenders, this includes a slew of MLPs and some foreign ADRs, as well as some familiar names, such as Analog Devices (NASDAQ:ADI), Campbell Soup (NYSE:CPB), Gap Inc. (NYSE:GPS), Honeywell (NYSE:HON), Nike (NYSE:NKE), Occidental Petroleum (NYSE:OXY), and Staples (NASDAQ:SPLS). Remarkably, the Challengers group has the same average yield as the Champions, at 3.33%, although the average streak is just 5.7 years. There are even more unfamiliar companies (to most of us, at least) and that is one of the primary reasons for this listing. By uncovering companies that have paid higher dividends for at least five years, I hope to open up a realm of possibilities that includes the Contenders and Champions of tomorrow. Although I think the listings are now fairly complete, I will continue to examine additional listings of dividend announcements for possible overlooked gems. On the negative side, the listings do include some that last raised their payouts more than a year ago, so some deletions are possible for those companies that fail to increase the dividend before the end of 2010.

Final Word

A slight change for this update was that the PDF file now appears in alphabetical order. I hope that the addition of the Sequence column makes up for the change from a listing in descending order by the length of the streak. (For those who lack a spreadsheet program, the excellent Open Office suite is available on the same web page as the Dividend Champions.) As a final step this month, I updated the Notes tab to reflect recent changes.

Disclosure: Author owns only XOM of those mentioned (but also owns dozens of other Champions/Contenders/Challengers)