Before the 2008 financial meltdown, names like Bank of America (BAC), Citigroup, Inc. (C), U.S. Bancorp (USB) and Wells Fargo & Company (WFC) were held in many dividend growth portfolios. And why not? They paid a good yield and grew their dividend on a regular basis. Now their yields range between 0.5% and 1.7%. There is a lesson to be learned here.
Investors should never over-allocate in one sector and certainty should never stop monitoring their investments. During the 2008-2009 time period many banks were making questionable loans, while investment firms were creating and peddling exotic financial instruments. In effect, they were operating under an unsustainable model. It was destined to come tumbling down, and did it ever.
The banks that were able to sustain their dividend during this dark period were usually small and locally managed. They were able to avoid the government's "help" and all the strings that came along with it.
Insurance companies are another prominent member of the Financial Services sector. They operate under the ultimate model. The companies charge premiums to protect you, invest the premiums, earn a return and find ways to minimize what they actually pay you when a claim is filed. Finally, they will raise your rates for filing a claim.
This week, I screened my dividend growth stocks database for Financial Services companies with a yield above 3.5% and those that have increased their dividends for at least 10 consecutive years. The results are presented below:
Community Bank System (CBU)
Yield: 3.6% | Years of Dividend Growth: 18
Community Bank System provides financial services in upstate New York, and in northeastern Pennsylvania as First Liberty Bank & Trust.
Yield: 3.8% | Years of Dividend Growth: 31
Community Trust Bank Corp. owns and operates Community Trust Bank, Inc. of Pikeville, KY, which provides commercial banking services in Kentucky andWest Virginia; and a trust company.
Yield: 4.8% | Years of Dividend Growth: 51
Cincinnati Financial Corp. is an insurance holding company that primarily markets property and casualty coverage. It also conducts life insurance and asset management operations.
People's United Financial Inc. (PBCT)
Yield: 5.0% | Years of Dividend Growth: 14
People's United Financial Inc. provides a full range of banking and financial service products to individuals, corporations and municipal customers in the U.S. Northeast.
Mercury General Corp. (MCY)
Yield: 5.4% | Years of Dividend Growth: 24
Mercury General Corp. is an insurance holding company, operating primarily in California, that writes a full line of automobile coverage for all classifications of risk.
Old Republic International (ORI)
Yield: 6.7% | Years of Dividend Growth: 30
Old Republic Intl writes property and liability, mortgage guaranty, title and life, and disability insurance.
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long CINF, CTBI. See a list of all my dividend growth holdings here.