In looking for established companies with a 7 to 10 year history of dividend growth coupled with sustainable dividend ratios below 70%, BCE Inc (BCE), Johnson and Johnson (JNJ) and Intel Corporation (INTC) are three interesting companies that met that criteria.
1. BCE - BCE Incorporated
"BCE Inc. is Canada's largest communications company, providing a comprehensive and innovative suite of broadband communication services to residential and business customers in Canada." (BCE company website)
BCE Inc has had a rich history of dividend payments. Looking back from the year 2001, BCE inc has had a steady history of dividend increases. During the financial crisis of 2008 into 2009, BCE was able to grow its dividend from $1.50 to $1.58 or an increase of 5%.
Below is a Chart of the dividend payout per year, for BCEs common shares.
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The current dividend payment as of January 2012 for BCE is $.5425 CDN per common share. According to BCE's 2012 guidance report the dividend payout for 2012 will be $2.17 CDN. Estimating BCE's sales at $17.82 billion, a profit margin of 13.9% and a projected profit of $2.47 billion, BCE will have an estimated EPS of $3.18. With an expected dividend payout of $2.17 and an EPS of $3.18, BCE has a payout ratio of 68.2%. According to BCE's 2012 guidance report :
BCE's dividend payout ratio based on 2012 Adjusted EPS is below the mid-point of its policy of 65% to 75% of Adjusted EPS
With that in mind, BCE should be able to maintain its dividend.
Holders of BCE's common shares have the option to participate in BCE's Dividend Reinvestment Plan. BCE sites some advantages of participating in the Dividend Reinvestment Plan on the company website. BCE states:
- Convenience of having cash dividends automatically reinvested into common shares instead of receiving cash payments
- Ability to purchase common shares without having to pay brokerage commissions, fees or service charges
- Full reinvestment of cash dividends, as the Plan allows fractions of common shares and cash dividends on those fractions to be included in your account
- One can make Optional Cash Payments in cash or in dividends on BCE preferred shares held. Optional Cash Payments can be made without reinvesting cash dividends on common shares
- Convenient tracking of your Plan Shares with quarterly statements of account
- Ability to withdraw and/or sell any number of Plan Shares at any time for a reasonable administrative cost without terminating your participation in the Plan
- Ability to terminate your participation in the Plan or stop all investment with respect to an Investment Period at any time without penalty
The current dividend yield for BCE is 5.38%
2. Johnson and Johnson (JNJ)
Like BCE, Johnson and Johnson has also had a rich history of dividend increases. Looking back from the year 2001, JNJ has had a steady history of dividend increases. Please note on April 26th 2001, JNJ stock split 2 for 1. During the financial crisis of 2008 into 2009, JNJ was able to grow its dividend from $1.795 to $1.93 or an increase of 6.9%.
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The current dividend payment as of January 3rd, 2012 for JNJ is $.57 USD per common share. According JNJ's forward guidance, JNJ will have an estimated EPS between $5.07 - $5.17 in 2012. Estimating JNJ's sales at $71.1 billion, a profit margin of 19.8% and a projected profit of $14.08 billion, JNJ will have an estimated EPS of $5.11. With an expected dividend payout of $2.28 and an EPS of $5.11, JNJ will have a payout ratio of 44.6%. JNJ should be able to maintain its dividend.
Johnson and Johnson has a dividend reinvestment plan. JNJ expands on its dividend reinvestment plan by stating: "The Johnson & Johnson Dividend Reinvestment Program [DRIP] is available to registered shareholders of Johnson & Johnson and allows for the reinvestment of all or a portion of dividends into additional shares of common stock without any fees or commissions. Plan participants may also make additional cash purchases of stock up to $50,000 per year. If you are not a registered shareholder, you will need to first purchase shares in certificate form from any stockbroker."
The current dividend yield for JNJ is 3.60%
Intel Corporation (INTC)
Another solid dividend payer, with a track record of increasing its dividend with sustainable payout ratios is Intel Corporation. From 2001 to 2011 Intel has had steady dividend increases. Intel's dividend has increased from $.08 in 2001 to $.7824 USD in 2011. During the financial crisis of 2008 into 2009, Intel was able to grow it's dividend from $.5475 to $.56 or an increase of 2.2%.
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The current dividend payment as of January 3rd, 2012 for Intel is $.21 USD per common share. According Intel's analysts estimates, Intel will have an estimated EPS of $2.50 in 2012. With Intel estimating sales growth (PDF under CFO commentary under first-quarter 2012 results) in the "high single digits", the company should have a sales around $57.39 billion. With a profit margin of 21.78% and a projected profit of $12.5 billion, Intel will have an estimated EPS of $2.50. With an expected dividend payout of $.84 and an EPS of $2.50, Intel will have a payout ratio of 33.6%. Intel should be able to maintain its dividend.
Intel does have a dividend reinvestment program. Unlike BCE and JNJ, there are fees associated with the DRIP program. If you are interested in reviewing the dividend reinvestment plan for Intel please view the terms at Computershare.
| Initial Setup Fee | $10.00 | |
| Cash Purchase Fee | $5.00 | |
| Ongoing Automatic Investment Fee | $2.50 | |
| Purchase Processing Fee (per share) | $0.10 | |
| Dividend Reinvestment Fee | 5% of amount reinvested up to a maximum of $3.00 | |
| Batch Sale Fee | $15.00 | |
| Batch Sale Processing Fee (per share) | $0.10 | |
| Batch Maximum Sales Fee | N/A | |
| Market Order Sale Fee | $25.00 | |
| Market Order Processing Fee (per share) | $0.10 | |
| Market Order Maximum Sales Fee | N/A | |
| Note: Please consult the plan documentation for further details on fees and commissions. | ||
The current dividend yield for Intel is 3.00%
Based off of the forward looking EPS, all three of the companies have reasonable dividend ratios.
1. BCE Incorporated = 68.2%
2. Johnson and Johnson = 44.6%
3. Intel Corporation = 33.6%
With all of the companies having dividend payout ratios below 70% and two of the three companies have dividend ratios below 50%. All the companies should be able to maintain their dividends going forward. In some cases the companies should increase them going into 2013.
For more information on established companies with sustainable dividend ratios please read my article: Canadian Banks: Solid Dividend Growth Coupled With Sustainable Payout Ratios
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
