Some companies commit to increasing shareholders' value by constantly increasing dividends. Their rising revenues, earnings, and cash flow enable them to implement this policy with consistency year after year. The absolute dividend champions are companies that have been able to do so for at least 50 years in a row. The list of such firms is not extensive and it includes some of the most popular blue chip names in the United States. Here is a closer look at 5 such companies.
Procter & Gamble Co. (PG) is a $173 billion consumer goods giant, producing a wide range of personal care products, from beauty products and laundry detergents to health care products and pet food. The company has grown its earnings per share (EPS) by an average rate of 10% per year over the past five years. Analysts forecast that the company will continue to expand its EPS by an average annual rate of 7.8% in the next five years.
P&G has increased dividends every year since 1957. It currently pays a dividend yield of 3.6% on a payout ratio of 69%. Over the past five years, P&G's dividend has grown at an average rate of 10.8% a year, almost on par with growth in its EPS. Today, the company's dividend is three times as large as that in 2002. P&G's rivals Colgate-Palmolive (CL) and Kimberly-Clark Corporation (KMB) pay yields of 2.5% and 3.7%, respectively. P&G is slightly overvalued relative to its own five-year average metrics and the consumer goods industry as a whole. Among guru managers, billionaire Donald Yacktman has a large stake in the company. Ken Fisher has also maintained a noteworthy position in this consumer goods firm.
Emerson Electric Co. (EMR) is a $34 billion diversified global manufacturing and technology company providing "products and services in network power, process management, industrial automation, climate technologies, and tools and storage businesses." The company has seen its EPS grow by an average annual rate of 7.9% a year over the past five years. It is forecast to accelerate its EPS growth to nearly 12% a year, under the assumption that a robust global economic expansion takes hold.
Emerson Electric has been raising its dividends each year since 1957. It currently pays a dividend yield of 3.4% on a payout ratio of 51%. The company has increased its dividend at an average rate of 8.9% per year over the past five years. Its current dividend is more than twice that paid out in 2002. The company's competitors General Electric (GE), Caterpillar (CAT), and ABB (ABB) pay yields of 3.6%, 2.1%, and 4.3%, respectively. As regards the company's valuation, its P/E is slightly below the industry's but well below the company's five-year average ratio. Fund managers Chris Davis (Davis Selected Advisors) and Ray Dalio (Bridgewater Associates-check out its top picks) have been adding to their respective small positions in the company.
Genuine Parts Company (GPC) is a $10 billion company selling replacement parts for passenger vehicles and industrial machines. The company's EPS has grown, on average, by 5.4% per year over the past five years. Analysts forecast that for the next five years, the company's EPS will expand at nearly double that rate.
Genuine Parts Company has been increasing its dividends every year since 1957. It currently yields 3.3% on a payout ratio of 53%. The company's dividend has grown at an average annual rate of 6.1% a year over the past five years. This year, the company bolstered its dividend by a higher 10% rate. Its current dividend is 70% higher than that in 2002. The parts maker's peer Advance Auto Parts (AAP) yields 0.3%, while AutoZone (AZO) does not pay any dividends. As regards the company's valuation, its stock is currently trading below the industry metrics, but above the company's own five-year average ratios. Fund manager Ray Dalio owns the stock, but has been slowly reducing his position.
Diebold Inc. (DBD) is a $2.3 billion company and the largest manufacturer of ATMs in the United States. It also sells electronic and physical security products such as vaults, and various software systems for the banking industry. The company has grown its EPS by an average annual rate of 6.6% a year over the past five years. Driven by the recovery in the financial services industry, it is expected to boost its EPS by a higher average annual rate of 10.5% in the next five years.
Diebold has paid higher dividends each year since 1954. It pays a dividend yield of 3.1% on a payout ratio of 39%. The company's dividend has been growing at an average rate of 4.7% per year over the past five years. Its current dividend is 73% higher than that paid out in 2002. Diebold's direct competitor NCR Corporation (NCR) does not pay any dividends. The company's P/E is slightly above that for the industry. Fund manager Joel Greenblatt sold out of his position in the company last year.
3M Corporation (MMM) is a multinational conglomerate producing some 55,000 different products, ranging from abrasives and laminates to dental products and electronic circuits. The company's EPS grew at a modest average annual rate of 3.3% per year over the past five years. Assuming that the economy will expand at a brisk pace, analysts forecast that the company's EPS will grow at a faster 11.3% annual rate in the next five years.
The conglomerate has been raising its dividend every year since 1959. It pays a dividend yield of 2.8% on a payout ratio of 39%. The company has raised its dividend at an average annual rate of about 4% per year over the past five years. Today, its dividend is 90% higher than that paid out in 2002. 3M Corporation's competitors TYCO International (TYC) and General Electric pay yields of 1.9% and 3.6%, respectively. The company's stock is trading on P/E below industry and market ratios. Among popular fund managers, Jean-Marie Eveillard (First Eagle investment Management - see top picks) has a large (and increasing) stake in the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.