Dividend Champions: Focus on Financials

The Dividend Champions spreadsheet and PDF have been updated through 2/28/11 both are available here. Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. Together, all of these companies may be referred to using the abbreviation “CCC.”

This is the fourth in a series of articles focusing on specific industries and isolating the CCC companies within those industries. The first covered Master Limited Partnerships (or MLPs) and can be found here; The second covered Real Estate Investment Trusts (or REITs) and can be found here; The third covered Utilities and can be found here.

What are Financials?

I'm starting again with what may seem like a facetious question so that I can spell out what is (and what is not) included in this article. Of course, the term immediately suggests banking institutions, and that is the largest group shown below. But it also includes what are loosely categorized as “Financial Services” firms and Insurance companies.

The Global Industry Classification Standard (or GICS) also includes Real Estate Investment Trusts (or REITs) in the financial sector, but I covered those in the second article in this series, so they won't be included below. (Likewise, Master Limited Partnerships, or MLPs, were covered in the first article, but might otherwise be included in the Energy sector, which I will include in a subsequent article.)

While much of the media attention is focused on the large banks (and particularly on whether they will soon be allowed to start increasing their dividends), the CCC listings include many of the local and regional banks that were able to avoid cutting their dividends during the recent financial crisis. In fact, those 41 Banking companies have an average market capitalization of only $853 million, which falls in the Small Cap category (from $100 million to $2 billion).

Also included in this article are 10 Financial Services firms, which run the gamut from mutual fund companies like Franklin Resources and T. Rowe Price to real estate and business development firms. The 30 Insurance companies included offer strong evidence that that industry was not as severely impacted by the recession as were the banks. Here again, the companies range from Micro Caps (under $100 million) to Large Caps like AFLAC and Travelers. It should be noted, of course, that many large industrial companies (or conglomerates) also run financing divisions, usually as a means of helping their customers to purchase their products over time. The best known example of that is General Electric (GE), which was deleted from the Champions listing after cutting its dividend in 2009. For the investor doing further research, information (or coverage) can be a little harder to find for the smaller companies listed, but the potential for higher yields and/or dividend growth may be worth the effort.

The Companies

Financials again make up one of the largest segments of the CCC universe, with 41 banks, 10 financial services firms, and 30 insurance companies. These 81 companies (compared with 74 in the Utilities article) have an average yield of 2.92%, almost exactly the 2.91% average for the 447-company CCC list. The Banks lead the way, with average yields of 3.47%. The trade-off is a lower rate of dividend growth (6.03%, on average), although there is a wide range of DGRs to consider. For an investor looking to add one or more financials to his or her portfolio, the table below should provide plenty of good choices. In considering these companies, it's a good idea to think about the role of any non-regulated activities that a company conducts. I'm including as many columns of data as is practical, from a perspective of width and significance.

			No.	2/28		%	Payout	TTM	NY%	MktCap	DGR	DGR
Company	Symbol	Industry	Yrs	Price	Yield	Inc.	%Ratio	P/E	Growth	($Mil)	5-yr	10-yr
1st Source Corp.	SRCE	Banking	21	19.57	3.27	6.67	52.89	16.17	n/a	473	6.5	7.2
Alliance Financial Corp.	ALNC	Banking	5	31.73	3.78	7.14	48.39	12.79	3.57	150	6.3	5.3
Arrow Financial Corp.	AROW	Banking	17	25.04	3.99	3.00	51.55	12.91	1.11	282	3.7	7.2
Auburn National Banc	AUBN	Banking	10	19.71	4.06	2.56	54.42	13.41	n/a	72	6.1	6.9
BancFirst Corp. OK	BANF	Banking	17	42.04	2.38	8.70	37.04	15.57	7.27	646	10.1	11.4
Bank of Marin Bancorp	BMRC	Banking	6	36.25	1.77	6.67	25.10	14.22	8.93	192	26.2	n/a
Bank of the Ozarks Inc.	OZRK	Banking	13	43.05	1.58	6.25	18.13	11.48	10.14	734	10.2	19.0
Bar Harbor Bankshares	BHB	Banking	8	29.05	3.72	1.89	41.38	11.13	8.77	111	4.5	3.2
BOK Financial Corp.	BOKF	Banking	6	51.35	1.95	4.17	27.70	14.22	11.56	3,500	27.0	n/a
Chesapeake Financial	CPKF	Banking	18	14.65	3.00	4.76	20.75	6.91	7.14	40	7.2	9.9
Cheviot Financial Corp.	CHEV	Banking	8	8.50	5.65	9.09	208.70	36.96	n/a	74	12.9	n/a
Citizens Financial Svcs.	CZFS	Banking	12	38.99	2.67	1.96	n/a	n/a	n/a	N/A	5.5	6.5
Citizens Holding Co.	CIZN	Banking	11	20.26	4.34	4.76	59.46	13.69	n/a	98	5.5	11.0
Commerce Bancshares	CBSH	Banking	43	40.16	2.29	2.77	36.51	15.94	7.38	3,480	4.6	9.5
Community Bank System	CBU	Banking	17	25.16	3.82	9.09	50.79	13.31	5.58	838	4.7	6.1
Community Trust Banc.	CTBI	Banking	30	28.61	4.26	1.67	56.48	13.25	4.93	437	4.7	8.0
Cullen/Frost Bankers	CFR	Banking	17	58.56	3.07	4.65	52.33	17.02	11.93	3,580	8.8	8.9
Eagle Financial Services	EFSI	Banking	7	16.80	4.29	5.88	64.86	15.14	n/a	55	6.7	n/a
Enterprise Bancorp Inc.	EBTC	Banking	7	14.70	2.86	5.00	36.52	12.78	n/a	137	10.8	n/a
First Capital Inc.	FCAP	Banking	10	16.00	4.75	5.56	54.68	11.51	n/a	45	5.6	7.1
First Financial Corp.	THFF	Banking	22	32.41	2.84	2.22	42.99	15.14	3.21	426	2.3	5.5
Harleysville Savings	HARL	Banking	22	15.24	4.99	5.56	55.88	11.21	n/a	56	4.5	10.9
Hingham Inst. for Saving	HIFS	Banking	15	51.51	1.86	4.35	19.96	10.71	n/a	109	3.3	6.0
Hudson City Bancorp	HCBK	Banking	12	11.50	5.22	7.14	55.05	10.55	11.69	5,680	17.5	30.4
Lake Shore Bancorp	LSBK	Banking	6	10.00	2.80	16.67	52.83	18.87	n/a	56	n/a	n/a
Landmark Bancorp Inc.	LARK	Banking	10	16.90	4.50	5.00	97.44	21.67	n/a	45	7.4	7.0
National Bankshares	NKSH	Banking	11	29.00	3.24	6.82	41.96	12.95	n/a	201	5.1	7.9
Norwood Financial	NWFL	Banking	13	27.10	4.28	3.57	43.94	10.27	n/a	75	10.3	10.0
Ohio Valley Banc Corp.	OVBC	Banking	15	20.12	4.17	5.00	65.63	15.72	n/a	80	6.1	6.1
Orrstown Financial Svc	ORRF	Banking	11	27.50	3.35	2.22	42.40	12.67	8.27	220	11.3	31.5
People's United Financial	PBCT	Banking	17	13.18	4.70	6.90	258.33	54.92	38.60	4,610	8.7	9.3
Prosperity Bancshares	PRSP	Banking	13	40.82	1.71	12.90	25.64	14.95	7.67	1,910	13.4	14.5
Republic Bancorp KY	RBCAA	Banking	12	17.14	3.34	8.33	18.51	5.55	4.17	359	12.9	16.3
Somerset Hills Bancorp	SOMH	Banking	6	9.05	2.65	20.00	52.17	19.67	n/a	49	44.9	n/a
Southside Bancshares	SBSI	Banking	16	22.81	2.98	5.00	27.09	9.09	8.61	356	14.3	19.0
Teche Holding Co.	TSH	Banking	10	36.57	3.94	1.41	42.11	10.69	4.79	76	7.7	11.0
Tompkins Financial	TMP	Banking	24	41.00	3.32	10.00	43.73	13.18	7.57	447	6.5	6.1
UMB Financial Corp.	UMBF	Banking	20	39.88	1.96	5.41	34.51	17.65	11.11	1,610	11.0	7.1
United Bankshares Inc.	UBSI	Banking	37	28.64	4.19	3.45	72.73	17.36	13.77	1,250	2.9	3.6
United Community Banc	UCBA	Banking	5	7.50	5.87	10.00	293.33	50.00	n/a	57	n/a	n/a
Westamerica Bancorp	WABC	Banking	19	51.58	2.79	2.86	44.86	16.07	4.33	1,500	3.4	6.9
Averages for	41	Banking	14.6	27.55	3.47	6.03	60.72	16.18	8.84	853	9.5	10.2
Ameriprise Financial Inc.	AMP	FinSvcs	6	63.32	1.14	5.88	16.82	14.79	13.60	15,620	45.2	n/a
AmTrust Financial Svcs.	AFSI	FinSvcs	5	19.23	1.66	14.29	13.56	8.15	11.98	1,150	n/a	n/a
Eaton Vance Corp.	EV	FinSvcs	30	31.30	2.30	12.50	54.14	23.53	21.11	3,730	14.2	20.6
Epoch Holding Corp.	EPHC	FinSvcs	5	15.73	1.53	20.00	28.92	18.95	n/a	359	n/a	n/a
Factset Research Sys.	FDS	FinSvcs	12	104.88	0.88	15.00	28.13	32.07	13.45	4,860	34.8	29.0
Franklin Resources	BEN	FinSvcs	30	125.62	0.80	13.64	14.25	17.89	11.31	28,020	17.1	13.9
PennantPark Investment	PNNT	FinSvcs	5	12.70	8.50	3.85	103.85	12.21	3.33	461	n/a	n/a
SEI Investments Co.	SEIC	FinSvcs	18	23.01	0.87	11.11	16.39	18.86	14.62	4,290	12.6	17.9
T. Rowe Price Group	TROW	FinSvcs	24	66.98	1.85	14.81	49.01	26.47	17.65	17,350	18.6	15.3
W.P. Carey & Co. LLC	WPC	FinSvcs	14	33.92	6.01	0.49	104.62	17.39	-28.57	1,340	2.6	1.8
Averages for	10	FinSvcs	14.9	49.67	2.55	11.16	42.97	19.03	8.72	7,718	20.7	16.4
ACE Limited	ACE	Insurance	18	63.25	2.09	6.45	14.49	6.94	-0.27	21,190	7.8	10.3
AFLAC Inc.	AFL	Insurance	28	58.86	2.04	7.14	24.24	11.89	9.22	27,640	21.0	21.3
Allied World Assurance	AWH	Insurance	5	61.71	1.30	11.11	6.01	4.63	-10.70	2,350	n/a	n/a
Alterra Capital Holdings	ALTE	Insurance	10	21.63	2.22	20.00	15.14	6.82	0.81	2,400	18.5	n/a
American Financial Grp	AFG	Insurance	5	34.63	1.88	18.18	15.01	8.00	0.86	3,640	11.5	-1.5
Assurant Inc.	AIZ	Insurance	7	40.63	1.58	6.67	25.60	16.25	8.00	4,060	15.2	n/a
Axis Capital Holdings	AXS	Insurance	9	36.32	2.53	9.52	15.28	6.03	3.67	4,260	7.9	n/a
Brown & Brown Inc.	BRO	Insurance	17	26.14	1.22	3.23	28.57	23.34	11.48	3,730	12.9	16.6
Chubb Corp.	CB	Insurance	46	60.68	2.57	5.41	23.08	8.98	1.23	18,040	11.7	8.3
Cincinnati Financial	CINF	Insurance	50	34.05	4.70	1.27	69.26	14.74	-3.40	5,520	6.4	9.0
Delphi Financial Group	DFG	Insurance	10	30.96	1.42	10.00	14.15	9.95	9.46	1,720	11.8	n/a
Donegal Group Inc. A	DGICA	Insurance	8	12.76	3.61	2.22	82.14	22.79	140.00	326	9.4	n/a
Donegal Group Inc. B	DGICB	Insurance	8	18.50	2.22	2.50	73.21	33.04	n/a	473	10.2	7.2
Erie Indemnity Company	ERIE	Insurance	21	69.84	2.95	7.29	66.45	22.53	4.12	3,930	8.1	13.5
Hanover Insurance Gp	THG	Insurance	6	46.47	2.15	33.33	30.86	14.34	2.35	2,100	32.0	14.9
Harleysville Group	HGIC	Insurance	24	36.55	3.94	10.77	59.50	15.10	4.56	988	14.7	9.6
HCC Insurance Holdings	HCC	Insurance	14	31.14	1.86	7.41	19.40	10.41	4.39	3,550	15.9	14.7
Infinity Prop. & Casualty	IPCC	Insurance	9	60.71	1.19	28.57	10.36	8.74	-0.44	759	18.5	n/a
Mercury General Corp.	MCY	Insurance	24	41.14	5.83	1.69	86.33	14.80	1.95	2,250	6.6	9.5
National Interstate Corp.	NATL	Insurance	6	20.84	1.54	14.29	15.24	9.92	14.67	405	32.0	n/a
Old Republic Int'l	ORI	Insurance	30	12.50	5.60	1.45	538.46	96.15	101.59	3,190	6.1	8.9
PartnerRe Limited	PRE	Insurance	17	79.30	2.77	10.00	21.03	7.58	4.53	5,550	6.2	7.0
RenaissanceRe Holding	RNR	Insurance	16	67.02	1.55	4.00	8.45	5.44	3.71	3,630	4.6	7.2
RLI Corp.	RLI	Insurance	35	57.41	2.02	3.57	19.33	9.57	1.02	1,200	13.7	14.7
StanCorp Financial Gp	SFG	Insurance	13	46.00	1.87	7.50	21.39	11.44	9.78	2,120	6.6	20.3
Torchmark Corp.	TMK	Insurance	5	65.25	0.98	6.67	10.16	10.36	10.69	5,220	6.8	5.4
Transatlantic Holdings	TRH	Insurance	20	50.93	1.65	5.00	13.57	8.23	7.57	3,170	14.3	11.5
Travelers Companies	TRV	Insurance	6	59.93	2.40	9.09	21.75	9.05	-0.96	25,830	9.2	2.7
W.R. Berkley Corp.	WRB	Insurance	9	29.95	0.93	16.67	9.66	10.33	-2.33	4,220	15.2	10.1
Wesco Financial Corp.	WSC	Insurance	39	391.16	0.43	2.44	16.47	38.35	n/a	2,780	2.9	3.0
Averages for	30	Insurance	17.2	55.54	2.30	9.11	45.82	15.86	12.06	5,541	12.3	10.2
Averages for	81	Financials	15.6	40.65	2.92	7.80	52.91	16.42	10.30	3,469	11.6	10.8
Averages for	447	CCC Co's	16.7	47.91	2.91	8.20	68.18	21.94	12.39	16,745	12.5	10.3

Note that Wesco Financial has agreed to be acquired by Berkshire Hathaway (BRK.A). Also, the list of 4-year streaks includes Bancorp Rhode Island (BARI) and Broadridge Financial Solutions (BR).

Summary

The Financial industry is a traditional source of average to above average yields and there are clearly many that have established long histories of annual increases. Unlike the subjects of the first two articles in this series (MLPs and REITs), the taxation on these dividends is fairly straightforward, at the 15% rate until at least the end of 2012. I expect that to be the case with subsequent installments in this series that will focus on other industry/sector groups. As always, I welcome feedback in the Comments section below.

Next Up: Healthcare

Disclosure: I am long AFL, GE, BEN, TRV.