Below are a few companies with not quite the legacy of those above, but nevertheless are providing positive feedback to their investors by with higher cash dividends:

Targa Resources (NGLS) is a natural gas midstream operator engaged in the business of gathering, compressing, treating, processing and selling natural gas and fractionating and selling natural gas liquids, or NGLs, and NGL products. October 8th the company increased its quarterly distribution to $0.5375/unit. The distribution is payable on November 12 to unitholders of record on October 18. The yield based on the new payout is 7.16%.

PAA Natural Gas Storage (PNG) is engaged in the business of acquisition, development, operation and commercial management of natural gas storage facilities. October 12th the company raised its quarterly distribution 58.8% to $0.3375/share. The distribution is payable on November 12, 2010, to holders of record of such units at the close of business on November 2, 2010. The ex-distribution date is October 29, 2010. The yield based on the new payout is 5.55%.

Bladex (BLX) is a Panama-based company that offers financial services for banks and corporations in Latin American and Caribbean. October 12th the company increased its quarterly cash dividend to $0.17/share. The dividend is payable on November 1, 2010 to stockholders registered as of October 22, 2010. The yield based on the new payout is 4.63%.

Goodrich (GR) is one of the world’s largest providers of equipment, parts and services to the large commercial, regional, business and military jet markets. October 12th the company raised its quarterly dividend 7% to $0.29/share. The dividend is payable December 30, 2010 to shareholders of record as of December 1, 2010. The yield based on the new payout is 1.51%.

Healthcare Services Group (HCSG) provides housekeeping, laundry, linen, facility maintenance and food services to hospitals and other health care facilities. October 12th the company increased its quarterly dividend 1% to $0.2325/share. The company also announced a 3-for-2 stock split. The yield based on the new payout is 3.80%.

Genesis Energy (GEL) operates crude oil common carrier pipelines, is an independent gatherer and marketer of crude oil, and operates a wholesale CO2 business. October 13th the company raised its quarterly distribution 3.3% to $0.3875/unit. The distribution will be paid on November 12, 2010, to unitholders of record at the close of business on November 2, 2010. The ex-distribution date is October 29, 2010. The yield based on the new payout is 6.15%

Calumet Specialty Products (CLMT) is an independent U.S. refiner and marketer that operates refineries in Louisiana and facilities in Pennsylvania and Texas, and distributes product throughout North America. October 13th the company increased its quarterly dividend to $0.46/unit. The distribution is payable on Nov. 12 to shareholders of record on Nov. 2. The ex-dividend date is Oct. 29. The yield based on the new payout is 8.79%.

Enterprise Products Partners L.P. (EPD) is an integrated provider of natural gas and natural gas liquids services, including processing, fractionation, storage, transportation, and terminalling. October 14th the partnership raised its quarterly distribution 1.3% to $0.5825/unit. The quarterly distribution will be paid on November 8, 2010, to unitholders of record as of the close of business on October 29, 2010. The ex-distribution date is October 27, 2010. EPD is a Dividend Achiever and has raised its dividend for 12 consecutive years. The yield based on the new payout is 5.60%.

Duncan Energy (DEP) gathers, transports, markets, and stores natural gas, as well as in transporting and storing natural gas liquids (NGLs) and petrochemicals in the U.S. October 14th the company raised its quarterly distribution to $0.4525/unit. The distribution is payable on Monday, November 8, 2010, to unitholders of record at the close of business on Friday, October 29, 2010. The ex-distribution date is October 27, 2010. The yield based on the new payout is 5.47%.

Enterprise GP Holdings (EPE) owns the general partner of Enterprise Products Partners, L.P. (EPD), a North American midstream energy company. October 14th the partnership increased its quarterly distribution 2.7% to $0.575/unit. The distribution is payable on November 8, 2010, to unitholders of record as of the close of business on October 29, 2010. The ex-distribution date is October 27, 2010. The yield based on the new payout is 3.63%.

A. Schulman (SHLM) sells plastic resins in various forms, which are used as raw materials by its customers, who include manufacturers, custom molders, processors and extruders. October 14th the company raised its quarterly dividend 3.3% to $0.155/share. The dividend is payable November 1, 2010, to shareholders of record on October 25, 2010. The ex-dividend date is October 21, 2010. The yield based on the new payout is 2.99%.

Omega Healthcare (OHI) invests in and provides financing to the long-term care industry. Its portfolio includes health care facilities in 27 states. October 14th the company increased its quarterly dividend 2.8% to $0.37/share. The dividend is payable November 15, 2010 to common stockholders of record on October 29, 2010. The ex-dividend date is October 27, 2010. The yield based on the new payout is 6.41%.

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 MMM, EMR. See a list of all my income holdings here.

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1.) An abrupt or permanent shift in a company’s business model as a result of business conditions.
2.) A dividend yield that is higher than average and/or higher than others in the industry.
3.) Diminishing cash available to pay dividends.

Ultimately, the ability of a company to pay its dividend is determined by its cash position – both cash on its balance sheet and its ability to generate cash flow. Below are several companies that are NOT cutting their dividends, but instead raising them:

BreitBurn Energy (BBEP) explores and develops oil & gas properties in U.S. July 30th the company increased its quarterly distribution 2% to $0.3825/unit. The distribution is payable on August 13, 2010 to the record holders of common units at the close of business on August 9, 2010. The ex-distribution date is August 5, 2010. The yield based on the new payout is 9.40%.

American Water (AWK) provides water, wastewater and other water-related services to residential, commercial, and industrial customers in the United States and Canada. July 30th the company raised its quarterly dividend 5% to $0.22/share. The quarterly dividend is payable on September 1, 2010 to all shareholders of record as of August 18, 2010. The ex-dividend date is August 16, 2010. The yield based on the new payout is 4.08%.

Donaldson Co. (DCI) operates as a worldwide manufacturer of filtration systems and replacement parts. July 30th the company increased its quarterly dividend 4% to $0.125/share. The dividend is payable September 10th to shareholders of record as of August 20, 2010. The ex-dividend date is August 18, 2010. DCI is a Dividend Achiever and has raised its dividend for 23 consecutive years. The yield based on the new payout is 1.07%.

NuStar GP Holdings, LLC (NSH) owns the 2% general partner interest, a 16.7% limited partner interest, and the incentive distribution rights in NuStar Energy L.P. August 2nd the partnership raised its quarterly distribution 2% to $0.46/unit. The distribution is payable on August 18, 2010, to holders of record as of August 6, 2010. The ex-distribution date is August 16, 2010. The yield based on the new payout is 5.98%.

PetMed Express (PETS) markets prescription and non-prescription pet medications and other health products for dogs, cats, and horses directly to the consumer. August 2nd the company raised its quarterly dividend 25% to $0.125/share. The dividend is payable on August 27, 2010, to shareholders of record at the close of business on August 13, 2010. The ex-dividend date is August 11, 2010. The yield based on the new payout is 3.11%.

Herbalife (HLF) sells weight-management, nutritional supplement, and personal care products. August 2nd the company increased its quarterly dividend to $0.25/share. The yield based on the new payout is 1.91%.

W&T Offshore (WTI) is focused on exploring and developing hydrocarbon resources in the Gulf of Mexico, primarily in the deep shelf and deepwater. August 2nd the company raised its quarterly dividend to $0.04/share. The dividend is payable on September 10, 2010, to the shareholders of record on August 20, 2010. The yield based on the new payout is 1.68%.

Steris (STE) develops, manufactures and markets infection prevention, contamination control, microbial reduction, and surgical and critical care support products and services. August 3rd the company increased its quarterly dividend 36% to $0.15/share. The dividend is payable September 21, 2010 to shareholders of record at the close of business on August 24, 2010. The ex-dividend date is August 20, 2010. The yield based on the new payout is 1.88%.

Euroseas (ESEA) provides ocean-going transportation services worldwide. It owns and operates drybulk carriers that transport iron ore, coal, grains, bauxite, phosphate and fertilizers. August 3rd the company raised its quarterly dividend 20% to $0.06/share. The dividend is payable on September 03, 2010 to all shareholders of record as of August 25, 2010. The ex-dividend date is August 23, 2010. The yield based on the new payout is 5.60%.

Nationwide Health Properties (NHP) invests in senior housing facilities, long-term care facilities and medical office buildings. August 3rd the company increased its quarterly dividend 2.2% to $0.46/share. The dividend is payable on September 3, 2010 to stockholders of record on August 20, 2010, with an ex-dividend date of August 18, 2010. The yield based on the new payout is 4.81%.

Broadridge Financial (BR) provides technology-based outsourcing solutions to the financial services industry. August 3rd the REIT raised its quarterly dividend 7% to $0.15/share. The dividend is payable on October 1, 2010, to stockholders of record at the close of business on September 15, 2010. The ex-dividend date is September 13, 2010. The yield based on the new payout is 2.92%.

Atrion Corp. (ATRI) designs, develops, manufactures, markets, sells and distributes various products and components, primarily for the medical and health care industry. August 3rd the company increased its quarterly dividend 16.7% to $0.42/share. The dividend is payable on September 30, 2010 to stockholders of record at the close of business on September 15, 2010. The ex-dividend is September 13, 2010. The yield based on the new payout is 1.68%.

Acme United (ACU) supplies cutting, measuring, and safety products to the school, home, office, and industrial markets in the United States, Canada, Europe, and Asia. August 4th the company raised its quarterly dividend 20% to $0.06/share. The dividend is payable on October 21, 2010 to stockholders of record on the close of business on October 1, 2010, with an ex-dividend date of September 30, 2010. The yield based on the new payout is 2.30%.

Murphy Oil (MUR) has exploration and production interests worldwide, and refining and marketing operations in the U.S. August 4th the company increased its quarterly dividend 10% to $0.275/share. The dividend is payable on Sept. 1 to shareholders of record on August 16. The ex-dividend date is August 12. MUR is a Dividend Achiever and has raised its dividend for 14 consecutive years. The yield based on the new payout is 1.94%.

Leggett & Platt (LEG) makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as diversified products for non-furnishings markets. August 4th the company raised its quarterly dividend 3.8% to $0.27/share. The dividend is payable on October 15 to shareholders of record on September 15. The ex-dividend date is September 13. LEG is a Dividend Aristocrat and has raised its dividend for 39 consecutive years. The yield based on the new payout is 5.08%.

Monsanto (MON) is a global provider of agricultural products and integrated solutions for farmers. August 4th the company raised its quarterly dividend 5.7% to $0.28/share. The dividend is payable on October 29, 2010 to shareholders of record on October 8, 2010. The ex-dividend date is October 6, 2010. The yield based on the new payout is 1.88%.

Delphi Financial Group (DFG) provides a diverse portfolio of employee benefit products to customers across the U.S. August 5th the company increased its quarterly dividend 10% to $0.11/share. The dividend is payable on September 1, 2010 to shareholders of record at the close of business on August 18, 2010, with an ex-dividend date of August 16, 2010. The yield based on the new payout is 1.71%.

Dover Corp. (DOV) manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment. August 5th the company raised its quarterly dividend 6% to $0.275/share. The dividend is payable September 15, 2010 to shareholders of record as of August 31, 2010. The ex-dividend date is August 7, 2010. DOV is a Dividend Aristocrat and has raised its dividend for 55 consecutive years. The yield based on the new payout is 2.24%.

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 LEG. See a list of all my income holdings here.

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I. Consumer Goods (13%)

Consumer goods are items purchased for personal or household use. These would include items such as soap, detergent, cleaning supplies, toilet paper, toothpaste, candies, sodas, etc. These tend to be non-cyclical and many of the products are low cost. Since the demand for these products are less affected by the economic cycle and the industries are mature, the companies tend to generate relatively stable and predictable cash flows. These characteristics are exactly what you look for in a great dividend company. Below are some examples of companies in the consumer goods sector:

Colgate-Palmolive (CL) is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products.
Analysis | Years of Dividend Growth: 47 | Yield: 2.44%

McCormick & Company (MKC) primarily produces spices, seasonings and flavorings for the retail food, food service and industrial markets. Trademarks include McCormick and Schilling.
Years of Dividend Growth: 24 | Yield: 2.70%

Procter & Gamble (PG ) is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries.
Analysis | Years of Dividend Growth: 53 | Yield: 2.90%

Coca-Cola Company (KO) is the world’s largest soft drink company. It engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates, fruit juices and syrups worldwide.
Analysis | Years of Dividend Growth: 48 | Yield: 3.35%

Kimberly-Clark Co (KMB) is a global consumer products company produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.
Analysis | Years of Dividend Growth: 38 | Yield: 4.22%

II. Financial Services (17%)

Have you ever had to pay a bank fee, origination point on a loan, or have you ever filed an insurance claim and were not satisfied with the amount of money you received? Financial stocks are cash cows – they generate large cash flows with minimal capital and ongoing expenses. Historically, these have been some of the best dividend growth stocks, at least until the industry became overly aggressive and made bad operating and investing decisions. Here are several financial companies that survived the last downturn:

Eaton Vance Corp. (EV) is a Boston-based holding company that is primarily engaged in investment management.
Years of Dividend Growth: 30 | Yield: 2.23%

T. Rowe Price Group Inc. (TROW) operates one of the largest no-load mutual fund complexes in the United States.
Analysis | Years of Dividend Growth: 30 | Yield: 2.30%

Chubb Corporation (CB) is one of the largest U.S. property-casualty insurers, Chubb has carved out a number of niches, including high-end personal lines and specialty liability lines coverage.
Years of Dividend Growth: 46 | Yield: 2.86%

Harleysville Group Inc. (HGIC) is a regional holding company for property and casualty insurance companies that operates in 32 states, primarily in the eastern half of the U.S.
Analysis | Years of Dividend Growth: 23 | Yield: 4.29%

Cincinnati Financial Corp. (CINF) markets primarily property and casualty coverage; it also conducts life insurance and asset management operations.
Analysis | Years of Dividend Growth: 50 | Yield: 5.92%

III. Industrial Materials (18%)

Companies classified as industrial materials are those engaged in the manufacturing or production of machinery, raw materials or component parts for use or consumption by other industries or firms. These companies don’t make the consumer goods, but they make the machinery and supply the raw materials that are used to manufacture them. Many of these companies are mature with established markets, strong customer relationships and often hold an exclusive right to their proprietary manufacturing process. Below are some companies in the industrial materials sector:

United Technologies Corp. (UTX) is an aerospace-industrial conglomerate with a portfolio including Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners, among other products.
Analysis | Years of Dividend Growth: 18 | Yield: 2.55%

Dover Corporation Corp. (DOV) manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment.
Years of Dividend Growth: 55 | Yield: 2.42%

Emerson Electric (EMR) primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors.
Years of Dividend Growth: 53 | Yield: 2.95%

Nucor Corporation (NUE) is engaged in the manufacture and sale of steel and steel products. As the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.
Analysis | Years of Dividend Growth: 37 | Yield: 3.73%

RPM International Inc. (RPM) 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.
Analysis | Years of Dividend Growth: 37 | Yield: 4.60%

It is no surprise the above three sectors carry the highest allocation in my income portfolio. To keep my asset allocation balanced, I must overweight other sectors in my non-income portfolios. In the same way that too many deserts will expose you to unnecessary health risks, being over-allocated in any sector put your portfolio at risk.

Full Disclosure: Long CL, CINF, PG, KO, KMB, HGIC, CINF, UTX, EMR, NUE. See a list of all my income holdings here.

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Dividends Provide Investment Stability

In a troubled market, dividend growth stocks provide a degree of stability to your portfolio. While everyone else is panicked about their portfolio’s decline, dividend investors see a downturn as an incredible buying opportunity. Many are now referring to the last 10 years as the lost decade. It was only lost if you were focusing on capital appreciation. Investors in dividend growth stocks continued to see their income grow over the decade.

Dividends Are Real

Unlike earnings, dividends can’t be manipulated or faked. From an accounting standpoint, it is relatively easy through fraud and manipulation to make an income statement look quite impressive. I take great comfort in a company with a strong cash flows and a consistent history of increasing cash dividends. An increasing cash dividend keeps pressure on management to ensure the company is well run. If there are too many missteps, then eventually a dividend will slip. This can be disastrous for a company’s stock price. Earnings can be manufactured, cash can not. Always follow the cash and it just might lead you to a great company. There is no faking the cash that shows up in your brokerage account.

Dividends Provide Feedback

Dividends provide continuous feedback. As time passes dividend investors see their income steadily grow. You do not have to wait five to ten years to determine if the strategy is working. Each dividend and dividend increase provides the investor with reassurance that the strategy is working.

Reinvested Dividends Drive Equity Returns

Historically, reinvested dividends provided a significant portion of equities’ returns. In Triumph of the Optimists: 101 Years of Global Investment Returns (2002), the authors looked at equity returns from capital gains and dividends from 1900 to 2000.  They determined that performance in any given year was driven by capital appreciation, but long-term returns were largely the result of reinvested dividends. Looking at 101 years of data in the U.S. and U.K., they found that a market-oriented portfolio with dividends reinvested would have generated nearly 85 times the wealth of the same portfolio relying solely on capital gains.

Good Companies Pay Dividends,
Great Companies Grow Dividends

You expect your employer to give you a raise periodically. Why wouldn’t you expect the same from your investments? We have all heard of compound interest (interest on interest), but compound dividends (dividends on growing dividends) is even more powerful.

Dividends Are Perpetual

You don’t have to cut down your income tree to enjoy a warm dividend fire. Unlike a capital gain strategy where you have to sell stocks to generate cash, spending dividends in retirement does not harm or erode your principle investment. In addition, a good dividend portfolio can be left to your children and their children.

Dividends Are Relatively Low Maintenance

You may not want to spend your retirement managing and worrying about your portfolio. Dividends from a quality, well-diversified portfolio are much more predictable than capital gains and best of all, they are passive. You don’t have to do anything, they just show up in your brokerage account each quarter. Inflation? Not to worry, the good companies routinely raise their dividends well in excess of the inflation rate. Retirement is not when you want to start learning how to invest in dividend securities. There is a degree of art to it — start young, time is always a great ally.

Dividend Growth Stocks

Below are ten dividend growth stocks that have excelled over the decades and have rewarded their shareholders with over 45 years of consecutive annual dividend increases:

Stodgy, for old people, yawn, boring! To this list you can add stable, real, effective, safer, perpetual, low maintenance, and yes, even exciting.

Full Disclosure: Long CL, JNJ, KO, MMM, PG, EMR, GPC. See a list of all my income holdings here.

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When discussing investing with various people I come in contact with, the conversation always follows a similar track. Usually, one of these:

1. The person will mention a few stocks they did well with, then upon probing will admit overall they were down and they are looking for a new strategy to follow.
2. The person will make a broad statement like ‘I’ve pulled everything out of the market it is just too risky.’ When pressed they admit to losing money not only this time but at other times when they abruptly exited the market.
3. The person will concede that after significant losses they turned their money over to a professional.

Obviously, there are some success stories, and some of them are even believable.  Due to the 2008 market downturn, most people are now comfortable admitting losses because they know they are not alone. When you are losing 10% a year while the market is going up 20% a year, its harder to fess-up since you feel you are the only one losing money.

Why do so few people succeed at investing?

All the pieces to answer this question were presented above. People want to succeed, but don’t know how. So they try to follow someone (or something) that appears to be succeeding. A friend at work, or a talking head on a business show mentions a stock or strategy that is out performing the market, and the investor jumps on board. Unfortunately, he or she is late to the party and the run-up either stalls or reverses. Fearful of a greater loss the investor sells out and moves to the next hot stock or strategy. Eventually, they permanently exit the market  or turn their money over to a professional that may, or may not, improve on their performance.

A Winning Investment Strategy

People do make money in the market, but it is not by following the talking heads or a tip from a friend. Long-term success in the market is based on a sound fundamental investing strategy that the investor is so confident in, that he or she will follow it in both bull and bear markets. For me, this is a value-based dividend growth strategy. My goal is to generate a higher dividend income than the previous month through the purchase of select dividend growth stocks. Here are some of the things I look for in an investment:

I. Long History Of Consecutive Dividend Increases

One indication that a company will continue to increase their dividends in the future, is a long history of consecutive dividend increases. Companies such as Dover Corp. (DOV) [Analysis], Genuine Parts Co. (GPC) [Analysis], Procter & Gamble Co. (PG) [Analysis], Emerson Electric (EMR) [Analysis] and 3M Company (MMM) [Analysis] have all increased their dividends for more than 50 years.

II. Strong Free Cash Flow

Just because a company has a history of increasing its dividend each year, does not mean it will continue to do so in the future.  We can’t know what management is thinking, but we can look at the financial statements for clues of the sustainability of the dividend payment.  Dividends are paid with cash, so the first place I look is at the company’s ratio of dividends to free cash flow (free cash flow payout). As a general rule, I prefer a number less than 70%. Companies such as United Technologies Corp. (UTX) [Analysis], Nucor Corp. (NUE) [Analysis] and Aflac Inc. (AFL) [Analysis] all have free cash flow payouts of 30% or less.

III. Low Debt To Total Capital Invested

The ability to generate enough cash to cover the dividend is only one part of the cash puzzle. One must ask, ‘Is the cash already spoken for?’ One of the larger uses for cash is in servicing debt. As a measure of debt levels, I prefer a company to limit its debt to total capital to no more than 45%.  Many companies, such as Johnson & Johnson (JNJ) [Analysis], Coca Cola Co. (KO) [Analysis], Chevron Corp. (CVX) and Automatic Data Processing Inc. (ADP) [Analysis], operate at levels below 35% of debt to total capital.

IV. Excellent Dividend Fundamentals

Not to over-state the obvious, but the company needs to be a good dividend investment. Put another way its dividend, over time, should significantly out-perform “safer” investments to compensate the investor for the equity risk. Companies such as Abbott Laboratories (ABT) [Analysis], McDonald’s Corporation (MCD) [Analysis] and Eli Lilly and Company (LLY) [Analysis] all have excellent key dividend metrics.

V. Trading At A Fair Value

Once we find everything we are looking for in a great dividend stock, there is one final question – ‘Is the stock trading at a fair value?’ Given the emotional nature of the market, a stock can be fairly priced today, over-valued tomorrow and under-valued the next day. You need to know what you are willing to pay for a stock going in. This is the area I will sometimes compromise in by paying a little more for great dividend fundamentals, but I know my limit prior to placing a buy order.

A great football coach once said ‘It’s not the will to win that matters – everyone has that. It’s the will to prepare to win that matters.’ Investing success doesn’t just happen, we must pursue it and engage it.

Full Disclosure: Long ADP, AFL, CVX, EMR, GPC, JNJ, KO, MMM, NUE, PG, UTX. See a list of all my income holdings here.

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Several market observers believe the market has moved too high too fast. In a recent Wall Street Journal article Jason Zweig expressed his concern. Here are some points he made:

• The Dow Jones Industrial Average is up 46% since March 9
• In March, stocks traded as low as 11.7 times their average earnings over the previous 10 years
• Today stocks are selling at 18.4 times which is above the long-term average of 16.3 times earnings
• In March, investors feared getting crushed in a further decline
• Now all they seem afraid of is missing an even greater rally
• In August, corporate insiders sold nearly 31 times as much stock as they bought
• Investors chase past performance, buying whatever has just made the most money for other people and themselves
• 401(k) participants tend to add significantly to whichever funds they already own that have gone up the most
• Benjamin Graham in his classic book “The Intelligent Investor,” wrote “the investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances.”
• If you can’t exercise that kind of emotional control, then by Graham’s definition you aren’t an investor at all

I have long believed that most people will lose money in the stock market over their lifetime. The above provides indirect evidence of my hypothesis. Emotion is a powerful thing the fear of losing it all or missing out when everyone else is making money drives some people to make bad decisions.  To be a successful investor, you need a winning process and a firm conviction to stand by it during the good and bad times. Otherwise, you would be better off not investing in stocks.

Here are five dividend stocks that are trading below their calculated fair value:

Automatic Data Processing Inc (ADP) – Analysis
Automatic Data Processing Inc. is one of the world’s largest independent computing services companies, provides a broad range of data processing services.

• Fair Value: $43.57
• Recent Price:  $37.50
• Yield: 3.4%

Cardinal Health Inc (CAH) – Analysis
Cardinal Health Inc. is one of the leading wholesale distributors of pharmaceuticals, medical/surgical supplies and related products to a broad range of health care customers.

• Fair Value: $46.16
• Recent Price: $25.00
• Yield: 2.0%

Dover Corp. (DOV) – Analysis
Dover Corp. manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment.

• Fair Value: $35.65
• Recent Price: $33.50
• Yield: 3.0%

Emerson Electric Co. (EMR) – Analysis
Emerson Electric Co. primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors.

• Fair Value: $38.39
• Recent Price: $35.75
• Yield: 3.6%

Sysco Corp. (SYY) – Analysis
SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food service industry in the United States and Canada.

• Fair Value: $27.36
• Recent Price: $25.00
• Yield: 3.8%

My investing process involves selecting stocks from quality companies that have a history of consistently increasing their dividends.  I believe in this methodology enough to stick with it through the good and bad times.

Full Disclosure: Long ADP, EMR, SYY. See a list of all my income holdings here.

When companies like 3M Company (MMM), Emerson Electric (EMR) and Dover Corp. (DOV) put together a string of consecutive dividend increases in excess of 50 years, they are sending a strong message to their shareholders. Below are a few companies with not quite they legacy of those above, but nevertheless are providing positive feedback to their investors by with higher cash dividends:

Teche Holding (TSH) is a bank holding company, with assets of $735.4 million at December 31, 2007, owns Teche Federal Bank, a federal savings bank with 19 offices in Louisiana.  Recently, the company raised its quarterly dividend 0.15% to $0.355/share. The dividend will be paid on September 30, 2009 to shareholders of record as of the close of business on September 16, 2009. The company has paid a cash dividend for 57 consecutive quarters. The current yield based on the new dividend is 4.10%.

Harris Corp. (HRS) focuses on communications equipment for voice, data, and video applications for commercial and governmental customers. This past week, the company increased its quarterly dividend 10% to $0.22/share. The dividend is payable September 18, 2009, to shareholders of record September 9, 2009. The current yield based on the new dividend is 2.61%.

Verizon Communications Inc. (VZ) offers wireline, wireless, and broadband services. VZ acquired MCI Inc in 2006 and has since sold or spun off non-core assets. Also, the company completed the acquisition of Alltel in early 2009. Yesterday, the company bumped its quarterly dividend by 3.3% to $0.475/share. The dividend is payable on Nov. 2, 2009, to Verizon Communications shareholders of record at the close of business on Oct. 9, 2009. The current yield based on the new dividend is 6.31%.

This week the number of companies increasing their dividends may be few, but there are many companies that have done so already, and many more that will do so later this year. For stocks with a long string of consecutive dividend increases, see this list.

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

(Photo Credit)

Many people define the market broadly as the S&P 500. Very little of my total portfolio is in a S&P 500 index. Its movements up or down have minimal effect on my goals. As a value-based dividend investor, it is in my best interest to have stocks depressed and yields high, at least for the short-term. This provides a choice between worthy investments, unlike the market boom years when it was a struggle to find fairly priced stocks.

Focus On Solid Dividend Stocks, Not The Market

Instead of looking at the market and its direction, investors in dividend stocks should focus on quality, price and ultimate value. Below are several quality 3, 4 and 5 Star dividend stocks selling below their calculated fair value (as of 8/11/09):

• McDonald’s Corp. (MCD) – 3-Star – Buy Price: $67.86 – Recent Price: $56.02 – Analysis
• Walgreen Co. (WAG) – 3-Star – Buy Price: $35.79 – Recent Price: $30.74
• Lowe’s Companies Inc. (LOW) – 4-Star – Buy Price: $30.92 – Recent Price: $23.26 – Analysis
• Emerson Electric Co (EMR) – 5-Star – Buy Price: $38.34 – Recent Price: $35.97 – Analysis
• Cardinal Health, Inc. (CAH) – 5-Star – Buy Price: $41.49 – Recent Price: $32.90 – Analysis
• Dover Corp. (DOV) – 5-Star – Buy Price: $33.37 – Recent Price: $35.97 – Analysis
  

The time will come at some point in the future where we once again struggle to fairly priced stocks. At that point, we will likely look back and regret not buying more when we had the opportunity.

Full Disclosure: Long MCD, EMR. See a list of all my income holdings here.

This week is no different, the dividend increases continue with several companies sharing the wealth with their shareholders through higher cash dividends:

Kaydon (KDN) designs, manufactures, and sells custom engineered products in North America, Europe, and Asia.  Recently, the company increased its quarterly 5.9% to $0.18/share. The dividend is payable October 5, 2009 to shareholders of record as of the close of business on September 14, 2009.  The current yield based on the new dividend is 2.22%.

American Water Works (AWK) provides water, wastewater and other water-related services to residential, commercial, and industrial customers in the United States and Canada.  Last week, the company raised its quarterly cash dividend by 5% to $0.21/share. The dividend is payable on September 1, 2009 to all shareholders of record as of August 18, 2009. The current yield based on the new dividend is 4.20%.

Atrion (ATRI) designs, develops, manufactures, markets, sells and distributes various products and components, primarily for the medical and health care industry. Tuesday,the company boosted its quarterly cash dividend 20% to $0.36/share. The dividend is payable on September 30, 2009 to stockholders of record at the close of business on September 15, 2009. The current yield based on the new dividend is 1.10%.

Leggett & Platt (LEG) makes a broad line of bedding and furniture components and other home, office, and commercial furnishings, as well as diversified products for non-furnishings markets. Yesterday, the company raised its quarterly dividend 4% to $0.26/share. The dividend is payable October 15, 2009 to shareholders of record on September 15, 2009. The ex-dividend date is September 11. After seven straight quarters with its dividend froze at $0.25/share, this Dividend Aristocrat was two quarter away from being removed from the list. The current yield based on the new dividend is 5.90%.

Dover (DOV) manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment. Thursday, the company increased it quarterly dividend 4% to $0.26. The dividend will be paid on September 15, 2009 to shareholders of record as of August 31, 2009. The ex-dividend date is August 27th. DOV is a Dividend Aristocrat that has increased its dividend for 54 consecutive years. The current yield based on the new dividend is 3.06%. [Analysis]

Finally, we celebrate the birth of a new dividend company as PetMed Express (PETS) declared its first ever dividend of $0.10/share on Monday. PETS markets prescription and nonprescription pet medications and other health products for dogs, cats, and horses directly to the consumer. The dividend is payable on August 31, 2009, to shareholders of record at the close of business on August 14, 2009, with an ex-dividend date of August 12th. The current yield based on the new dividend is 2.15%.

There are many companies that continue to consistently raise their dividends. For stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned stock. See a list of all my income holdings here.

(Photo Credit)

In yesterday’s article, I noted that Jason Zweig had called into question the validity of data used in Jeremy Siegel’s book  “Stocks for the Long Run”. Given the recent market declines and credibility questions, has Mr. Siegel abandoned his long-held beliefs in “buy-and-hold” and “stocks for the long run?”

To the contrary, Mr. Siegel in a recent MSN Money article was very adamant about his position. Below are some of the relevant points he made:

• Over the 10 years that ended in May, stocks have returned a dismal -1.7% per year
• There have been other 10-year periods during which stocks have recorded even bigger losses
• Stocks are still the best long-term investments
• Over periods of 20 years or longer, stocks have never lost money, even after inflation
• After reaching such a low, stocks’ average return for the next five years has been almost 9.5% annually after inflation
• Research has shown that investors would have done better if they had tilted their portfolios toward value stocks
• Dividend-weighted indexes have outperformed value indexes over the past 10, 20 and 30 years

I have long been an advocate of selecting Dividend stocks using a Value based approach (hence the name of my site DividendsValue.com). Over time, low priced, quality stocks that pay an increasing dividend will out-perform their competition. Here are several of those stocks pulled from my Dashboard:

Automatic Data Processing Inc. (ADP) – Analysis
Automatic Data Processing Inc. is one of the world’s largest independent computing services companies, provides a broad range of data processing services.

• Buy Price: $40.86
• Recent Price: $35.11

Dover Corp. (DOV) (ADP) – Analysis
Dover Corp. manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment.

• Buy Price: $37.06
• Recent Price: $33.25

Emerson Electric Co. (EMR) (ADP) – Analysis
Emerson Electric Co. primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors.

• Buy Price: $38.34
• Recent Price: $33.20

Johnson & Johnson (JNJ) – Analysis
Johnson & Johnson engages in the manufacture and sale of various products in the health care field worldwide.

• Buy Price: $62.17
• Recent Price: $58.96

United Technologies Corp. (UTX) – Analysis
United Technologies Corp. is an aerospace-industrial conglomerate with a portfolio including Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners, among other products.

• Buy Price: $73.14
• Recent Price: $53.75

Even in investing, fads come and go, but quality will always endure.  When the chips are down, go for the blue ones.

Full Disclosure: Long EMR, JNJ, UTX. See a list of all my income holdings here.