Checking In With the 2010 Dividend Aristocrats

by: The Dynamic Dividend

Entering the year, 42 companies were members of Standard & Poor’s prestigious S&P 500 Dividend Aristocrat index, which tracks the performance of S&P 500 companies that have increased their dividends for at least 25 consecutive years.

With less than two months left until the 2011 version of the index is compiled (on the third Friday of December), all but seven of the companies on the current index have given shareholders the raise necessary to retain their Dividend Aristocrat status. The companies that have failed to increase their dividends in 2010 can be divided into three categories: The Good, The Bad, and The Ugly.

The Good

Four of the Dividend Aristocrats without a 2010 dividend increase have a valid excuse: They typically give shareholders a raise during the fourth quarter of the year, and will likely declare an increased payment when they announce their final dividend of the year.

Automatic Data Processing (NASDAQ:ADP) has increased its dividend every year since 1975, and typically does so each November. Last year, for instance, the company announced it was giving its shareholders a 3% raise on November 10. Shares of ADP currently trade at $43.80, with a 3.11% dividend yield.

Becton, Dickinson and Co. (NYSE:BDX) has been raising its dividend annually since 1973, and has established itself as one of the least conservative Dividend Aristocrats. Since 1999, the company has more than quadrupled its dividend rate. Last year the medical technology company gave shareholders a 12% raise on November 24. Shares of BDX closed Friday trading at $76.40 apiece, where they sport a dividend yield of 1.94%.

Brown-Forman (NYSE:BF.B) is one of the newest member of the Dividend Aristocrats, having given its payout a boost every year since 1984. The alcoholic beverage company typically hands out its raise in mid- to late-November, including the 4.4% increase announced last November 16. Shares of BF.B closed the week at $61.93, where they carry a 1.94% dividend yield.

Emerson Electric (NYSE:EMR) has raised its dividend every year since 1956, typically in the fourth quarter. Last year the company raised its dividend by 1.5% on November 2. Shares of EMR currently trade at $54.51 with a dividend yield of 2.46%.

The Bad

The following companies make their payments to shareholders on a quarterly basis, and have already declared four dividends this year – without making an increase. As a result, they will no longer be Dividend Achievers when the 2011 version of the list is announced in December.

Integrys Energy Group (NYSE:TEG) has increased its dividend every year since 1958, including a 1.49% raise at the beginning of 2009. Since that boost, the dividend has been flat for eight straight quarters, including the fourth quarter payment announced on October 14. While it may come as a shock that this diversified utility holding company would break 50+ years of dividend-increasing tradition, the writing has been on the wall for quite a while. Integrys has raised its dividend by more than 2% only twice over the last decade, and its latest increase was its lowest to date. Meanwhile, revenue and earnings have both been in freefall. Shares of TEG closed the week at $53.39, where they carry a dividend yield of 5.09%.

Eli Lilly (NYSE:LLY) has given shareholders annual raises since 1967, and is arguably the most financially sound and attractively-priced company named in this article. But the pharmaceutical giant faces a steep patent cliff — nearly half of its revenue is tied to drugs with patents ending before 2013 — and the uncertainty surrounding the drugs in its pipeline have led to recent dividend stinginess. Since handing out a 4% raise leading up to its February 2009 dividend, the company has held its dividend flat. On Monday, the company announced the final nail in its Dividend Aristocrat coffin: It would pay $0.49 for the eighth consecutive quarter. Shares finished the week at $35.40, sporting a 5.54% dividend yield.

The Ugly

Supervalu (NYSE:SVU) has been a lameduck member of the Dividend Aristocrat index since before the 2010 version was even announced. The grocery chain operator revealed a plan to cut its dividend by 50% back in October 2009, effective with its first payment of 2010, in an attempt to preserve capital. Since the company technically raised its dividend in 2009, it was still eligible for the 2010 version of the index, which is compiled and released by Standard & Poor’s based on the prior year’s dividend performance. Obviously, Supervalu will not be included on the 2011 release of the index. Following a disappointing earnings release, shares of SVU fell more than 11% this week, all the way down to $10.80. The stock currently has a dividend yield of 3.24%.

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