The ultimate goal for investors is growth from higher stock prices and dividends. Growing dividends are important because they are paid from rising EPS and also provide current income. Dividend Aristocrats, 51 companies selected by S&P which have raised annual dividends for a minimum of the last 25 years, are an excellent source of investment ideas. Many began their streaks in the 1970s (or before), continuing through good times and recessions. Dividends were increased through the financial meltdown 3 years when a number of highly regarded companies (including Dividend Aristocrats) had to cut dividends.
Some Dividend Aristocrats have yields above 3%, a few are even above 4%. Income is welcome, especially during difficult times and by retirees. However others with low yields, around 1-2%, have had excellent capital appreciation over the last 10 years. Below are 8 of the best:
1. CR Bard (BCR) is a leading multinational developer and marketer of innovative, life-enhancing medical technologies in vascular, urology, oncology and surgical specialty products. 2011 sales were up 6% to $2.9 billion and diluted EPS rose 6% to $6.40. Business continues strong with sales up 17% in January 2012. Analysts are forecasting EPS of $7.08, up 6%, for 2012. The annual dividend has been increased for 41 consecutive years and the $92.30 stock yields 0.8%.
2. Brown-Forman (BF.B) is known for quality alcohol beverages, including Jack Daniel's, Southern Comfort, Finlandia, Canadian Mist and Gentleman Jack sold in 135 countries. It has marketing operations and sales offices in 30 foreign countries, with foreign sales accounting for 55% of the total. In fiscal 2011, sales grew 6% to 3.4 billion and EPS was up 29% to $3.90 In the last 15 years, the stock gained 350% while the Dow doubled. Over the last 35 years, EPS grew at a 13% compounded annual growth rate. The dividend has been raised for the last 29 years and the $80.09 stock provides a 1.7% yield.
3. WW Grainger (GWW) is North America's leading supplier of maintenance, repair and operating products and is expanding global operations (including in India and Japan). In addition, $2 billion of sales came from eCommerce. Sales for 2011 were up 12% to $8.1 billion and EPS rose 31% to $9.07. For 2012, the company is guiding sales growth of 10-14% with EPS of $9.90-$10.65. GWW has been increasing dividends for 39 years and the $206.12 stock yields 1.3%.
4. Sherwin-Williams (SHW) is a global leader in paint coatings under brands such as Sherwin-Williams, Dutch Boy, Krylon, Minwax and Thompson's sold through 3400 company-operated stores. Other brands are sold by independent dealers in more than 109 countries. Sales increased 13% to $8.8 billion in 2011 and EPS was $4.14, similar to the prior year. For 2012, sales are guided to increase by a high single-to-low-teens percentage and diluted EPS should be $5.37-$5.67. The $106.12 stock yields 1.5% and the annual dividends has been increased for 34 years (just raised 7% to $1.56).
5. Sigma-Aldrich (SIAL) makes biochemical, organic chemical products used in scientific research, including research, biotechnology, pharmaceutical development for the diagnosis of disease for pharmaceutical, diagnostics and high technology manufacturing. Customers include more than 1 million scientists. Sales in 2011 grew 10% to $2.5 billion and EPS was up 19% to $3.72. Organic sales growth for 2012 is expected to be in the mid single digit range (partially due to the recent acquisition of BioReliance Holdings) and adjusted EPS is guided at $3.90-$4.05. The annual dividend has been increased for the last 36 years and the $70.51 stock yields 1.0%.
6. T Rowe Price (TROW) is a global investment management organization with $490 billion under management. It manages mutual funds, subadvisory services and separate accounts for individual and institutional investors, retirement plans, and financial intermediaries and provides fundamental research. Revenue in 2011 was $2.7 billion and EPS rose 15% to $2.92. TROW is cautious about 2012 but is looking for more growth. The annual dividend has been increased for the last 25 yrs and the $60.98 stock yields 2.1%.
7. VFC Corp (VFC) is a $9 billion apparel and footwear company with diverse, international brands. Revenue is guided to increase 15% and adjusted EPS is expected to rise to $9.30 net of a negative $0.60 impact from pension expense adjustments and foreign currency translation. Timberland (acquired last year) should account for $1.7 billion of revenues and $1.10 of adjusted EPS in 2012. The $144.98 stock yields 2.0% and dividends have been increased for 40 years.
8. Exxon Mobil (XOM) is the largest energy company in the world with earnings of $41 billion in 2011 (2nd best year in history), up $11 billion from 2010, and EPS increased 35% to $8.42. Upstream earnings (oil wells) earned $34.4 billion, up $10.3 billion. Exploration expenditures were a record $36.8 billion and $29 billion was distributed to shareholders through dividends and share purchases. The annual dividend has been increased for 30 consecutive years and the $85.83 stock provides a 2.2% yield.
These companies have excellent records of growth. All stocks have at least tripled over the last 10 years (except for XOM which doubled) during a difficult time in the stock market while Dow increased only a modest 22%. With track records like these, rapid growth is expected to continue. Growing earnings allows management to reward stockholders with increased dividends and stock repurchases. Growing dividends also provide a significant investment bonus, especially when reinvested. A decade forward, stockholders should be proud of these investments.