Seeking Alpha
Profile| Send Message| ()  

There are some great stalwarts on this list who have raised their dividends for over 40 years and currently offer above-average dividend yields. These are the 40-year "dividend kings" to consider now:

Johnson & Johnson (JNJ): The dividend has been increased for 49 consecutive years. The yield is 3.54% and the annual payout is $2.28. The quarterly payout was increased by 5.56% to $0.57 with the payout ratio at 55.61%. The growth rate over the last decade is 13%.

The stock has edged up about 5% for the year, trading at a trailing price/earnings multiple of 15.7. It trades at a discount to Abbott Laboratories (ABT) at 18.9 (trailing) and at a slight premium to Novartis (NVS) at 13.04 (trailing).

The company’s diversified products and operations should see it chug along just fine in the coming years. New products, expansion in emerging markets will play a significant role in growing its earnings. This is a worthwhile holding at the current valuation and should form the core of an income investor’s portfolio.

Kimberly-Clark Corp. (KMB): The dividend has been increased for 39 consecutive years. The yield is 3.9% and the annual payout is $2.8. The quarterly payout was increased by 6.06% to $0.70 with the payout ratio at 66.83%. The growth rate over the last decade is 9.2%.

The stock has gained about 13% for the year, trading at a trailing price/earnings multiple of 17.03. It trades at a slight premium to Proctor & Gamble (PG) at 16.5 (trailing) and at a discount to Energizer Holdings (ENR) at 19.9 (trailing).

The company’s products are generally immune to economic uncertainties. Consequentially, earnings tend to be relatively stable. Various cost cutting measures combined with increasing demand from its emerging market operations should see it generate solid earnings and dividend growth for the years ahead.

If you can get it cheaper during the current market turmoil, grab as many shares as possible. The valuation is still fair at the current level.

Lancaster Colony Corporation (LANC): The dividend has been increased for 48 consecutive years. The yield is 2% and the annual payout is $1.32. The quarterly payout was increased by 10% to $0.33 with the payout ratio at 34.3%. The growth rate over the last decade is 6.6%.

The stock has gained over 20% for the year and trades at a trailing price/earnings multiple of 18.7. General Mills (GIS) trades at a discount, 15.2 (trailing) whilst Kraft Foods (KFT) at 19.9 (trailing) trades at a slight premium to Lancaster Colony.

Lancaster’s latest results show weakness in its glassware and candles business segment which is likely to continue. This will be a drag on earnings, thereby slowing dividend hikes. Kraft Foods offers a higher yield and is a better option considering its diverse business mix.

Leggett & Platt Inc. (LEG): The dividend has been increased for 40 consecutive years. The yield is 5.1% and the annual payout is $1.12. The quarterly payout was increased by 3.7% to $0.28 with the payout ratio at a very generous 94.9%. The growth rate over the last decade is 10.1%.

The stock is down about 5% for the year, trading at a trailing price/earnings multiple of 18.7 which is at a premium to Flexsteel Industries (FLXS) at 9.13 (trailing) and Genuine Parts Company (GPC) at 16.9 (trailing).

Going forward, near term demand will remain weak, which will hurt earnings. Cost management will ease the pain, but not enough to make any significant impact though. Investors will be enticed by the high yield, but bear in mind that LEG’s business fortunes are tied to the housing market and general economic health which is slow at the moment.

Lowe’s Companies (LOW): The dividend has been increased for 49 consecutive years. The yield is 2.25% and the annual payout is $0.56. The quarterly payout was increased by an eye popping 27.2% to $0.14 with the payout ratio at 38.36%. The growth rate over the last decade is at inflation-busting 27.6%.

The stock has broken even for the year, rising over 25% since early August. It now trades at a trailing price/earnings multiple of 18.3, which is a slight premium to The Home Depot (HD) at 17.4 (trailing).

The generous dividend increase certainly is surprising given that earnings will limp along as big ticket renovation spending is fairly low on weak home refinancing and consumer spending. Long term though, aging homes and the high ownership of houses will play into Lowe’s hands perfectly.

Lowe’s solid balance sheet and impressive free cash flow generation should see it maintain its impressive dividend record. Investors should wait for the stock price to retreat as it sits about 9% below its 52 week high.

Source: 5 Stocks With 40 Years Of Dividend Growth To Consider