Dividend Contenders are stocks that have raised their dividends for 10 to 24 years in a row. Based on such a record, these companies have clearly adopted a managed dividend policy and are committed to raising their dividends every year if they possibly can.
I have written several "Periodic Table" articles before, the most recent being an examination of Dividend Champions that appeared in May. The periodic tables of dividend stocks are based on the periodic tables of chemical elements that we all learned about in high school. This is simply an organizational framework to provide insight. We will organize the Dividend Challengers by their current yields and dividend growth rates. The idea is to identify stocks with favorable combinations of yield and dividend growth.
As of the end of August, there are 105 Contenders. The source for this and all data in this article is David Fish's Dividend Champions document (aka CCC) published at the end of August, available here. Once again I thank David not only for producing this extraordinary research tool, but also for giving me permission to slice and dice it every so often to provide different slants on the information that it contains.
In the Periodic Table, the X and Y axes are yield and dividend growth rate (DGR). Over several articles, I have tinkered with the format to make these tables useful to the highest number of readers. This edition uses very similar ground rules as last time:
- DGR Timeframe. To be conservative, I use the lowest DGR from among the 1-, 3-, and 5-year DGRs. Because the DGRs from the source document are calculated from data for calendar years 2011 and earlier, I also considered the most recent increase if there has been one in 2012. This is designated by "12." Thus, "EOG-1" means that the DGR used was the one-year rate, and that it was the lowest of the four choices. "ROST-12" means that the 2012 increase was used, and that it was the lowest of the four choices. If two DGRs were identical, I show both timeframes separated by a comma (such as "CASS-3,5").
- Break Points. I think that most people set their low-end yield or DGR requirements with a "whole" number like 3.0% or a "half" number like 2.5%, so I use numbers like that to begin each new level. That said, note that percentage yields and DGRs have been rounded to one decimal place, so a yield like 2.98% has been rounded to 3.0%.
- Shading. I shade the cells where the least likely stocks of interest reside. Of course,this reflects my own judgment, and interest will vary from investor to investor, often determined by factors other than the two covered here. This is how I chose what to shade:
- In general, stocks with yields under 2.5% or DGRs under 5% are shaded. However...
- High Yield/Low DGR. If a stock's yield is high, which I define as more than 5%, there is no shading even if the DGR is miniscule. With a 5%+ yield, the investor may not care much about the dividend's growth rate.
- Low Yield/High DGR. Similarly, some investors may be interested in stocks that have displayed a very high rate of dividend growth even if the current yield is low. For that reason, I did not shade stocks if the DGR was at least 15% provided the yield was at least 2.0%.
- Please use the shadings in the spirit in which they are intended-rough guidelines, not absolute endorsements or criticisms. Do not consider stocks in the white areas to be recommendations. Remember this table covers only two elements - yield and DGR - which while important do not constitute sufficient due diligence for any stock investment.
- Multiple Increases in a Year. Some companies - especially MLPs and REITs - often increase their dividends more than once per year. For these stocks, it could be misleading to place them according to their 2012 increase(s) to date, as the year is not yet complete and more increases may be coming. So their 2012 increase(s) have been disregarded, and their placement is based on the lowest of their 1-, 3-, or 5-year DGRs. They are called out by "&" as the last symbol in their listing.
- Overdue Increases. Some of these stocks have gone more than a year since their last dividend increase. They are still on the CCC list because their total payouts haven't frozen or declined in a calendar year yet, but clearly they are on or are approaching endangered-species territory in terms of their dividend increase streaks. These are called out here by "?" as the last symbol in their listing. On the source document, David calls attention to these overdue stocks by using red ink.
PERIODIC TABLE OF DIVIDEND CONTENDERS
September 18, 2012
Dividend Growth Rate % (Lowest of 1, 3, or 5-Year DGR or 2012’s Increase)
0.1 – 4.9
5.0 – 9.9
10.0 – 14.9
15.0 – 19.9
0.1 – 0.4
0.5 – 0.9
1.0 – 1.4
1.5 – 1.9
2.0 – 2.4
2.5 – 2.9
3.0 – 3.4
3.5 – 3.9
4.0 – 4.4
4.5 – 4.9
5.0 – 5.4
5.5 – 5.9
6.0 – 6.4
There are several familiar stocks in the white area of the table:
- United Technologies (NYSE:UTX)
- Enbridge (NYSE:ENB)
- General Dynamics (NYSE:GD)
- Harris (NYSE:HRS)
- Next Era Energy (NYSE:NEE)
- ConocoPhillips (NYSE:COP)
- NTT DoCoMo (NYSE:DCM)
- National Retail Properties (NYSE:NNN)
- Kinder Morgan Energy Partners (NYSE:KMP)
- Omega Healthcare Investors (NYSE:OHI)
Of the 176 Dividend Contenders, 63 are in the white area. Dividend growth investing involves picking individual stocks. They are usually outliers from the “average” S&P 500 stock that has a yield under 2%. In fact, many of these stocks are not in the S&P 500. There are lots of mid-cap stocks here, invalidating the common wisdom that all dividend growth stocks are large-cap companies. And there are 20 ADR stocks here, representing foreign corporations that are not eligible for the S&P 500.
This compilation should only be used as a starting point for investing ideas. Complete due diligence must take many more factors into account, such as debt, revenue and earnings growth rates, valuation metrics, and business models. A list such as this does not nearly comprise proper due diligence. It is just a starting point.
Develop your own strategy and requirements and stick to them. Don’t invest in anything without performing your own due diligence.