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What Happened To The Class Of '89 Dividend Aristocrats?

|Includes:BAX, CL, DOV, EMR, GPC, IFF, JNJ, K, The Coca-Cola Company (KO), LOW, MMM, PG, PH, TMK

There were 26 Dividend Aristocrats in 1989. Of these 26, 5 were removed from acquisitions, 6 were removed due to not increasing their dividends, 4 were removed due to reducing dividend, 7 are still on the list, and 4 were removed for unknown reasons

Acquisitions

Ticker

Name

Year Removed

Acquiring Firm

CSR

Central & Southwest Corporation

1998

American Electric Power

HI

Household International

2003

HSBC

RBD

Rubbermaid

1999

Newell

WLA

Warner-Lambert

2000

Pfizer

AMP

AMP Inc.

1999

Tyco

No Dividend Increase

Ticker

Name

Year Removed

AHP

American Home Products (changed to Wyeth in 2002)

2002

K

Kellogg

2003

LDG

Longs Drug Stores

1995

PH

Parker-Hannifin Corp.

1990

WIN

Winn-Dixie

2000

TXU

Texas Utilities Company

1995

Reduced Dividend

Ticker

Name

Year Removed

BAX

Baxter International Inc.

1998

FPL

Florida Power & Light (Changed to NextEra Energy: NEE)

1995

IFF

International Flavors & Fragrances

2001

NSI

National Service Ind.

1999

Still on List

PG

Ticker

Name

DOV

Dover Corp.

EMR

Emerson Electric

JNJ

Johnson & Johnson

KO

Coca-Cola

LOW

Lowe's Companies

MMM

3M

Procter & Gamble

Reason for Removal Unknown

Ticker

Name

Year Removed

CL

Colgate-Palmolive

1990

GPC

Genuine Parts Company

2002

MAS

Masco Corporation

1996

TMK

Torchmark Insurance

1996

Unknown Review

CL & GPC have raised their dividend every year since their inclusion on the dividend aristocrats list in 1989 per Yahoo! Finance. Colgate-Palmolive's investor relations claims that they have not reduced dividend payments in this time period. CL & GPC were both re-added to the dividend aristocrats lists in 2012. If you include CL & GPC, 9 businesses out of 26 would have paid uninterrupted dividends to shareholders since 1989.

Masco Corporation was removed from the list in 1996 despite increasing its dividend. It should have been removed from the list much later, in 2009, when it reduced its dividend. Why it was removed in 1996 is a mystery.

Torchmark was removed from the list in 1996, despite increasing its dividend for the year. It should have been removed much later, in 2006 when it froze its dividend. The business has not cut its dividend since being included on the dividend aristocrat list to this present day.

No Dividend Increase Review

American Home Products/Wyeth froze its dividend from 2000 through 2004. From 2005 to 2009, the business resumed paying increasing dividends. If you did not sell on the freeze, American Home Products/Wyeth was acquired by Pfizer in 2009.

Kellogg (NYSE:K) froze its dividend from 2001 through 2004. It has since paid increasing dividends every year since.

I do not have sufficient data on Longs Drug Stores to know if they continued paying the same annual dividend up until the company's acquisition in 2008 by CVS. If you have data on this, please let me know and I will update accordingly.

Parker-Hannifin's did not increase its dividend in 1989, and was removed from the index in 1990. The business has waited 2 years to increase its dividend several times, but has not reduced the dividend since being included to the dividend aristocrat index in 1989.

Winn-Dixie froze its dividend in 1999. It decreased its dividend in 2001, and declared bankruptcy in 2005.

Texas Utilities Company froze its dividend in 1994, and reduced it in 1995.

Big Picture Review

  • 7 businesses are still on the list from 1989 (DOV, EMR, JNJ, KOW, LOW, MMM, PG)
  • 2 businesses should still be on the list from 1989 (CL, GPC)
  • 3 businesses have increased dividends most years without ever reducing dividend (PH, K, TMK)
  • 6 businesses were acquired (CSR, HI, RBD, WLA, AMP, AHP). AHP had frozen its dividend before being acquired
  • 1 business froze its dividend, and I don't have sufficient data to see if dividend was decreased before being acquired by CVS in 2008 (LDG)
  • 7 businesses reduced dividend (BAX, FPL, IFF, NSI, WIN, TXU, MAS). WIN & TXU froze dividend before reducing their dividend payment. MAS was removed prematurely, but reduced its dividend later

Out of 26 businesses, 18 have paid stable or increasing dividends, or were acquired. One froze dividend and I am not sure what happened afterwards due to insufficient data. 7 businesses reduced their dividend.

Having almost 70% of your stocks have favorable outcomes from 1989 to 2014 is a very high success rate. Investing in dividend aristocrat stocks reduces downside risk by forcing investors to seek stable businesses that return money to shareholders.

To see the returns for the seven stocks that have been on the Dividend Aristocrats index continuously since 1989, click here.

Sources

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: KO, PG, MMM, JNJ, CL, GPC, PH, TMK, LOW, EMR, DOV, IFF, BAX, K