These stocks have been raising their dividends for more than 25 years. The yields from some of these stocks are attractive, though their valuations are at a premium. For now take note of them and keep an eye out when they are selling at reasonable valuations.
MGE Energy Inc. (MGEE): The dividend has been increased for 35 consecutive years. The yield is 3.3% and the annual payout is $1.53. The quarterly payout was increased by 2% to $0.3826 with the payout ratio at 56.68%. The growth rate over the last decade is a paltry 1.2%.
The stock is up 5.2% for the year and trades at a trailing price/earnings multiple of 17.09, slightly expensive when looking at Wisconsin Energy Corporation (WEC) at 15.5 and Integrys Energy Group (TEG) at 16.48. It recently hit a new 52 week high.
Whilst the yield is attractive, the dividend growth rate is nothing to write home about. Going by its history, investors looking for “retirement” stocks should give this one a miss. Utility stocks are mostly bought for their steady earnings stream and dividend payouts. Therefore it’s only logical to expect that payouts will increase steadily over time to outpace inflation. This is not the case with this stock, there are better options available in previous articles in this series.
Middlesex Water Company (MSEX): The dividend has been increased for 39 consecutive years. The yield is 4% and the annual payout is $0.74. The quarterly payout was increased by a miserly 1.37% to $0.1850 with the payout ratio at 80.43%. The growth rate over the last decade is at a snail’s pace 1.7%.
Investors are certainly paying handsomely for above average yields. The shares are expensive, trading at a trailing price/earnings multiple of 21.2. Not surprisingly, rival Artesian Resources Corporation (ARTNA) is also richly valued at 23.48 (trailing).
Yes, the yield is attractive, but to pay so dearly is unwise. Factor in the miserly hike in the recent payout and you can see why it’s so ridiculous to buy this stock at the current valuation. Previous articles in this series contain stocks paying 4% and above and at fair valuations.
Mine Safety Appliances (MSA): The dividend has been increased for 40 consecutive years. The yield is 3% and the annual payout is $1.04. The quarterly payout was increased by 4% to $0.26 with the payout ratio at 70.7%. The growth rate over the last decade is 20.2%.
As with MSEX, investors are also willing to pay a premium for solid, dividend paying stock. The shares trade at a trailing price/earnings multiple of 19.4, a little cheaper than Lakeland Industries (LAKE) at 21.5.
The company’s dividend statistics (yield, payout ratio and growth rate) are worth taking note off. The only thing counting against this issue is the high valuation. The stock has risen over 25% in the last 3 months. Wait for the market to go into manic depressive mode before snapping up this stock.
NACCO Industries (NC): The dividend has been increased for 26 consecutive years. The yield is 2.31% and the annual payout is $2.59. The quarterly payout was increased by a miserly 1.9% to $0.5325 with the payout ratio at a lowly 13.32%. The growth rate over the last decade is 8.9%.
The shares trade cheaply, its trailing price/earnings multiple is 5.1 which is heavily discounted when compared to Arch Coal Incorporated (ACI) at 19.5 and Stanley Black &Decker (SWK) at 17.5. The recent sharp run up in the stock price seems to be the doing of value investors. The shares have risen sharply over the last three months after being down over 40% for the year. The stock is about 15% down for the year to date.
With a low payout ratio and dividend hikes, income investors won’t be handsomely rewarded by holding this stock. The low valuation multiple in relation to its peers may reflect investors unhappiness with this company’s prospects or current business model.
National Fuel Gas (NFG): The dividend has been increased for 41 consecutive years. The yield is 2.6% and the annual payout is $1.42. The quarterly payout was increased by 2.9% to $0.355 with the payout ratio at 45.6%. The growth rate over the last decade is 3.7%.
The stock rose sharply from October and is down about 15% for the year, trading at a trailing price/earnings multiple of 18, which is a slight premium to Consolidated Edison (ED) at 16.7, which stacked up well the last time I compared utilities.
Whilst NFG’s diversified earnings base is attractive, its dividend growth record bothers me. As with MGE Energy, the dividend growth has not kept up with inflation and probably won’t do so for the next decade. There are better options.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.