Low Sweat Investing's  Instablog

Through Wednesday of this week, The Wall Street Journal reported dividend news from several companies. Here’s a quick look at some highs and lows, at least from where I’m sitting.

Let’s start with a high-yielder that announced a low increase.

Calumet Specialty Products Partners L.P.  (CLMT) bumped its dividend just 1%, but investors collect about a 9.5% yield so you probably won’t hear many complaints, at least from new shareholders.

CLMT is a refiner that processes crude oil into specialty products such as lubricating oils and solvents, as well as into gasoline and other fuels. This is the company’s first increase since it cut its dividend in May 2008. It had been raising the dividend aggressively before that cut.

The company’s cash flow from operations covers the current dividend with ease, though net income, which stumbled over low energy prices, does not. With oil recovering, CLMT might bear watching by experienced high-yield investors and traders who don’t mind K-1 tax forms.

CLMT’s return on equity is over 18%, with long-term debt about equal to equity. Valuations are near their historical averages. The stock has trounced the market, the energy sector and some popular energy MLPs over the trailing 1-year and 3-month periods, but is a volatile issue than has underperformed over longer time periods.

And now, how about some dividend news from a low-yielder with high dividend increases and sky-high capital returns?

Atrion Corp. (ATRI), a medical supplies smallcap, made the news this week with a $6 per share special dividend announcement.

With the stock near $160, the one-time special dividend adds 3.8% to ATRI’s regular yield.

But ATRI isn’t a yield play: although the company has tripled its regular quarterly dividend via five straight years of healthy increases, the yield without the one-time special payout is under 1%.

ATRI is a capital appreciation stock for aggressive investors who view growing dividends as a sign of business health and management confidence, rather than a source of high current income.

The stock catapulted 200% over the trailing 5-year period and 60% in the past year, powered upward by strong sales and earnings growth.

Return on equity is 16%, with no long-term debt. ATRI’s payout ratio is just 15%, so look for plenty more dividend growth ahead. Investors have jumped in recently, so the stock trades near the high end of its historic valuations.

ATRI mocks me from my watchlist, where it sits, reminding me, to my regret, of its earlier, cheaper days. I simply couldn’t make a spot for an under 1%-yielder in my portfolio. Too bad for me.

In this last bit of highs and lows in dividend news, insurance company American Financial Group (AFG), followed through on its Q4 announcement, declaring a nearly 6% dividend boost for Q1. AFG yields about 2.2%.

The company is trying to regain its former dividend highs, but has a good climb to get there, making the stock a low priority for me.

AFG cut its dividend in half in 2002 then began increasing it again in 2006, including a gorgeous 25% increase in 2008. But the dividend is still about 18% lower than before that 2002 cut.

More than that, at its current roughly 2% yield, AFG needs to show it can return to large, sustainable dividend increases - but it’s not clear how soon its business will support that.

Still brimming with New Year cheer, I hope the company does well, but I’m not staking a 2010 resolution on it. (I plan to exercise more, eat less and stop wearing socks with holes in them, just like every other year.)

Here’s Morningstar:

“After years of subpar returns, profitability has been on the mend at American Financial Group, especially within its core property-casualty segment . . . In our opinion, the company's business model does not benefit from an economic moat and most of its product lines face significant competition.”

Morningstar goes on to give AFG a Grade of ‘C’ for Growth and ‘D’ for Profitability. Meanwhile, analysts surveyed by Yahoo Finance still forecast revenue and earnings declines.

That doesn’t exactly build high confidence, especially with plenty of 2% to 3% yielders on the Achiever and Aristocrat lists that offer higher dividend growth right now.

To see a profile of just one of them, check out my Seeking Alpha article “Owens and Minor: Unappreciated Dividend Achiever” (OMI).

Or, if reading about AFG gave you an irresistible longing to wait for a beaten down insurance company to turn itself around, consider getting paid 6% while you wait. Check out 23-year Achiever Mercury General (MCY), profiled in “Mercury General: 6% Dividend Deal or Total Wreck?”

And that’s all, at least for now, on some highs and lows from recent dividend news.

References and Links

Yahoo Finance “CLMT Annual Cash Flow," January, 2010.

Press Release, “Atrion Corporation Declares Special Dividend of $6.00 per Share,” January 4, 2010.

Morningstar, “Morningstar’s Take and Grades on American Financial Group,” January 2010.

As usual, The Wall Street Journal recently noted a number of dividend increases. For a quick take on the best and worst of them, follow the link to my Seeking Alpha article.

“The Best and Worst of Recent Dividend Hikes,” December 14, 2009

http://seekingalpha.com/article/178000-the-best-and-worst-of-recent-dividend-hikes

This post was published as a Seeking Alpha article on December 31.

Please follow the link to read the article and readers' comments.

http://seekingalpha.com/article/180479-an-old-book-yields-six-types-of-dividend-growers