Seeking Alpha
Value, long-term horizon, dividend investing, dividend growth investing
Profile| Send Message| ()  

In compiling the Dividend Champions list (found here) I get to see which companies are nearing the anniversaries of their previous dividend increases. Most of these firms raise their payout about the same time every year, but some companies go longer before boosting their dividends, and this can raise concerns about their streaks of increases.

New Series

This is the first in what I hope will be a monthly series listing companies whose latest dividend increase might be considered “overdue.” In other words, these companies have gone more than a year since their previous increase, something that might be considered a sign that the dividend (or at least the streak of increases) is in danger. (Note that the dates for these companies appears in Red in the Dividend Champions spreadsheet and PDF.)

Of course, some firms regularly go more than a year between increases, so this listing is only an “early warning” sign that some of the companies listed may warrant concern. I hope that this series will help to augment David Van Knapp's new series about possible “Dividends in Danger,” and, as we get closer to year-end, the listing will act as a dividend streak “death watch,” since it will include companies that will be deleted if they fail to increase the dividend in 2011, making the payout unchanged from that of 2010.

Dividend Champions (25 or more years):

No.

3/31

%

Pay

Payout

TTM

Company

Symbol

Yrs

Price

Yield

Inc.

Date

%Ratio

P/E

*

American States Water

AWR

56

35.86

2.90

4.00

12/1/09

58.76

20.26

3

Gorman-Rupp Company

GRC

37

39.39

1.07

5.00

12/10/09

27.10

25.41

5

United Bankshares Inc.

UBSI

37

26.52

4.52

3.45

1/4/10

72.73

16.07

2

Investors Real Estate Trust

IRET

39

9.50

7.22

0.29

1/15/10

762.22

105.56

0

CenturyLink Inc.

CTL

37

41.55

6.98

3.57

3/22/10

92.65

13.27

1

Dividend Contenders (10-24 years):

No.

3/31

%

Pay

Payout

TTM

Company

Symbol

Yrs

Price

Yield

Inc.

Date

%Ratio

P/E

*

Hudson City Bancorp

HCBK

12

9.68

6.20

7.14

5/30/09

55.05

8.88

1

Harleysville Savings

OTCQB:HARL

22

15.10

5.03

5.56

8/19/09

55.88

11.10

2

Consolidated Water Co.

CWCO

13

10.90

2.75

15.38

10/31/09

69.77

25.35

3

Span-America Medical Sys

SPAN

11

15.50

2.58

11.11

12/4/09

27.78

10.76

4

Universal Forest Products

UFPI

16

36.65

1.09

233.33

12/15/09

44.94

41.18

0

Harsco Corp.

HSC

16

35.29

2.32

2.50

2/16/10

1025.00

441.13

0

Meridian Bioscience Inc.

VIVO

19

23.99

3.17

11.76

2/11/10

131.03

41.36

0

Ohio Valley Banc Corp.

OVBC

15

21.12

3.98

5.00

2/10/10

65.63

16.50

0

Westamerica Bancorp

WABC

19

51.37

2.80

2.86

2/13/10

44.86

16.00

1

United Technologies

UTX

16

84.65

2.01

10.39

3/10/10

35.86

17.86

2

Dividend Challengers (5-9 years):

No.

3/31

%

Pay

Payout

TTM

Company

Symbol

Yrs

Price

Yield

Inc.

Date

%Ratio

P/E

*

Gas Natural Inc.

EGAS

5

11.73

4.60

12.50

4/30/09

36.00

7.82

1

Natural Resource Partners

NRP

8

35.07

6.16

0.93

5/14/09

140.26

22.77

1

Royal Dutch Shell plc A

RDS.A

5

72.86

4.61

5.00

6/10/09

51.22

11.11

0

Royal Dutch Shell plc B

RDS.B

5

73.24

4.59

5.00

6/10/09

51.22

11.16

0

Comfort Systems USA Inc.

FIX

6

14.07

1.42

11.11

9/21/09

51.28

36.08

2

Allied World Assurance Co.

AWH

5

62.69

1.28

11.11

12/10/09

6.01

4.71

1

Energy Transfer Equity LP

ETE

5

45.00

4.80

0.93

2/19/10

251.16

52.33

0

ITT Corp.

ITT

8

60.05

1.67

17.65

4/1/10

23.20

13.93

0

PPL Corp.

PPL

9

25.30

5.53

1.45

4/1/10

64.81

11.71

0

Public Service Enterprise

PEG

7

31.51

4.35

3.01

3/31/10

44.48

10.23

0

Astro-Med Inc.

ALOT

7

7.80

3.59

16.67

4/2/10

100.00

27.86

3

Birner Dental Management

BDMS

7

19.85

4.03

17.65

4/9/10

94.12

23.35

1

PG&E Corp.

PCG

6

44.18

4.12

8.33

4/15/10

64.54

15.67

0

*Number of Years with no increase (1999-2010), except Challengers, which shows Number of Years with no increase since streak began.

There will be other companies that join this listing during the year as they pass the anniversary of their previous increase without hiking the dividend. Since the determinant for inclusion revolves around the actual Dividend Payment, that Date is listed above, along with the Payout Ratio and the Price/Earnings ratio, two key indicators of a company's ability to increase the payout. (Because of space limitations, I'm limiting the columns shown.)

Some Companies at Greater Risk than Others

Not all of these companies are in great danger of seeing their streaks of dividend increases end. For example, Champions American States Water (AWR) and Gorman-Rupp (GRC) have each had several years since 1999 during which they did not increase their dividends, but did so in time to extend their streaks. This resembles the pattern I called “alternators,” which describes companies that increase the payout in the middle of every other year, relying on the fact that the middle year would automatically have a total payout that exceeded that of the previous year and would be less than that of the following year. Another Champion, CenturyLink (CTL), went six quarters between increases the last time, so it appears likely to do so again. And, of course, the boards of directors at companies with very long streaks are keenly aware of them and tend to avoid disappointing their shareholders by letting the streaks end.

Among the Contenders, United Technologies (UTX) tends to go five quarters between increases, so it is likely to declare a boost in the dividend in the coming quarter. Certain types of companies, such as REITs (Real Estate Investment Trusts) and MLPs (Master Limited Partnerships), have a tendency to pay out much more than earnings per share, simply because of their legal structure, so we can't tell much from seemingly high payout ratios or P/Es in such cases. But dividend streaks at companies like Harsco (HSC) and Meridian Bioscience (VIVO) may be at risk, so investors need to determine if their numbers are distorted by an unusual year or one-time event. There has already been much discussion about Hudson City Bancorp (HCBK) and a “likely” dividend cut, but three other banking Contenders seem to have overdue dividend increases, despite seemingly good Payout and P/E ratios.

Dividend Challenger ITT Corp. (ITT) has announced plans to split into three companies, so its dividend streak is probably on hold. But delayed dividend hikes by utilities PG&E, PPL, and Public Service Enterprise Group are a bit puzzling, although they have only just gone to a fifth quarter of the same dividend rates. Overall, the Challengers group may eventually see a greater number of streaks end, simply because these companies have not yet established a “culture” of dividend increases, perhaps because their earnings are less consistent or because more of their resources are devoted to sales growth and other expansion. At least that is what investors need to consider as they seek to own companies that have the long-term characteristics that they seek.

As this is the first effort in this series, comments and suggestions are welcome below.

Disclosure: I am long CTL, UTX.

Source: 28 'Overdue' Dividend Increases: Reason to Worry?