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Eric Landis
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I am a P.E. working as a Civil Engineer and am married with a two year old son and another on the way. I recently took a more active role in managing my 401k for retirement and plan to share some of my experiences as I work to build my portfolio. My interest in investing mostly began in 2005... More
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  • Dividend Champions Providing Yields Above Historical Norms

    Common sense would say that as the market nears an all-time high, there must be few investments available with attractive valuations. There are some obvious examples of stocks trading at insane valuations. (TSLA) anyone? However, there are many more trading at reasonable levels that could be great entry points for long term investors.

    This became apparent to me recently as I was doing research in looking for new opportunities for my portfolio. As I was searching through my list, I realized that several dividend growth companies were providing yields that are noticeably above their traditional range.

    Now, I would never recommend buying a stock on it's yield alone. In fact, that is one of the first lessons I've learned in my time with dividend growth investing. Yield chasing often leads one to buy into companies with declining business models who are at the precipice of a dividend cut. Some recent examples of this being (CTL), (PBI), (CLF) and (EXC).

    What I'm talking about with this article are the companies that have been growing earnings for the last twenty plus years and have been raising dividends along the way, but for whatever reason, Mr. Market has decided not to pay as much as he has in the past for those earnings and dividends. The end result is the yield on the stocks just keeps slowly creeping higher and higher as time goes on.

    With this in mind, I have taken the time to search through the CCC List provided by David Fish, which can be found here, and try to identify some of the stronger dividend payers that are currently unloved by the market.

    Clorox Company (CLX)

    Clorox is a diversified consumer goods company specializing in cleaning and disinfecting products; plastic bags, wraps and containers; cat litter products; charcoal products; water filtration products; and dressings and sauces in the food segment.

    The company is current trading about 5% below its 52-week high and has a yield of 3.3%. Over the last 20 years the company has grown its dividend at a compounded growth rate of 9.5%, which nearly matches its earnings growth rate over the same period of 9.6%. The company has grown dividend payouts for the last 36 years.

    CLX Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

    CLX Dividend Yield (TTM) data by YCharts

    As you can see above, the company has generally provided a yield of between 1.5-2.5% since the early 1990's. It took a large price drop during the Great Recession to get the yield over 3%, and except for a short period in the first half of this year it has maintained the plus 3% payout.

    The Coca-Cola Company (KO)

    One of the most iconic brands in world, Coca-Cola is a beverage company that manufactures, markets and sells an array of nonalcoholic beverages worldwide. Some of the brand names under the Coke umbrella include Sprite, Minute Maid, Powerade, Dasani and Vitaminwater.

    The company is currently trading about 10% below its 52 week high and has an annual yield of 2.9%. Over the last 20 years the company has grown its dividend at an annual rate of 10.6% and grown earnings at a slightly lower rate of 8.8%. The company has grown dividend payouts for the last 51 years.

    KO Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

    KO Dividend Yield (TTM) data by YCharts

    As with Clorox, over the last 20 years the stock has generally provided a yield under 2.5% up until the 2008-2009 recession. The yield during that period shot up to nearly 4% as the price of the stock dropped along with the market. Since then the yield drifted back down to 2.5% as the price recovered. However, with the recent pullback in price the yield is now once again approaching the magic 3.0% target.

    Johnson & Johnson (JNJ)

    Johnson & Johnson engages in the research and development, manufacture, and sale of health care products worldwide. The company operates in the consumer goods, pharmaceutical and medical devices and diagnostics. Some of the brands owned by Johnson & Johnson includes: Johnsons, Neutrogena, Lubriderm, Listerine, Band-Aid and Tylenol.

    The company is currently near its 52 week high and has an annual yield of 2.9%. Over the last 20 years the company has grown its dividend at an annual rate of 12.6% and grown earnings at a slightly lower rate of 10.9%. The company has grown dividend payouts for the last 51 years.

    JNJ Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

    JNJ Dividend Yield (TTM) data by YCharts

    From the early 1990's up until the 2008 recession, the stock generally yielded under 2.5%, but since then has yielded between 2.50% and 3.75%. With a current yield of 2.9%, the company is still providing a yield that is above recent historical norms, but with the stock near a 52 week high there may be a opportunity to lock in a greater than 3% yield on a pullback.

    McDonald's Corp. (MCD)

    McDonald's franchises and operates McDonald's restaurants in the United States and around the world. As of the end of 2012, the company operated 34,480 restaurants in 119 countries.

    The company is currently trading about 8% below its 52 week high and has an annual yield of 3.4%. Over the last 20 years the company has grown its dividend at an impressive annual rate of 19.4% and grown earnings at a rate of 10.8%. The company has grown dividend payouts for the last 38 years.

    MCD Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

    MCD Dividend Yield (TTM) data by YCharts

    Since hitting a low point of around 0.5% in 2000, the yield on the stock steadily rose during the decade, hitting 2.5% and then spiking to near 5% during the recession. The yield then drifted down to 2.5% again as the stock price recovered before rising again over the last two years as share price has stagnated while payouts have continued to increase.

    The Proctor & Gamble Company (PG)

    Proctor and Gamble manufactures and sells branded consumer goods products. The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care. Some of the products sold by Proctor and Gamble includes: Head & Shoulders, Olay, Braun, Gillette, Oral-B, Vicks, Dawn, Tide, Charmin and Pampers.

    The company is currently trading slightly below its 52 week high and provides an annual yield of 3%. Over the last 20 years the company has grown its dividend at an annual rate of 10.9% and grown earnings at a rate of 9.4%. The company has grown dividend payouts for the last 57 years.

    PG Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

    PG Dividend Yield (TTM) data by YCharts

    For the 15 years prior to the recent recession the stock provided a yield of 1%-2.5%. As with the others, the yield pushed higher as the stock price dropped in 2009, with the yield getting as high as 3.5%. Since then the yield has varied between 2.75% and 3.5%.

    Wal-Mart Stores Inc. (WMT)

    Wal-Mart Stores operates retail stores in three segments: Walmart U.S., Walmart International, and Sam's Club. The company operates approximately 11,000 stores in 27 countries.

    The company is currently trading about 5% below its 52 week high and provides an annual yield of 2.5%. Over the last 20 years the company has grown its dividend at an annual rate of 19% and grown earnings at a rate of 12.6%. The company has grown dividend payouts for the last 39 years.

    WMT Dividend Yield (<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart

    WMT Dividend Yield (TTM) data by YCharts

    Walmart is the company showing the smoothest trend in increasing yield. Since the yield bottomed out in the late 90's under 0.5%, the yield has been on a slow and steady rise up to its current level as the rate of dividend increases have outpaced increases to the share price. Another interesting item of note on the chart is that the current PE ratio of under 15 is near the lows of the last 20 years. While there has been a recent slowdown in earnings growth, analysts are projecting a 9% growth rate over the next 5 years. If the company can meet those projections, this appears to be a great entry point on the stock.

    Conclusion

    Although the market continues to set new all-time highs, that doesn't mean there aren't attractive opportunities available for investment. These blue chips have a long history of providing steady growth in earnings and dividends and at their current levels you can lock in yields that are above historical norms.

    While they don't have the attraction of some of the high flyers in the market, they do provide a factor of safety with their reliable growth and are a good anchor for a portfolio should the market storms arrive once again.

    Disclosure: I am long CLX, MCD, WMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I am a Civil Engineer by trade and am not a professional investment adviser or financial analyst. This article is not an endorsement for the stocks mentioned. Please perform your own due diligence before you decide to trade any securities or other products.

    Oct 21 4:47 PM | Link | 2 Comments
  • My New Dividend/Growth Portfolio

    I've always had an interest in investing in dividend paying stocks, but after reading a multitude of articles on Seeking Alpha, including a great recommendation by several members, Chowder if i recall correctly, I read the book The Single Best Investment by Lowell Miller.

    This book made complete sense to me and provided me the tools to re-build my 401K portfolio. In the past I've dabbled in mostly high growth potential stocks, hitting a few homeruns (TIE, BIDU, HANS, CMG) along the way, while losing plenty of money in others that didn't live up to the hype. The remainder of my funds I invested in boring old mutual funds.

    Last week I decided to take my 401K into my own hands and rebuild it from the bottom up. I knew it would cost a few dollars in transaction fees to get the job done with so many trades, but I feel in the long run this new, simple, formula can lead me to a great portfolio of buy and hold forever type stocks.

    I decided to invest roughly $500 each into 30 positions to make up my dividend growth portfolio. I used some amazing resources including David Allen Schwartz's http://www.tessellation.com/dividends/index.html and the site dripinvesting.org/. I also read countless investor presentations and quarterly earnings reports from company website and read many articles on seekingalpha.com.

    From hours of research in the evenings, after the wife and kid went to bed of course, I came up with this list 30 stocks to represent my future ticket to retirement.

    SYMBOLNAMEPRICEDIV/SHAREYIELD 
    AAPLApple Inc.450.8110.602.30 
    AEOAmerican Eagle Outfitters, Inc.20.640.442.20 
    AFLAFLAC Inc.50.071.402.80 
    CHDChurch & Dwight Co. Inc.61.451.121.90 
    CLRContinental Resources, Inc.83.89-- 
    CLXThe Clorox Company83.132.563.10 
    DRIDarden Restaurants, Inc.46.232.004.40 
    EOGEOG Resources, Inc.125.340.750.60 
    EXPEagle Materials Inc.63.500.400.60 
    FLOFlowers Foods, Inc.27.680.642.30 
    GCIGannett Co., Inc.19.860.804.00 
    INTCIntel Corporation20.420.904.30 
    LEGLeggett & Platt, Incorporated29.781.163.80 
    LMTLockheed Martin Corporation88.124.605.20 
    LNCOLinn Co, LLC39.272.847.70 
    MATMattel, Inc.40.521.443.50 
    MCDMcDonald's Corp.95.253.083.30 
    MDUMDU Resources Group Inc.24.250.692.90 
    OXYOccidental Petroleum Corporation83.612.162.50 
    PIIPolaris Industries, Inc.85.821.682.00 
    QSIIQuality Systems Inc.18.820.703.60 
    RAVNRaven Industries Inc.28.630.421.50 
    RGRSturm, Ruger & Co. Inc.53.671.532.90 
    SCCOSouthern Copper Corp.36.750.962.40 
    TGTTarget Corp.63.601.442.30 
    THOThor Industries Inc.37.780.721.90 
    VVCVectren Corporation33.021.424.40 
    WFCWells Fargo & Company35.821.002.80 
    WSOWatsco Inc.78.111.001.30 
    WYNNWynn Resorts Ltd.117.344.003.30 

    This portfolio has nice balance across all sectors and has an average yield of approximately 2.9%. There is a mix of small cap, slightly lower paying growth stocks and large cap steady paying companies.

    The only company that doesn't pay a dividend in the portfolio is CLR, which is the biggest oil producer in the prolific Bakken Shale play in North Dakota, and I have decided to hold onto it as a growth stock.

    I am excited to see how this new portfolio performs and will enjoy seeing all the reinvested dividends begin to work their compounding magic over the years!

    ----------------------------------------------------------------

    Update:

    I've made a few changes to the portfolio by selling AEO, CLR and QSII and adding ROST, GPC and QCOM. I liked the growth rate of ROST over AEO for retail, I was overweight oil and light on technology so I swapped CLR for QCOM and while QSII had a nice yield they haven't shown any recent growth so I decided to swap for GPC.

    Disclosure: I am long AAPL, AFL, CHD, CLX, DRI, EOG, EXP, FLO, GCI, GPC, INTC, LEG, LMT, LNCO, MAT, MCD, OXY, PII, QCOM, RAVN, RGR, ROST, SCCO, TGT, THO, VVC, WFC, WSO, WYNN.

    Feb 24 9:51 AM | Link | Comment!
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