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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 second in a monthly series listing companies whose latest dividend increase might be considered “overdue,” since these companies have gone more than a year since their previous increase, a possible 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.) Some firms regularly go more than a year between increases, so this is only an “early warning” sign that some of them may warrant concern.

I hope that this series will help to augment David Van Knapp's new series about possible “Dividends in Danger?” As we get closer to year-end, some of the listings 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.

4/29

%

Pay

Payout

TTM

Company

Symbol

Yrs

Price

Yield

Inc.

Date

%Ratio

P/E

*

United Bankshares Inc.

UBSI

37

26.16

4.59

3.45

1/4/10

72.73

15.85

2

Investors Real Estate Trust

IRET

39

9.41

7.29

0.29

1/15/10

285.83

39.21

0

CenturyLink Inc.

CTL

37

40.78

7.11

3.57

3/22/10

92.65

13.03

1

Weyco Group Inc.

WEYS

29

24.25

2.64

6.67

7/1/10

53.78

20.38

0

Dividend Contenders (10-24 years):

No.

4/29

%

Pay

Payout

TTM

Company

Symbol

Yrs

Price

Yield

Inc.

Date

%Ratio

P/E

*

Harleysville Savings

OTCQB:HARL

22

14.97

5.08

5.56

8/19/09

57.14

11.26

2

Consolidated Water Co.

CWCO

13

9.81

3.06

15.38

10/31/09

69.77

22.81

3

Universal Forest Products

UFPI

16

32.29

1.24

233.33

12/15/09

61.54

49.68

0

Ohio Valley Banc Corp.

OVBC

15

19.50

4.31

5.00

2/10/10

65.63

15.23

0

Meridian Bioscience Inc.

VIVO

19

24.71

3.08

11.76

2/11/10

124.59

40.51

0

Westamerica Bancorp

WABC

19

50.79

2.84

2.86

2/13/10

45.28

15.97

1

Harsco Corp.

HSC

16

35.60

2.30

2.50

2/16/10

1025.00

445.00

0

Tompkins Financial Corp.

TMP

24

40.74

3.34

10.00

5/14/10

43.73

13.10

3

Dividend Challengers (5-9 years):

No.

4/29

%

Pay

Payout

TTM

Company

Symbol

Yrs

Price

Yield

Inc.

Date

%Ratio

P/E

*

Gas Natural Inc.

EGAS

5

11.23

4.81

12.50

4/30/09

58.70

12.21

1

Natural Resource Partners

NRP

8

34.41

6.28

0.93

5/14/09

140.26

22.34

1

Royal Dutch Shell plc A

RDS.A

5

77.48

4.34

5.00

6/10/09

51.22

11.81

0

Royal Dutch Shell plc B

RDS.B

5

78.36

4.29

5.00

6/10/09

51.22

11.95

0

Comfort Systems USA Inc.

FIX

6

12.21

1.64

11.11

9/21/09

51.28

31.31

2

Allied World Assurance Co

AWH

5

64.97

1.23

11.11

12/10/09

6.01

4.88

1

Public Service Enterprise

PEG

7

32.17

4.26

3.01

3/31/10

44.48

10.44

0

ITT Corp.

ITT

8

57.79

1.73

17.65

4/1/10

23.20

13.41

0

PPL Corp.

PPL

9

27.43

5.10

1.45

4/1/10

64.81

12.70

0

Astro-Med Inc.

ALOT

7

7.79

3.59

16.67

4/2/10

100.00

27.82

3

Birner Dental Management

BDMS

7

19.95

4.01

17.65

4/9/10

106.67

26.60

1

PG&E Corp.

PCG

6

46.08

3.95

8.33

4/15/10

64.54

16.34

0

United Community Bancorp

UCBA

5

6.86

6.41

10.00

5/28/10

293.33

45.73

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

Since the previous article on this topic, Champions American States Water (AWR) and Gorman-Rupp (GRC) each increased their dividends. Among the Contenders, United Technologies (UTX) and Span-America Medical (SPAN) also did so, as did Challenger, Energy Transfer Equity LP (ETE). Unfortunately, Hudson City Bancorp (HCBK), as many expected, cut its payout, so the 28 companies featured last month initially dropped to just 22. But one company in each category was added when they declared the same dividend rate for a fifth straight quarter.

So which dividends might be in danger? Some 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. Some alarming Payout Ratios and/or P/Es, like those at Harsco (HSC) and Meridian Bioscience (VIVO) may suggest great risk, but a look ahead at the estimated earnings per share for this year and next might provide a bit of comfort. After the cut at Hudson City, other overdue banking Contenders might raise questions, despite seemingly good Payout and P/E ratios.

Note that delayed dividend hikes by ITT (which plans to split into three companies), PPL, Astro-Med (ALOT), Birner (BDMS), and PG&E (PCG) will not result in deletion because those companies paid at least one dividend at a lower rate in 2010, meaning that the total payout in 2011 will be higher, barring an actual reduction. (The same is true of the latest additions to the lists.) The Challengers group may eventually see more streaks end, simply because they have not yet established a “culture” of dividend increases.

As mentioned earlier, I hope that this series will provide some fodder for Mr. Van Knapp's series, which hopes to identify some of the early warning signs of dividends in danger. Possible categories include:

  • ...Companies subject to regulatory penalties or restatements of income. Example: Hudson City Bancorp (HCBK).
  • ...Companies with fundamental weakness, such as earnings trending below payouts or declining sales or free cash flow trends. Example: Sysco Corp. (SYY)?
  • ...Companies facing the “buggy whip” factor, struggling to maintain growth in declining industries. Example: Pitney Bowes (PBI).

As always, comments and suggestions are welcome below.

Source: 25 'Overdue' Dividend Increases: Are Cuts on the Horizon?