By Mark Goldstein
With a bullish start to the year, I analyzed some of the most consistent dividend payers in the market. I think these five companies will perform well in 2012. Please use my analysis as a starting point in your review for dividend income stocks.
General Electric Co (GE)
General Electric, also known as the bellwether of the economy, is a leading technology and financial services company. General Electric, with a presence in over 100 countries, is one the most diversified companies, with operations in almost every sector of the economy.
General Electric has a dividend payout ratio of 48%. Over the past five years, General Electric's average dividend yield has been 3.9% and is 3.6% at the time of writing. The organization took a beating during the financial crisis due to its financial services arm. General Electric made some tough decisions and has seen income from operations go up. The organization's order books are full. As a result, General Electric has increased its dividend at a rate of 17% annually over the last three years and bought back shares during the same time period.
General Electric's dividend payout ratio of 48%, which is on the lower side, leaves vast room for upside potential in 2012. Over the last six months, insiders have bought approximately 85,000 shares. I expect General Electric to climb steadily in the coming quarters as credit tightens and General Electric finances more of its customers' purchases.
Altria Group Inc. (MO)
Altria is a holding company. Through its subsidiaries, Altria is involved in the business of tobacco, smokeless products, wine and financial services. Altria's major subsidiaries are Philip Morris, John Middleton Inc., U.S. smokeless tobacco, etc.
Over the last five years, Altria's EPS has increased by 9% compounded annually, from $1.51 in 2006 to $1.93 in the last quarter. Altria has a dividend payout ratio of 93. Altria's average dividend yield over the past five years is 10.4% (5.7% at the time of writing), which is higher than the 30 year Treasury bond trading at 2%. Furthermore, Altria has increased its dividend payment for 43 years, if the spinoffs are accounted for.
Although the smoking rate has been falling in the U.S., it has been increasing globally. Altria is able to pass along rate increases to its customers without any major changes in the smoking pattern, as there is no substitute for a particular brand of tobacco. I expect Altria to trend upward in the coming quarters primarily due to well established tobacco product lines and growth in foreign markets.
Exxon Mobil (XOM)
Exxon Mobil is an American oil and gas company, with presence in five continents. It is involved in exploration of oil and natural gas, production of petroleum and chemical products and transportation, marketing and selling of these products. Exxon Mobil is one of the biggest companies in the world with revenues bigger than the GDP of many countries.
Over the last 10 years Exxon Mobil has increased its EPS at a rate of 12.45% compounded annually. Exxon Mobil has not a skipped a dividend for over 100 years and has increased its dividend consistently for the past 28 years. Over the last five years its average dividend growth rate has been approximately 7% with a yield of 2%.
Exxon Mobil's dividend payout ratio of around 22% -- lower than its competitors in the industry -- is an indicator of the fact that it is poised to move toward the industry average.
Exxon Mobil has one of the most consistent share buyback programs and in turn distributes the wealth amongst its shareholders. Exxon Mobil has the highest ROI and ROE over its competitors at 18 and 27 respectively. I expect Exxon Mobil to show consistent growth in the coming quarters and exceed market expectations.
Avon Products, Inc. (AVP)
Avon Products is in the business of creating, manufacturing and selling jewelry, fashion wear, footwear, fragrances, skin care, cosmetics and home decorating products. The company is present in over 140 countries through its distribution channels. Avon Products has been increasing its presence in China, and with its increasing disposable income, looks to continue that trend in 2012.
Over the past years five years Avon Products has increased its EPS growth rate at an average of 30.81%. During the same period its dividend yield has averaged 2.6% and is 5.2% at the time of writing. The organization has increased its dividend at 8% annually over the last 8 years.
With a dividend payout ratio of 54% and very high interest coverage ratio, Avon Products should be able to increase its dividend and maintain its dividend growth rate throughout 2012.
Coca-Cola is the biggest non-alcoholic beverage company. It has a presence in almost all the countries on the planet with products ranging from water, soda and juice to tea and coffee. In 2009, Coca-Cola's management announced a plan to double its revenue by 2020, and so far, with the results of the past few quarters, it can be said that they are on target to achieve it.
Coca-Cola has increased its dividends over the past 49 years and over the past five years its dividend growth rate has been 7% with a yield of 2.8%. Coca-Cola currently has a dividend payout ratio of 34%, giving its management room to increase this year.
Coca-Cola has a strong balance sheet with LT Debt/Equity of 0.41. Coca-Cola's management has been very efficient in realizing opportunities, whether it is through mergers or by expanding product lines. Coca-Cola's management efficiency can be gauged from highest ROE, ROI and ROA amongst its competitors with 38%, 27% and 16% respectively. With a strong management team, and exceptional brand awareness, I expect Coca-Cola to combine innovation with its well established product lines to propel growth in 2012.