Dividends Value » APD

12 Confident and Secure Companies Boosting Dividends *

D4L — Fri, 18 Mar 2011 07:30:47 +0000

If income investing were as simple as picking the stock with the highest yield, everyone would be an expert. Most assume (rightfully so) that yield is heavily influenced by risk, but much more goes into determining yield. The industry the company operates in, legal considerations (REITs and MLPs), maturity and growth potential all have an effect on an individual stock’s yield, along with the company’s ability to grow its dividend.

Below are several companies confident and secure enough in their business to increase their cash dividends:

Air Products (APD) serves customers in industrial, energy, technology and healthcare markets worldwide with a unique portfolio of atmospheric gases, process and specialty gases, performance materials, and equipment and services. March 17th the company increased its quarterly dividend 18% to $0.58/share. The dividend is payable on May 9, 2011 to shareholders of record at the close of business on April 1, 2011. This marks the 29th consecutive year that Air Products has increased its dividend payment. The yield based on the new payout is 2.7%.

Independent Bank Corp. (INDB) is a full-service community bank serving southeastern Massachusetts, Cape Cod, and Rhode Island. March 17th the company increased its quarterly dividend 6% to $0.19/share dividend which is payable on April 8, 2011, to stockholders of record as of the close of business on March 28, 2011. The yield based on the new payout is 3.0%.

Washington Trust Bancorp, Inc., (WASH) offers a full range of financial services, including commercial banking, small business banking, personal banking, and wealth management and trust services. March 17th the company increased its quarterly dividend 4.8% to $0.22/share. The dividend will be paid on April 14, 2011 to shareholders of record on March 31, 2011. The yield based on the new payout is 4.0%.

Patterson Companies, Inc. (PDCO) is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets. March 16th the company increased its quarterly dividend 20% to $0.12/share. The dividend is payable on April 28, 2011 to shareholders of record at the close of business on April 11, 2011. The yield based on the new payout is 1.5%.

Ashland Inc. (ASH) operates as a specialty chemicals company in the United States and internationally. March 16th the company announced its intentions to increase its dividend 16.6% to $0.70/share from its current annual rate of $0.60/share, commencing with the June 15 dividend payment. The yield based on the new payout is 1.2%.

Realty Income Corporation (O) is a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. March 15th the company increased its monthly dividend to $0.1445625/share. The dividend is payable on April 15, 2011 to shareholders of record as of April 1, 2011. This is the 54th consecutive quarterly increase and the 61st dividend increase since Realty Income went public in 1994. The Company continues its long-term policy of declaring and paying dividends on a monthly, rather than on a quarterly, basis. The yield based on the new payout is 5.0%.

Williams-Sonoma, Inc. (WSM) is a nationwide specialty retailer of high quality products for the home. March 15th the company increased its quarterly dividend 13% to to $0.17/share. The dividend is payable on May 24, 2011 to shareholders of record as of the close of business on April 27, 2011. The yield based on the new payout is 1.7%.

BioMed Realty Trust, Inc. (BMR) is a real estate investment trust (REIT) focused on Providing Real Estate to the Life Science Industry®. March 14th the company increased its quarterly dividend 17.6% to $0.20/share. The dividend is equivalent to an annualized dividend of $0.80 per common share. The yield based on the new payout is 4.6%.

Xilinx, Inc. (XLNX) is the world’s leading provider of programmable platforms. March 14th the company increased its quarterly dividend 18.8% to $0.19/share. The dividend is payable on June 8, 2011 to all stockholders of record at the close of business on May 18, 2011. “The increase in our quarterly dividend reflects our strong and consistent operating cash flow as well as our commitment to returning shareholder value,” said Moshe Gavrielov, Xilinx President and Chief Executive Officer. The yield based on the new payout is 2.4%.

Lennox International Inc. (LII) is a global leader in the heating, ventilation, air conditioning, and refrigeration markets. March 11th the company increased its quarterly dividend 20% to $0.18/share. The dividend is payable on April 15, 2011 to stockholders of record as of March 25, 2011. The yield based on the new payout is 1.4%.

Steel Dynamics, Inc. (STLD) manufactures and sells steel products in the United States. March 10th the company increased its quarterly dividend 33% to $0.10/share.The dividend is payable on or about April 14, 2011, to shareholders of record at the close of business on March 31, 2011. The yield based on the new payout is 2.1%.

Hudson Pacific Properties, Inc. (HPP) is a full-service, vertically integrated real estate company focused on owning, operating and acquiring high-quality office properties primarily in Northern and Southern California. March 10th the company increased its quarterly dividend 31.6% to $0.125/share. The dividend is payable on March 31, 2011 to stockholders of record on March 21, 2011. The yield based on the new payout is 3.5%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long O. See a list of all my income holdings here.

(Photo Credit)

12 Industrial Strength Dividend Stocks *

D4L — Wed, 16 Feb 2011 07:30:13 +0000

This is the third installment in a multi-part series that looks at different sectors that have traditionally been very friendly to dividend investors. Each of these sectors have attributes that make the companies in them potentially desirable to long-term buy-and-hold dividend growth investors. Understanding these attributes will hopefully help us to select the very best companies for our income portfolios. Last week we looked at Financial Services Sector. This week we are looking at Industrial Materials…

Industrial Materials Attributes

The Industrial Materials Sector consists of companies that manufacture products or otherwise harvest a product, such as a mining company. The products are most often inputs or raw materials into another manufacturing process, such as steel producer. Many of these companies are often referred to as members of the “smokestack industry” and are classified as cyclical stocks – a stock that rises and falls in step with the economy.

Timing is important when buying an industrial stock. If you buy when business is booming you will likely pay too much, which means a very low yield. Most stocks in this sector are currently overpriced. The average yield on Industrial Sector stocks that I follow is only 1.7%. This includes only 3 stocks yielding in the 3% range., with all the others sub-3%. Several of these sub-3% companies were yielding in excess of 4% in 2008 when the world looked bleak for Industrial stocks.

Industrial Materials Companies

Below are several leading Industrial Materials companies that I follow. The companies selected have a dividend yield of 2.00%, or higher, and have raised their dividends for at least 15 years.

RPM International Inc. (RPM)
Yield: 3.5% | Growth:2.5 % | Years: 38
RPM International Inc. makes specialty coatings and products for the structural waterproofing and corrosion control markets, as well as products for the consumer, do-it-yourself, and hobby markets.

MDU Resources Group Inc. (MDU)
Yield: 3.0% | Growth: 1.9% | Years: 20
MDU Resources Group Inc. is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production.

Nucor Corporation (NUE)
Yield: 3.0% | Growth: 0.8% | Years: 37
Nucor Corporation is the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.

PPG Industries, Inc. (PPG)
Yield: 2.5% | Growth: 1.9% | Years: 37
PPG is a leading manufacturer of coatings and resins, flat and fiber glass, and industrial and specialty chemicals.

Illinois Tool Works Inc. (ITW)
Yield: 2.3% | Growth: 4.8% | Years: 47
Illinois Tool Works Inc. is a diversified manufacturer that operates a portfolio of about 840 industrial and consumer businesses throughout the world.

3M Company (MMM)
Yield: 2.3% | Growth: 2.5% | Years: 52
3M Co. provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives, and other chemical additives.

Harsco Corporation (HSC)
Yield: 2.3% | Growth: 1.9% | Years: 20
Harsco Corp. is a global industrial service provider and manufacturer has operations in steel mill services and access services, as well as construction.

Emerson Electric Co. (EMR)
Yield: 2.2% | Growth: 2.2% | Years: 55
Emerson Electric Co. designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial, and consumer markets around the world.

Air Products And Chemicals Inc. (APD)
Yield: 2.2% | Growth: 2.1% | Years: 29
Air Products and Chemicals Inc. is a major producer of industrial gases and electronics and specialty chemicals and also has interests in environmental and energy-related businesses.

General Dynamics (GD)
Yield: 2.1% | Growth: 10.1% | Years: 19
General Dynamics is the world’s fifth largest military contractor and also one of the world’s biggest makers of corporate jets.

United Technologies Corp. (UTX)
Yield: 2.0% | Growth: 10.4% | Years: 18
United Technologies Corp. portfolio includes Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners, among other products.

Pentair, Inc. (PNR)
Yield: 2.0% | Growth: 5.6% | Years: 34
Pentair Inc. makes and markets water and fluid control devices, and electrical and electronic enclosures.

Conclusion

The Industrial Materials Sector is the largest sector in my database of dividend stocks. Of the 198 stocks that I track, it currently is represented by 34 stocks (17%). As noted above, this is not a sector I am in a position to buy often, but when the time is right, I plan on taking full advantage of the opportunity. Two of my largest annualized returns (IRR) come from industrial stocks: 3M (MMM) at 46.5% and Emerson Electric Co. (EMR) at 49.7%. I wouldn’t buy them at their current valuation, but based on where they were when I purchased them, I am enjoying a healthy yield-on-cost.

Full Disclosure: Long NUE, ITW, MMM, EMR, GD, UTX. See a list of all my income holdings here.

(Photo Credit)

9 Dividend Stocks Building Future Yield *

D4L — Fri, 19 Mar 2010 10:30:27 +0000

As a young investor I followed an aggressive growth strategy. Having narrowly missed the tech bubble bursting, I purchased my first dividend stock on December 11, 2003. I had heard dividend investments were supposed to be safer, but knew very little else about the strategy. I was fortunate enough to accidentally buy enough good dividend stocks to learn the “secret” of dividend investing. It is not necessarily starting with a high-yield investment, but ending up with a high-yield investment. This usually occurs by buying stocks with a moderate yield and a long history of growing dividends and letting time do its job.

This week several companies are building future yield by increasing the cash dividends paid to their shareholders:

Birner Dental (BDMS) develops, acquires, and provides business services to dental practice networks in Colorado, New Mexico and Arizona. March 12th the company increased its quarterly dividend 17% to $0.20/share. The yield based on the new payout is 4.92%.

Warwick Valley Telephone Co. (WWVY) provides telephone, Internet and video services to customers in the towns of Warwick, Goshen and Wallkill, New York andWest Milford and Vernon townships, New Jersey. March 12th the company raised its quarterly dividend 9.1% to $0.24/share. The dividend is paid on March 31, 2010 to shareholders of record as of March 22, 2010. The ex-dividend date is March 18, 2010. The yield based on the new payout is 6.63%.

Lennox Int (LII) is a global provider of heating, ventilation and air conditioning and refrigeration products. March 12th the company increased its quarterly dividend 7% to $0.15/share. The dividend is payable on April 15, 2010 to stockholders of record as of March 26, 2010. The ex-dividend date is March 24, 2010. The yield based on the new payout is 1.35%.

PepsiCo (PEP) is a major international producer of branded beverage and snack food products. March 15th the company raised its quarterly dividend 7% to $0.48/share. The dividend is payable on June 30, 2010 to shareholders of record on June 4, 2010. The ex-dividend date is June 2, 2010. PEP is a Dividend Aristocrat and has raised its dividend for 38 consecutive years. The yield based on the new payout is 2.89%. [Analysis]

Astro-Med Inc. (ALOT) designs, develops, manufactures and distributes specialty printers and electronic instruments that acquire, store, analyze and present data in multiple formats. March 16th the company raised its quarterly dividend to $0.07/share. The dividend is payable on April 2, 2010 to shareholders of record on March 19, 2010. The ex-dividend date is March 17, 2010. The yield based on the new payout is 3.76%.

Mead Johnson (MJN) is a global leader in pediatric nutrition. March 17th the company increased its quarterly dividend 12.5% to $0.225/share. The dividend is payable April 1, 2010, to shareholders of record on March 24, 2010. The ex-dividend date is March 22. The yield based on the new payout is 1.75%.

Guess? Inc. (GES) offers one of the world’s leading lifestyle collections of contemporary apparel and accessories for men, women and children, sold in multiple channels including wholesale, company-owned retail locations, e-commerce, and licensed stores. March 17th the company increased its quarterly dividend to $0.16/share. The yield based on the new payout is 1.37%.

Air Products (APD) is a major producer of industrial gases and electronics and specialty chemicals also has interests in environmental and energy-related businesses. March 18th the company raised its quarterly dividend by 9% to $0.49/share. The dividend is payable on May 10, 2010 to shareholders of record at the close of business on April 1, 2010. The ex-dividend is March 30. APD is a Dividend Aristocrat and has raised its dividend for 28 consecutive years. The yield based on the new payout is 2.62%.

Prospect Capital (PSEC) is a financial services company that primarily lends to and invests in middle market privately-held companies. March 18th the company raised its cash distribution to $0.41/share. This distribution marks the Company’s 22nd consecutive quarterly increase. The ex-dividend date is Monday, March 29, 2010. The record date is Wednesday, March 31, 2010. The yield based on the new payout is 13.48%.

When looking for companies that are likely to build future yield, look first at those that have done it in the past. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long PEP. See a list of all my income holdings here.

(Photo Credit)

Dividend Payout vs. Free Cash Flow Payout *

D4L — Wed, 14 Oct 2009 10:30:29 +0000

I am a firm believer in keeping things simple. However, you can simplify things to the point they no longer have value. In my opinion, a lot of the commonly used financial metrics can be very misleading unless you understand what is behind them. I would put EBIT, EBITDA and Dividend Payout in this category. As an investor in dividend stocks, I see Dividend Payout used a lot, so let’s take a closer look at it.

Dividend payout is expressed as a percentage and is calculated by dividing annual dividend per share by annual earnings per share (EPS). This tells the investor what percentage of earning the company is paying out as a dividend. At first blush this may seem to make a lot of sense, but it suffers from the following potential problems:

I. Earnings Does Not Equal Cash

As an accountant, I can tell you our profession in its pursuit of theoretical perfection has adulterated the financial statements to the point that it has become very difficult for non-accountants to understand what’s behind the numbers. Accounting pronouncements such as SFAS No. 143 “Accounting for Asset Retirement Obligations” (ARO) that requires a company to recognize expenses today for cash payments that may not occur for decades or even centuries widens the gap between earnings and cash. Applying “fair value” principles allowed under GAAP, financial institutions (and others) can mark to market debt on their books and create non-cash income or expense, depending on the direction of interest rates. Many point to mark to market accounting as one of the major contributors to the 2008 financial melt-down.

II. Quality of Earnings

Would you rather a company that you are invested in to increase its earnings by 1.) increasing sales and holding cost down or 2.) sell a fully depreciated plant. Obviously, you would rather have the former since it has the possibility of being duplicated over and over again. You can only sell a specific asset once. In addition to cash and non-cash earnings, a statement of earnings also contains operating and non-operating earnings.

A Better Dividend Payout Calculation

A dividend payout ratio is supposed to provide the investor with an indication of how much cash as a percent of earnings the company is paying its investors. As you can see from the above discussion, a payout ratio based on GAAP net earnings could potentially have a lot of noise in it and not provide a clear picture of the economic condition of the business.

What the investor is really wanting to know is what percentage of cash is the company paying as a percentage of cash generated from running the business. The irony here is that operating cash is readily available on the Statement Of Cash Flows in the Operating section. This section focuses on the cash generated by running the business. It excludes cash generated by selling pieces of the business – these are shown in the investing section. It also excludes cash generated from selling stock or issuing debt – these are shown in the financing section.

In calculating a payout ratio, I prefer Free Cash Flow over Operating Cash Flow. Free Cash Flow is Operating Cash Flow less normal capital expenditures (normally the first line in the investing section). For a business to remain viable, it must replace capital assets when they wear out.

The formula for Free Cash Flow Payout is simply Annual Dividend Per Share divided by Free Cash Flow Per Share. I like to see a percentage of 70% or less. The 70% is somewhat higher than many people look for with a traditional payout ratio. I am comfortable with the higher number since we are talking about real cash generated from running the business vs. accounting earnings that may or may not be there. So how do the two ratios compare?

Needless to say, the variances are all over the place. In many companies I looked at the traditional dividend payout ratio was within 10 percentage points higher than a free cash flow payout. This means the GAAP earnings was lower than the calculated Free Cash Flow. Here are some example of this situation:

Chubb Corp (CB) – Traditional: 28% – FCF Payout: 21% – Analysis
Clorox Company (CLX) – Traditional: 50% – FCF Payout: 50%
Emerson Electric Co. (EMR) – Traditional: 53% – FCF Payout: 45% – Analysis
Family Dollar Stores Inc. (FDO) – Traditional: 25% – FCF Payout: 22%
Hormel Foods Corp. (HRL) – Traditional: 34% – FCF Payout: 33%
International Business Machines (IBM) – Traditional: 23% – FCF Payout: 18%
3M Co. (MMM) – Traditional: 50% – FCF Payout: 45% – Analysis
Microsoft Corp. (MSFT) – Traditional: 32% – FCF Payout: 29%
SYSCO Corporation (SYY) – Traditional: 52% – FCF Payout: 48% – Analysis
United Technologies Corp. (UTX) – Traditional: 35% – FCF Payout: 30% – Analysis

Sometime the gap is much larger. This could have resulted from significant non-cash charges on the income statement. Companies with large gaps include:

Aflac Incorporated (AFL) – Traditional: 44% – FCF Payout: 10% – Analysis
CenturyLink Inc. (CTL) – Traditional: 87% – FCF Payout: 46%
Diebold Inc (DBD) – Traditional: 74% – FCF Payout: 30%
Illinois ToolWorks Inc. (ITW) – Traditional: 76% – FCF Payout: 31% – Analysis
Leggett & Platt Inc. (LEG) – Traditional: 262% – FCF Payout: 34% – Analysis
Nucor Corporation (NUE) – Traditional: 88% – FCF Payout: 29% – Analysis
Pitney Bowes Inc. (PBI) – Traditional: 73% – FCF Payout: 38%
PPG Inds Inc (PPG) – Traditional: 158% – FCF Payout: 48%
RLI Corp (RLI) – Traditional: 158% – FCF Payout: 48% – Analysis
RPM International Inc (RPM) – Traditional: 84% – FCF Payout: 49% – Analysis
AT&T Inc. (T) – Traditional: 81% – FCF Payout: 49%

Sometimes the gap is not only large, but goes the other way. This is potentially the most dangerous since focusing on the traditional dividend payout may lead you to believe the dividend is covered better than it actually is. Examples of this situation would include:

Air Products and Chemicals Inc. (APD) – Traditional: 56% – FCF Payout: 172%
Franklin Resources Inc. (BEN) – Traditional: 23% – FCF Payout: 48%
BP Plc (BP) – Traditional: 50% – FCF Payout: 114% – Analysis
Lowe’s Companies, Inc. (LOW) – Traditional: 27% – FCF Payout: 57% – Analysis
Exxon Mobil Corp (XOM) – Traditional: 27% – FCF Payout: 54%

Although Free Cash Flow Payout is a better payout ratio than the traditional dividend ratio, the investor should look at both and understand the differences. Taking an expense for impairing goodwill is much different than recognizing an expense for losing a lawsuit. The former will not directly involve cash out the door, but the latter will if the company loses on appeal.

Full Disclosure: Long CLX, EMR, MMM, SYY, UTX, AFL, CTL, ITW, NUE, BP. See a list of all my income holdings here.

(Photo Credit)

Oracle (ORCL): The Birth Of A New Dividend Stock *

D4L — Fri, 20 Mar 2009 10:30:51 +0000

It is a powerful statement when others are hoarding cash that a company has the confidence to declare its first dividend to eliminate excess cash. Oracle (ORCL) did just that on Wednesday when it reported third-quarter EPS of $0.35/share, $0.03/share better than the analyst estimate of $0.32/share, and it declared its first ever dividend of $0.05/share. The dividend yield is 1.15%. ORCL is a leading supplier of enterprise database management systems and business applications.

Another company looking to give cash back to their shareholders is FortuNet (FNET). On Tuesday, FNET announced that shareholders will vote at its 2009 annual meeting on April 17, 2009 on a special $2.50/share cash dividend that was approved by the Board of the Company. FNET is a manufacturer of multi-game and multi-player server-based gaming platforms.

One Dividend Aristocrat chose to raise its dividend in a more traditional manner. Thursday, Air Products and Chemicals Inc. (APD) announced a 2.2% increase its quarterly dividend to $0.45/share payable on May 11, 2009 to shareholders of record at the close of business on April 1, 2009. The new dividend yield is 3.17%. APD is a major producer of industrial gases and specialty and intermediate chemicals also has interests in environmental and energy-related businesses.

Other than the above, it was a slow week for dividend increases. Unfortunately, the dividend slashers were still out in full force. Times like these separate the pretenders from the contenders. For more companies around the world with a long string of consecutive dividend increases, see my updated Stock Ideas page. There were a lot of companies crossed off last week.

Full Disclosure: No position in any of the aforementioned securities.

(Photo: Steve Woods)