Dividend Champions for February

by: David Fish

The Dividend Champions spreadsheet and PDF have been updated through 1/31/11 and are available here. Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years.

During the past month, I have focused on updating the listings for dividend increases and other announcements. Following is a discussion of my latest efforts.

New Companies, New Sources

During January, two encouraging trends emerged. One was the rapid replenishment of the Dividend Challengers, which were joined by several new companies that have reached the five-year level of dividend increases. As I've mentioned previously, I started to write down companies with four years of increases in the fall, and that evolved into the addition of an Appendix that can be found on the Notes tab. But it was also clear from that work that there were many more companies that must have recorded a fourth year of increases during the first three quarters of 2010, and most of those should show up as new Challengers during 2011, while others will be added to the Appendix.

Already this year, new Challengers include OGE Energy (NYSE:OGE), Robbins & Myers (NYSE:RBN), Epoch Holding (NASDAQ:EPHC), and several MLPs (Master Limited Partnerships): Duncan Energy Partners (NYSE:DEP), Crestwood Midstream Partners (NYSE:CMLP), Targa Resources Partners (NYSE:NGLS), and Spectra Energy Partners (NYSE:SEP). In fact, MLPs appear to be the fastest growing group of Dividend Challengers, and some are moving up to Contender status.

The second area that I found encouraging was the use of some additional sources of dividend data to augment Yahoo and the company websites. So far, they've been most helpful in identifying streaks by foreign ADR (American Depository Receipt) companies. The first is the Corporate Actions area of Marketocracy, such as this link for Telefonica SA (NYSE:TEF).

which helped me to find a “missing” 2005 dividend that corrected TEF's streak from 5 to 8 years. The dividend amounts appear to be more exact than Yahoo in many cases, but there are still some missing amounts for some companies. The second website to provide some missing information was the Financial page at Google, which may already be an icon for anyone with a Google toolbar, or can be reached here. By clicking on either “All” or “10y” on a company's graph, a series of dividend “balloons” appears at the bottom. Scrolling over these displays the dates and amounts. Unfortunately, Google's Historical Prices (on the upper left) do not include an option for “Dividends Only,” as Yahoo's does. This source helped me to add Nippon Telegraph & Telephone (NYSE:NTT) and NTT DoCoMo (DCM), among others.

New Graduates, New Ideas

As mentioned last month, 2011 promises to be a good year for companies advancing from Contender to Champion or from Challenger to Contender status. Already, one company, HCP Inc. (NYSE:HCP), the former Health Care Properties, has been promoted to Champion status. Its press release called the latest dividend increase its 26th consecutive year of increases, although it had previously been listed at 24 years. (I generally defer to the company's claim.) Two companies (Norfolk Southern (NYSE:NSC) and Sunoco Logistics Partners (NYSE:SXL)) have graduated to Contender status and they were joined in that group by five new entries: Chesapeake Financial Shares (OTCQB:CPKF), Citizens Financial Services (OTCPK:CZFS), Canadian Natural Resources (NYSE:CNQ), Unilever NV (NYSE:UN), and Unilever plc (NYSE:UL). The last three of these were a result of researching the sources mentioned above. (Before any ADR fans get their hopes up, it appears that many ADR companies still fail to qualify because of a down year in 2009 distributions.) Overall, the number of companies listed on the Champions, Contenders, and Challengers tabs, along with those in the Appendix, has risen to 464, from 443 at the end of 2010.

Although there were no major structural changes this month, I did spend some time enhancing the notations for the ADR companies, especially those with semi-annual dividends. In addition to ensuring that each listing showed the country of original, I added a notation to reflect when the dividend rate had been “annualized.” This was done to address a problem that arises from the fact that such companies typically pay an interim and a final distribution, which are generally very different amounts – often one quite large while the other is quite small. For example, if a company paid 30¢ and 90¢, up from 25¢ and 85¢, respectively, in the previous year, showing either change (90¢ vs. 85¢ or 30¢ vs. 25¢) meant over- or under-stating the yield, percentage increase, annual amount, and payout ratio.

So my solution, marked by the “@” symbol, is to reflect half the annual total dividends – as if the rate were raised from 55¢ to 60¢ in the example above - which makes the yield and other computations correct. It may not be a perfect solution, but I think it is the “lesser evil.”

Final Words

As the Dividend Champions listing continues to evolve, I hope that it will be useful to investors, but remind everyone that it is just a starting point for additional research. I usually close by inviting your feedback, but this month, I want to pose a couple of specific questions that I am considering:

  1. Having noticed that some companies, especially MLPs, have a tendency to raise their dividend more than once a year – in some cases, every quarter – I am considering replacing the usual percentage increase calculation with a notation, such as “m” for “multiple.” The idea is that a deceivingly low percentage would not be an unfair “red flag” on that company and that it would not tend to lower the group average (at the bottom of the column), since that company may have actually increased its rate during the year by as much as four times the percentage currently shown. Opinions?
  2. Inclusion of “special cases.” Although there may be others, I'm mulling whether adding a company such as National Presto Industries (NYSE:NPK) could be justified. The company has a habit of adding a “special” dividend to its regular once-a-year payouts. Although I usually exclude “special” or “extra” dividends (which might indicate a false decline the following year), the company's pattern of paying an extra amount on a regular basis might be viewed as a de facto regular dividend, which would currently give NPK a 7-year streak of rising dividends. Of course, if it were included, the company would be subject to deletion if its total payout were reduced. I would add a notation if it were listed.

I would appreciate opinions on these two questions and any other suggestions in the comment section below.

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