Andrew Hawkins, Guest Editor
This is part four of the Dividend Rocket series. If you missed parts 1, 2, or 3, check them out. Investment Underground took another look at some dividend rockets that are set to take off and produce great value to those holding the stocks. Take a look at 8 more companies that can help your portfolio see exceptional returns.
Eli Lilly and Company (LLY): Eli Lilly is a worldwide pharmaceutical provider. It manufactures and markets drugs focused on the fields of neuroscience, endocrinology, oncology, cardiology, and also animal health. The products LLY makes treat a variety of conditions and illnesses within these fields.
Eli Lilly stated earlier in the year that first quarter 2011 dividend would be $0.49, which is a dividend yield of 5.1%. It is currently trading around $38.10. It has a price to earnings of 8.7, compared to the industry average of 19.7. LLY has a strong operating margin of 26.4% and earnings per share growth (3 year average) of 19.1. It also has a return on equity of 25.6%. I think Eli Lilly will continue to line your portfolio with strong dividends for quite a while. Be careful on how long you hold this position though. There is a lot of skepticism about LLY due to some patents expiring in the coming years.
American States Water Company (AWR): American States Water Company is a public utilities company. Through subsidiaries, it provides water, electric and contract services. The company operates mainly out of California and in parts of Arizona. AWR also provides wastewater services, like maintenance, replacement, and operation of the wastewater system. It has a market cap of $634.47 million.
AWR is trading around $34.10, which is $3 shy of the 52-week low of $31.24. Despite this, AWR has a 3.35% annual dividend yield and a $0.28 quarterly dividend. American States Water has been increasing dividends consistently for the past 57 years. AWR has a payout ratio of 60%. With a current stock price of about $34.10, AWR is a great way to collect income now and see distribution growth in the future.
Piedmont Natural Gas Company (PNY): PNY is an energy services company. It operates out of North Carolina and services North Carolina, South Carolina, and parts of Tennessee. Its core business is to provide natural gas to residential, commercial, industrial, and other customers. It also works in transportation and storage of natural gases.
Piedmont Natural Gas Company has been raising dividends every year for 33 years now. It currently has a 10 year annual dividend growth rate of 4.4% and just announced a first quarter 2011 dividend of $0.29. This is projected to yield 3.8% annually. The payout ratio is 72%. PNY has a return on equity of 11.2 compared to the industry average of 8. Also, as the shift continues from coal-fired power plants to natural gas, PNY stands to benefit. I think you will see PNY continue to raise dividends as it has for the past 33 years and continue to deliver value through distributions to shareholders.
Colgate-Palmolive Company (CL): Colgate-Palmolive is a leader in consumer products. They are most recognized for their oral care products, such as toothbrushes, mouth wash, dental floss, and toothpastes. They also produce a whole range of personal care products like shampoo, body wash, hand soap, deodorants, and antiperspirant. They also make pet nutrition products. They operate many high profile brand names like Colgate, Palmolive, Speed Stick, Ajax, Science Diet, and Irish Springs.
CL has a market cap of $41.7 billion. Colgate has a strong international presence and produces over 60% of sales from outside of the US. It has a quarterly dividend of $0.58 and an annual dividend yield of 2.7%. The company has a 44% payout ratio. The strong brand names and diversified presence of CL makes it a buy. It will continue to operate without too much competitor pressures and will continue to make value to shareholders through payouts.
RPM International Inc. (RPM): RPM International produces and sells a wide range of specialty chemical products. It sells to two markets, industrial and consumer. The industrial segment makes sealants and adhesive for various uses. They also make roofing and flooring systems and several other things. The consumer segment is responsible for making a range of products used by consumers for home improvement and other projects. These products include caulking, sealants, adhesives, paints, finishes, coatings, and others.
RPM has a market cap of $3 billion. For the last 38 years, RPM International has been steadily raising dividends. The current quarterly dividend is set at $0.21. Also, the current dividend yield is 3.73%. RPM is trading around $23.27. It has a price to earnings ratio of 16.6 compared to the industry average of 24.6. It also has a forward P/E is 14.1. With a solid operating margin of 10% and $206.05 million of operating cash flow, RPM will continue the trend of raising dividends and providing value to shareholders.
Bank of Hawaii Corporation (BOH): Bank of Hawaii is the 50th state’s largest bank. It is isolated to the islands of Hawaii and Pacific Islands. BOH provides a range of typical banking financial services. The bank is split into 4 segments: Retail Banking, Commercial Banking, Investment Services, and Treasury. This tropically located bank has a market cap of $2.22 billion and trades at about $46.49.
BOH bank has been engaging in share repurchases in the first quarter of 2011. As of March 31, the company has repurchased 443,000 shares for around $20.8 million. The bank has board approval to buy back more than $43 million of common stock. The quarterly distribution of $0.45 makes for an annual dividend yield of 3.8%. BOH has not raised dividends since 2008, when the economy tanked I think that the bank is back on stable ground and will soon resume raising dividends, as it had before 2008. The bank has emerged from the credit crisis leaner and with a net margin of 27.3%. Be on the lookout for a dividend hike soon.
Coca-Cola Company (KO): Coca-Cola Company is the world leader in manufacturing and distributing carbonated and non-carbonated beverages. They sell a wide range of beverages from water and flavored water to juices and energy drinks. KO sells mainly to distributors who then sell to the consumer. They also sell concentrates and syrups to fountain drink wholesalers. Coca-Cola has a market cap of $152.06 billion.
Coca-Cola announced a first quarter 2011 quarterly payout of $0.47. This is a 6.8% jump from last year’s quarterly dividend of $0.44. The $0.47 quarterly distribution makes for an annual dividend yield of 2.8%. KO has a payout ratio of 34%. I think that the brand name of Coca-Cola provides a huge competitor advantage and makes the barriers for others huge. As of December 31, 2010, KO lists its Intangible Assets as $15.24 billion. With a solid history of increasing dividends, Coca-Cola is a great stock to have in the portfolio.
PepsiCo Inc. (PEP): PepsiCo Inc. is also a leader in the beverage manufacturing, but also has a large presence in the snack foods industry. They own and market through brand names such as Gatorade, Tropicana, Quaker, Frito-Lay, Tostitos, Sun Chips, Aunt Jemima, and obviously Pepsi. PEP has a market cap of $111.48 billion and a price to earnings ratio of 18.8.
PEP announced a quarterly dividend hike from $0.48 to $0.515. This makes for a 7.2% jump. Recently, it has been a tradition for PepsiCo to raise dividends in Q3 and not in Q1, like many of the previously reviewed companies. PEP is currently yielding 2.9% annually. In the past five years, the quarterly dividend has increased 71.6% from $0.30 in 2006 to $0.515 today. I think PepsiCo has a large competitive advantage both in the beverage space and the snack food industry. PEP is a buy for me. A payout ratio of 51% and $8.59 billion in operating cash flow, lead me to believe that it will continue to hike payouts and flourish as a company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.