For the very long-term investor, a stock's ex-dividend date is effectively inconsequential. Surely the buy-and-holder will receive his or her fair share of dividend payments over the course of a lengthy holding period. In this way, appropriateness and overall value is much more important than whether or not the investor catches the latest payout.
I recognize that this article is titled much in the same way as other 'actionable' articles, such that there is a beckoning 'buy now' bias. Likewise the underlying information remains practically the same. However, I would like to precursor the article by suggesting that price paid and the fundamental soundness of a company is much more important than receiving an extra dividend payment. With that being said, for those looking to initiate new capital, it can be disheartening to complete one's due diligence only to realize that you missed the most recent dividend by a day or two.
Below are six stocks that are going Ex-Dividend in the first half of February. Each has increased its dividend for at least the last 10 years.
Target (TGT) - This Minneapolis-based discount variety store is no stranger to increasing its dividend, as it has done so for 40 consecutive years. Most would consider Wal-Mart (WMT) as the overwhelming powerhouse in the Discount Retail sector. However Target has a history of increasing its dividend for 7 more years than Wal-Mart, has the same 2.4% current yield and pays out slightly less of its profits with a payout ratio under 30%. Wal-Mart has been beefing up payouts by an impressive 15%-plus rate over the last decade, yet Target strikes again with a 5-year average dividend growth rate of 20.1% and a 10-year average rate of 18.5%.
Just a week ago, if someone had asked me to recommend a dividend growth stock in the retail/discount arena, Wal-Mart would have been my hands down choice. But after taking a glance at Target, it seems Target is at least worth another look. Analysts seem to agree, as 21 brokers come to a collective 1-year average target upside of about 15.3% for Target versus a 1-year target upside of just 2.6% for Wal-Mart. In addition to Target's strong commitment to returning shareholder value, investors can also cheer about the recent $5 Billion Share Repurchase announcement. Even if you're not all that jazzed up about share repurchases, the company's goal of raising the dividend to $3 or more by 2017 has to do something for you. This represents a 6% yield on cost in just 5 years. Target's most recent $0.30 quarterly payout goes ex-dividend on February 13th with a Payable date of March 10th.
PPG Industries (PPG) - This Pittsburgh-based Specialty Chemical Company isn't fooling anyone with the initials; history buffs know PPG as Pittsburgh Plate Glass. For the dividend investor, there certainly hasn't been any fooling around as PPG Industries has paid an uninterrupted dividend since 1899. That's 454 straight dividends for those scoring at home. PPG recently announced a $0.57 quarterly dividend that's payable on March 12th for those that buy before the ex-dividend date on February 15th. True, the dividend growth rate hasn't been stellar as of late, increasing nearly on par with inflation over the last decade. But then again PPG has been increasing its dividend every 10 months on average for the last 9 years.
Consolidated Edison (ED) - At first glance this New York-based utility company looks like a solid choice for the dividend investor. After all, Consolidated Edison has a history of increasing payouts for the last 37 years, a current yield of 4.1% and an industry acceptable payout ratio of about 68%. However, I believe there are two fundamental issues that one must confront to initiate in Consolidated Edison today. First, the company had a 32% total return last year, but a second straight year of market crushing returns for the low risk / low reward utility sector doesn't appear promising.
Second, while Consolidated Edison does have a solid record of payout increases, in the last decade these have come to the average yearly tune of less than 1%. This means that one is actually losing purchasing power over time. Any dividend growth stock would be a better choice over the long-term given the historical growth rates. However, if you're only concerned with safe income in the short-term, Consolidated Edison could be an option. Edison goes ex-dividend of the 13th of February with a payable date of March 15th.
Walgreen Co. (WAG) - This Illinois-based Drug Store has been rewarding long-term investors for awhile now, as Walgreen has increased its dividend for 36 straight years. What's nice about the Walgreen business is that soon a large share of its investors will be giving back to the company. Our largest population source, the "Boomers", are getting older. With this in mind, they're going to need drugs and lots of them. From a sustainability standpoint, Walgreen appears poised to continue its success as it pays out just 30% of its profits in the form of dividends, while long-term demand appears to be in place.
The 2.6% current yield might appear a touch low for some income investors. However, the 5-year average dividend growth rate around 23.6% and the 10-year average growth rate around 20.1% suggest future yield on cost will be more than acceptable. Walgreen goes ex-dividend on February 15th with a $0.225 payable dividend on March 12th.
TJX Companies (TJX) - This Massachusetts-based Department Store has to hold its own against bigger Target and goliath Wal-Mart with regard to discount apparel. On the dividend scene, TJX has been able to increase its payout for 15 straight years. However, the 1.1% current yield and near 20% payout ratio surely leave investors wanting. Dividends have been growing by an average yearly rate of around 22.1% over the last half decade and an ever impressive 23.8% over the last decade. Still, investors would need this same type of growth for the next 12 years for a yield on cost in the double digits. A quick look to the next payout might appear to show a slashed dividend, but this is simply due to the 2-for-1 stock split that goes into effect on February 2nd. TJX goes ex-dividend on February 7th with a $0.095 payable dividend on March 1st.
Southern Company (SO) - At first gander this Atlanta-based Utility Company appears to fit in the same mold as Consolidated Edison. The dividend increase history isn't quite as storied, coming in at just 10 years, but the current yield around 4.2% and payout ratio near 74% sound familiar. Just like Consolidated Edison, Southern had a big gain last year, with a total return coming in at 25.5%. It seems imprudent to chase last year's trend going forward. Analysts seem to agree, as 17 brokers come to a collective 1-year target upside of absolutely nothing.
However Southern Company does have something that Consolidated Edison doesn't, an average dividend growth rate that outpaces inflation. At 4% over the last decade, it doesn't do much, but it will hold your purchasing power through time. Those looking for a safe short-term 4%-plus yield that's likely to increase with inflation could do well by examining the largest holding in the utility index. Southern Company's $0.4725 payout goes ex-dividend on February 2nd with a payable date of March 6th.