The Dynamic Dividend

The Dynamic Dividend
Contributor since: 2010
None of these companies pay "stock" dividends.
These names (and their dividends) are safe for at least another two years with the Fed committing to low rates through 2013.
Great stuff, thanks for posting. I think a lot of investors overlook the strong balance sheet that should give Intel's fantastic R&D machine plenty of time to innovate through near-term hurdles.
This is a great list of quality companies. Although I was under the impression WP Carey was technically not a REIT (it simply manages a portfolio of REITs), so the IRS restrictions in the intro do not apply. Is this correct, or did it recently change?
Smucker doesn't own Dunkin Donuts, it's simply licensed to manufacture and sell its ground coffee products within retail stores.
Hey Martin. Here's an update/clarification to the article iampaul100 linked earlier (which I wrote): CHL traded ex-dividend with regards to its second 2010 payout on May 11. The dividend will be $1.0264 per ADS, and should be paid on 6/14. Hope that helps!
Good point. I was focusing more on the lost income than recovery time, which I am completely unqualified to make an estimate on. But:
A buyer at today's opening price ($18.66) will be looking at a yield-on-cost of 6.86% if/when the company is able to return its payout to traditional levels. The stock seems to have solid yield support in the 5.50% range, so they should enjoy considerable capital appreciation as well.
I think there's no doubt that today's buyers will be in a really fantastic position once the recovery is complete -- its just a matter of how much patience will be required to reach that point.
Shareholders will probably be out more than just $0.64 per share. Empire plans on reinstating the payout at a reduced level ($0.25 per share) in 2012, and raising it as the community recovers. Who knows how long it will take them to recover their payout fully, but with 8-10k customers not needing service "for the foreseeable future" due to structural damage, I think you're looking at an extended period of weaker earnings -- and as a result, dividends.
I actually think the market got this one right. The stock closed with a 5.55% dividend yield the last trading day before the tornado hit, and investors are looking at a 5.25% yield-on-cost at the current price (assuming the dividend returns at the targeted rate).
Update: WWE just released a statement outlining its "revised" dividend policy:
Class A shareholders take a 67% cut, Class B shareholders (McMahon family) takes a 50% cut. Everyone is getting $0.12/share moving forward.
"If Lyondell starts to add a dividend, expect the price to go even higher."
Looks like it's on the way:
Remind me to never have you "cut" my grass, or my hair for that matter :)
Ummm... totally overlooked? That's exactly the scenario I outlined as the most likely to unfold. Re-read the last sentence in the article:
"The company could realize that even an extension of the original waiver would not be sustainable much longer, and elect to cut its dividend across all share classes. (By process of elimination, the likeliest scenario.)"
A cut is a reduction, not a complete elimination. WWE needs to trim its payout to a more sustainable level, and probably will sooner than later.
Yep, TheRenegade is right. LLY has been flat for nine quarters now. It officially lost its "Aristocrat" status at the beginning of this year after 42 consecutive years of dividend growth. Ouch!
Be careful with the last entry on this list. Hudson City Bancorp (HCBK) will likely cut its dividend by as much as 50% later this month, as a result of their recent balance sheet restructuring.
For those interested, I wrote more on this topic here:
Just announced today, $0.60 dividend with ex-date in April:
Great call here. I wish I'd seen this when it was originally posted.
Thanks for using my article to support your views. I didn't get much in the way of positive feedback initially, but both stocks are up considerably (STRA +6%, DV +16%) in the short time since I wrote it. Now that the DOE has ironed some of the uncertainty out of their futures, I'm banking on more of the same.
I have read the Eisman slides, that's actually what prompted me to track these stocks. I wouldn't have touched them at the time, but they're now down more than 30% (DV) and 40% (STRA) since that report was presented back in May, which is a different story.
I thought I made it clear that I wasn't projecting past results into the future, but I'll try to be more clear the next time I write something like this. My goal was to show the margin of safety built into the dividends (and dividend growth) of these companies, even if profits decline substantially.
In Microsoft's case, it can cover the dividend quite easily without borrowing, but a lot of their cash is held overseas. Rather than bring that money back to the states (and have it taxed) to pay the dividend, it's simply cheaper for the company to sell debt.
Keithley (KEI) probably won't be dropping below $21.60 any time soon, considering that's the price Danaher is acquiring it for. Same with AirTran (AAI), their merger with Southwest gives their shares a lot of stability where they're at.
PSA is a consistent payer, but their dividend increases are pretty sporadic. Over the last 20 years, the company has averaged a 10% annual increase to its dividend rate, but there have been huge gaps between the raises.
For instance, there was a period from 1994 to mid-2001 where PSA's dividend rate was stuck at $0.88 per share (although a few special dividends were mixed in). Then in late 2001, the dividend rate was more than doubled to $1.80 - where it stayed until 2005.
Here's a pretty good look at the company's dividend history:
The article doesn't refer to dividend yield, it's talking about earnings yield. Two different things.
Edit: Oops, I'm a few minutes late.
I definitely agree. The confectioner landscape is littered with stocks that either display moderate dividend growth but are overvalued (TR, HSY), or have nice valuations but flat dividends (RMCF). Pick your poison, I guess...
Am I missing anything that seems to capture the best of both worlds?
Great analysis. You nailed it, this is by far one of the best dividend-paying medical stocks out there. In fact, it's one of the best dividend-paying stocks, period.
MDT seems poised to continue its success, even with the bar set pretty high. If the next two decades are even half as good as the last two, it will be a great stock to own.
"Tootsie Roll can be considered a true value company..."
I would like to see a little more evidence to support this claim. TR trades at about double its book value (pretty good) and 26x future earnings (not good). It also trades at about double its Graham Number, which hardly makes it a value play.
If you're looking for a value play among confectioners, one that's caught my eye recently is Rocky Mountain Chocolate Factory (RMCF). It has a 4.4% yield (all cash) and only trades at about 10x earnings. It trades at about 135% of its Graham Number, which blows away any of the dividend-paying confectioners I've come across.
Corn is definitely a huge reason these stocks have taken a beating, but you have to factor in the Chinese tariffs as well. They were imposed last month, and ramped up this week:
Talk about terrible timing...
As was pointed out earlier, OKE derives most of its income from a large stake in ONEOK Partners, giving it plenty of utility exposure.