At the start of the new year, it's time to reassess portfolio performance and set goals. This is especially important for retirement accounts. Goals will vary, largely because of different time horizons. Some people have retired or are near retirement while others have decades of investing before retirement. But overall goals don't change much from one account to the next. Investors want capital growth along with some degree of safety. Capital growth comes from income and appreciation. However capital appreciation has been uneven since 2000 because of choppy earnings growth and a severe recession 3 years ago. Capital appreciation has not been as productive or reliable as in the past.
Dividend and dividend growth have been more reliable, especially from quality companies with consistent records of raising dividends through good and bad times. Dividend Aristocrats are the companies with records of raising annual dividends for at least the last 25 consecutive years. Below are seven Dividend Aristocrats with a minimum track record of raising dividends for the least 34 years (even through recessions when streaks of lesser companies ended).
|RPM Intl (RPM)||$23.63||3.6%|
|Johnson & Johnson (JNJ)||$65.13||3.5%|
|Abbott Labs (ABT)||$55.42||3.5%|
|Emerson Electric (EMR)||$47.83||3.3%|
Kimberly-Clark is a paper company with popular brands such as: Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. These brands typically hold #1 or #2 share positions in more than 80 countries. The annual dividend has been increased for 39 consecutive years.
Sysco is the global leader in marketing and distributing food products to restaurants, healthcare and educational facilities and hospitality businesses. The annual dividend has been increased for the last 42 years.
RPM International manufactures high-performance coatings, sealants and specialty chemicals with over 40% of sales coming from outside the US. The annual dividend has been increased for the last 37 years.
Clorox sells a variety of household products such as Clorox bleach, Armor All, STP, Kingsford, Hidden Valley, Brita and Glad bags around the world. The dividend has been increasing the annual dividend for 34 years.
Johnson & Johnson ranks as the world's largest and most diverse health-care company with more than 250 operating companies worldwide. Its global presence is expanding in the BRIC countries: Brazil, Russia, India and China. When the dividend is increased in a few months, its streak of higher dividends will be half a century.
Abbott is an old line pharmaceutical global company which has diversified over the years. It has paid annual dividends since 1926 and has been increasing the dividend for the last 39 years.
Emerson Electric is a diversified global manufacturing and technology company offering products and services in network power, process management, industrial automation, climate technologies and storage businesses. It has been increasing the annual dividend for 55 years.
These companies offer yields above 3% and the dividends are expected to grow for many years. Since 2006, these companies have typically increased dividends at least 50%.
One company that deserves extra attention is Emerson. Because it does not have household brand names, it is not as well known. But it has an impressive record of growth. After being hurt by the recession, EMR has rebounded, helped by its global diversification (59% of sales come from outside the U.S.). Sales in emerging markets expanded from 15% in 2001 to 35% (of $24 billion) in 2011. Management is guiding 2012 sales up 6% and EPS growth of 10% (from $3.27). What makes this company exceptional is the dividend, which has increased at a compounded annual growth rate of 11% since 1956. The cover of its current annual reports trumpets what long term growth is about: "2011 ANNUAL REPORT, 55 YEARS OF INCREASED DIVIDENDS, EMERSON".
Another interesting opportunity is Abbott Labs. Its management will split the company into two companies in 2012, hoping to raise value for shareholders. With its long term record of growth, this company deserves a P/E more than 11X.
The main objective for retirement is to grow for higher income to better enjoy retirement and pay for increased costs in later years. While safety of principal is important, few investments selected are risky. These companies offer attractive yields, growing income and opportunity for investment gains needed during retirement. When investing for retirement, don't forget the importance of growth and increasing dividends.