This is part VI of the dividend champion series. In Part V we looked at five companies that consecutively increased their dividends for 50+ years. There are very few companies that have a history of increasing their dividends for 30 years. Even less can make it to the 40 year club, and all but a select few can ever hope to join the 50 year club. Thus, the list covered in part V represents a unique group of companies that have consistently increased their dividends for 50 or more years. Today, we are going to examine four companies that have increased their dividends consecutively for 35-57 years; Vectren is the only company on the list that did not make it into the 50 year club.
Our favourite play is Emerson Electric. It has been paying dividends for almost 65 years, has consecutively increased its dividends for over five decades, has a decent revenue growth rate of 12%, ROE of 24%, a very decent 5 year dividend growth rate of 9.9% and a total return for the past three of 42.99%; not to mention the very strong healthy levered free cash flow rate of $2.43 billion. It also sports a price to free cash flow ratio of 24.40.
Three other noteworthy players are Exxon Mobil Corp, Halliburton Company and Wells Fargo & Co. which have yields of 2.3%, 1.1% and 1.9%, respectively.
Exxon has been paying dividends since 1882, has increased them consecutively for 28 years, has a three year total return of roughly 19%, a quarterly earnings growth rate of 40.5% (which is very good for a company with such a large market cap), a quarterly revenue growth rate of 31.5%, a ROE of 26.85%, and incredibly large levered free cash flow rate of $21 billion.
Exxon also sports the following ratios: Price to tangible book of 2.7, price to cash flow of 7.00, price to free cash flow of 27 and a five year EPS growth rate of 1.95%
Halliburton has been paying dividends since 1947, has a three year total return of 103%, a quarterly earnings growth rate of 25%, a quarterly revenue growth rate of 40%, a ROE of 24.5%, and a levered free cash flow rate of $538 million.
Halliburton also sports the following ratios: Price to tangible book of 2.83, price to cash flow of 8.10, and a five year EPS growth rate of -2.34. Net income for the past 3 years is as follows: For 2008, $1.53 billion, for 2009 $1.14 billion and in 2010, it jumped to $1.83 billion. For 2011, net income so far stands at roughly $1.93 billion.
Wells Fargo has been paying dividends since 1939, has a three year total return of 3.65%, a quarterly earnings growth rate of 21%, a quarterly revenue growth rate of 2.2%, a ROE of 11.74%, and a profit margin of 28.3%.
Wells Fargo also sports the following ratios: Price to tangible book of 1.53, price to cash flow of 9.70, price to free cash flow of 4.10 and a five year sales growth rate of 20.3. Net income for the past three years is as follows: For 2008 it was $2.65 billion. In 2009, it experienced a massive spike up to $12.2 billion and in 2010, it remained virtually unchanged at $12.3 billion. For 2011, net income so far stands at $12.1 billion.
We also provided enterprise values and levered free cash flow rates. The enterprise value is a combination of the market cap, debt, minority interests, preferred shares less total cash and cash equivalents. This provides a better picture because it is a more accurate representation of a company's value, in contrast to simply looking at the market cap. Free levered cash flow rates provide investors with a better picture of the company's ability to generate cash in contrast to EPS. Earnings can be manipulated through the use of accounting gimmicks but it's much harder to fake cash flow. Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa.
Traders seeking higher yields but who are also open to more risk might find this article of interest.
EPS 5yr growth rate
Quarterly revenue growth
Emerson Electric Co. (NYSE:EMR)
Emerson Electric has an enterprise value of $36.3 billion and price/book value of 3.21. It has a quarterly revenue growth of 12%, a quarterly earnings growth rate of 1.6%, a ROE of 24%, a decent five-year dividend growth rate of 9.9%, a total return of 42.99% for the past three years, and has been paying dividends since 1947. It has a very healthy levered free cash flow rate of $2.43 billion.
Price to tangible book -101
Price to cash flow 10.20
Price to free cash flow 24.40
5 year sales growth 1.56
Return on assets 11.32%
Total debt $5.2B
200 day moving average $ 48.90
Book value $14.07
Dividend yield 5 year Average 2.80%
Dividend rate $1.60
Payout ratio 44%
Dividend growth rate 5 year average 9.19%
Paying dividends since 1947
Total return last 3 years 42.99%
Total return last 5 year 17.18%
Vectren Corporation (NYSE:VVC)
Vectren has an enterprise value of $4.37 billion and price/book value of 1.68. It has a healthy quarterly revenue growth of 29%, a strong quarterly earnings growth rate of 115%, a five-year dividend growth rate of 2.4%, a total return of 35% for the past three years, and has been paying dividends since 1946. It has a levered free cash flow rate of -$21.00 million. Net income for the last three years is as follows: In 2008, it stood at $129 million, in 2009 it jumped up to $133 million and in 2010 it was unchanged at $133.7 million. For 2011, it stands roughly $95 million.
Price to tangible book 1.99
Price to cash flow 6.20
Price to free cash flow -16.80
5 year sales growth 0.40
Vectren Corp has been named as a Top 10 dividend paying utility stock, according to Dividend Channel, which publishes its weekly "DividendRank" report. The report noted that among utilities, Vectren shares displayed both attractive valuation metrics and strong profitability metrics. For example, the recent Vectren share price of $29.21 represents a price-to-book ratio of 1.6 and an annual dividend yield of 4.79%. By comparison, the average utility stock in Dividend Channel's coverage universe yields 4.1% and trades at a price-to-book ratio of 2.0. The report also cited the strong quarterly dividend history at Vectren Corp, and favorable long-term multi-year growth rates in key fundamental data points.
Return on assets 4.63%
Total debt $1.94B
200 day moving average $ 27.56
Book value $17.75
Dividend yield 5 year Average 5.00%
Dividend rate $1.40
Payout ratio 80%
Dividend growth rate 5 year average 2.41%
Paying dividends since 1946
Total return last 3 years 35%
Total return last 5 year 29%
Cincinnati Financial Corp. (CINF)
Cincinnati Financial Corporation is engaged in property casualty insurance marketed through independent insurance agents in 39 states. It has an enterprise value of $5.5 billion and price/sales value of 1.26. It has a revenue growth of -11.9%, a very decent five-year dividend growth rate of 4.16%, a total return of 21% for the past three years, and has been paying dividends since 1954. It has a levered free cash flow rate of -$4.5 million and an attractive price/book value of 1.01.
Price to tangible book 1.01
Price to cash flow 30.90
Price to sales 1.29
5 year sales growth -3.65
Return on assets 0.89%
Total debt $894M
200 day moving average $ 27.83
Book value $29.54
Dividend yield 5 year Average 5.00%
Dividend rate $1.61
Payout ratio 163%
Dividend growth rate 5 year average 4.16%
Paying dividends since 1954
Total return last 3 years 21%
Total return last 5 year -16%
Procter & Gamble Co (PG)
Procter & Gamble has an enterprise value of $213 billion and price/sales value of 2.16. It has a quarterly revenue growth (yoy) of 8.9%, a decent ROE of 18.23, and a five-year dividend growth rate of 11.2%, which is strong for a company with a market capitalization of $183 billion. Procter & Gamble has a quarterly earnings growth rate of -1.90%, a total return of 19% for the past three years, and has been paying dividends since 1891. It has a massive levered free cash flow rate of $7.66 billion. Net income has been dropping for the past three years. In 2008, it was at $13.4 billion, in 2009 it was at $12.73 billion and in 2010, net income was $11.79 billion. For 2011, the net income so far is roughly $8.3 billion dollars.
Price to tangible book -7.59
Price to cash flow 12.60
Price to free cash flow 53.50
5 year sales growth 1.91
Return on assets 7.24%
Total debt $38.5B
200 day moving average $ 63.43
Book value $23.27
Dividend yield 5 year Average 2.70%
Dividend rate $2.10
Payout ratio 51%
Dividend growth rate 5 year average 11.2%
Paying dividends since 1891
Total return last 3 years 19%
Total return last 5 year 17.8%
The markets are still choppy, though our analysis reveals that the Dow and S&P 500 will most likely head higher until earlier next year. So traders can use pullbacks to open positions in the above-mentioned stocks. This is what we had to say in the conclusion section of the best of the best series we published on December 16th:
On a short-term basis, the Dow has put in a bottom and is getting ready to challenge the 12,000 ranges again. However, there is a chance that the recent lows could be tested before the rally gathers steam. Going out a little bit further, the cycles suggest that the Dow should be able to rally till early next year and there is a fairly good chance that the Dow could trade to the 12,800 ranges and the and the SPX could trade to the 1305-1330 plus ranges with the possibility of mounting an intra-day spike to the 1340 ranges. The dollar is overbought and has generated a few sell signals on the hourly time frames, so a pullback here would help drive commodities and the general market higher.
While we have provided a lot of fundamental data on the four companies mentioned, our focus has always been on technical analysis. The technical outlook for a specific stock or the market determines whether we will go long or short or remain neutral. Our subscribers benefited strongly from our prediction that the markets would start to rally around the 20-23rd of December. This provided them with the opportunity to close their shorts and open new longs. Almost 7 days before the market bottomed, we stated the following in the conclusion section of the best of the best dividend champion series (part III):
The markets are currently very choppy and current pattern is projecting a volatile ride until about the 23rd of this month. After that the markets are expected to mount a pretty strong rally as the dollar is projected to pull back and consolidate before building up steam for another strong leg up; potentially the strength in the dollar could surprise everyone next year. As a result, it would make sense to wait until the 23rd or so of the month before deploying new funds into the above plays. The above-mentioned 5 companies are dividend champions with splendid long term payment histories; this is an achievement that all but a select few companies can lay claim too.
As stated at the beginning of the article our favourite play on the list is Emerson, but Exxon is also a very good candidate as it has been paying dividends since 1882 and has a very strong quarterly earnings growth rate of 40.5%.
Going forward, we think that the markets could put in a short term top around the 27-29th of this month. The pullback should provide traders with a good opportunity to open up long positions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before investing any capital in them.
Earnings vs. expecations graphs were sourced from smartmoney.com