In this article in my series, we look at companies that have raised their dividends for 30 years or more. Two companies on this list have a record of over 50 years in raising their dividends. Use this analysis as a starting point for your own due diiligence.
Nordson Corp. (NDSN): The dividend has been increased for 48 consecutive years. The yield is 1.08% and the annual payout is $0.5. The quarterly payout was increased by 19.05% to $0.1250 with the payout ratio at a very miserly 15.48%. The growth rate over the last decade is 4.1%.
The stock has fallen sharply from early July when it was about 20% up. The shares are down about 15% for the year and trade at a trailing price/earnings multiple of 12.6, which is a slight discount to 3M Corporation (MMM) at 13.9.
Glancing over the payout ratio history of this company makes for depressing reading. In 2002, the payout ratio stood at 86%, dropping to less than half only two years later to end up in the current sorry situation. Whilst the recent dividend hike may spark interest, I would not hold this stock. 3M Corporation is a better dividend play selling at a reasonable price.
Northwest Natural Gas (NWN): The dividend has been increased for 56 consecutive years. The yield is 3.7% and the annual payout is $1.53. The quarterly payout was increased by 2.3% to $0.4450 with the payout ratio at 72.95%. The growth rate over the last decade is 3.1%.
The stock has edged up about 3% for 2011, trading at a trailing price/earnings multiple of 19.9, which is a steep premium to Portland General Electric Company (POR) at 13.3.
Whilst POR doesn’t hold a candle to NWN’s dividend record, it may interest you to look at POR’s dividend statistics in comparison to other dividend-paying utilities. The yield is 4.2% with the annual dividend at $1.06. The payout ratio stands around 60% with the payout growing from $0.68 in 2006, when the company first started paying to $1.06 in 2011, though it has slowed considerably since 2007 with very low single digit increases.
I would wait for the valuation to come down to a fairer level before looking at NWN, though I won’t consider it for my portfolio as the payout hikes won’t compensate for raging inflation in the years to come.
Nucor Corp. (NUE): The dividend has been increased for 38 consecutive years. The yield is 3.7% and the annual payout is $1.45. The quarterly payout was increased by 0.69% to $0.3625 with the payout ratio at 73.23%. The growth rate over the last decade is 25.4%.
Nucor’s shares trade at a trailing price/earnings multiple of 20.6 and finished off 2011 about 10% down.
Based on my estimates, this stock trades around 12X its 2012 earnings, which is an attractive valuation. Factoring the 3.7% yield, this stock is certainly worth keeping in mind due to its healthy finances, a diverse product mix and dominant positions in the markets in which it operates. This should help it post solid revenue gains and dividend hikes for 2012.
Old Republic International (ORI): The dividend has been increased for 30 consecutive years. The yield is 7.92% and the annual payout is $0.7. The quarterly payout was increased by 1.45% to $0.175. The growth rate over the last decade is 8.9%.
The stock finished off 2011 in negative territory. Initially it was down over 45%, only to stage a mini rally and it is now down over 30%. The shares currently trade at a forward price/earnings multiple of 61.8.
Of concern to me are the company’s finances. A depressed housing environment combined with volatile equity and debt markets have severely impacted earnings of this company and its peers. It’s no surprise that short sellers have been targeting such stocks.
The yield is enticing but there are other companies out there with similar or higher yields combined with fairly healthy finances. The mortgage industry seems likely to continue hurting from the housing fallout. Give this one a pass
Parker-Hannifin Corp. (PH): The dividend has been increased for 54 consecutive years. The yield is 1.9% and the annual payout is $1.48. The quarterly payout was increased by 15.63% to $0.37 with the payout ratio at 21.89%. The growth rate over the last decade is 9%.
Parker-Hannifin shares trade at a trailing price/earnings multiple of 11.6. This compares favorably to rivals Eaton Corporation (ETN) at 12.3 and Honeywell International (HON) at 16.06. The stock had a strong run in the last quarter of 2011, rising about 20% to end the year about 10% under after being more than 30% in the red.
As with Nordson, Parker-Hannifin’s payout ratio has steadily declined since 2002 when it stood at 64%. This stock may interest momentum investors who favor cyclical stocks since the company’s end markets tend be in cyclical in nature. Income investors are advised to look elsewhere. Eaton Corporation is one stock to consider, as a starting point, its yield is 3.1%.