Dividends Value » HRL

10 Dividend Stocks With With A 10%+ Dividend Growth Rate *

D4L — Wed, 06 Apr 2011 07:30:13 +0000

The difference between an income investor and a dividend growth investor is time and the understanding of how compound growth works. If you are 67 years old and need income today, you will likely select a different group of stocks than an enlightened 27 year old that doesn’t necessarily need the income today. The 27 year old has the the luxury of time to grow a superior yield, while the 67 year old may be forced to assume additional risk to buy a higher current yield. Here are some of the reasons an investor might forgo current yield in hopes of future gain…

Dividend Growth Provides For Inflation

Inflation is the silent killer for many retirement portfolios. Over time, prices tend to increase. If you rely solely on a portfolio of long-term fixed income securities, you will lose purchasing power each year as inflation robs your portfolio. Dividend growth rates on traditional high-yield stocks (e.g. utilities, REITs, etc.) are often less than inflation. However, most blue-chip dividend growth stocks grow their dividends well in excess of the annual inflation rate.

Dividend Growth Often Provides For Higher Value

The combination of a good starting yield and respectable dividend growth will often provide the investor with greater long-term value when compared to alternatives with higher current yields and lower growth dividend rates. The only way to know for sure is to run the numbers using a model such as my D4L-PreScreen.xls.

Compound Dividend Growth Is Powerful

Compound interest is what occurs when interest previously earned is added to the principle and is considered when calculating future interest – i.e. earning interest on interest. Compound dividends are like compound interest on steroids. Like compound interest, dividends are being reinvested. However, these dividends are growing which provides and added boost.

Conservative View Of Dividend Growth

The dividend growth rate is a key metric in many calculations. As such, I use a conservative estimate as follows: The minimum dividend growth rate of the 1, 3, 5, 7, 10 year compound annual growth rate or 15%, if dividends grew on average in excess of 15% for each consecutive 4 year periods, within the last 10 years of history.

10 Stocks With a 10%+ Dividend Growth Rate

General Dynamics Corp. (GD) | Yield: 2.5% | Growth: 10.1%
General Dynamics is the world’s fifth largest military contractor and also one of the world’s biggest makers of corporate jets. GD is a member of the S&P 500 a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1979 and has increased its dividend payments for 19 consecutive years.

Hormel Foods Corp. (HRL) | Yield: 1.9% | Growth: 10.6%
Hormel Foods Corp. company is a leading processor of branded, convenience meat products (primarily pork) for the consumer market. HRL is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1928 and has increased its dividend payments for 45 consecutive years.

Wal-Mart Stores Inc. (WMT) | Yield: 2.8% | Growth: 11.0%
Wal-Mart Stores, Inc. is the largest retailer in North America, WMT operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets. WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 36 consecutive years.

Colgate-Palmolive Co. (CL) | Yield: 2.9% | Growth: 12.5%
Colgate-Palmolive Company (Colgate) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories. CL is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1895 and has increased its dividend payments for 47 consecutive years.

Owens & Minor Inc. (OMI) | Yield: 2.6% | Growth: 13.2%
Owens & Minor Inc. is a leading domestic distributor of medical and surgical supplies to the acute care market, a health care supply chain management company, and a direct-to-consumer (DTC) supplier of testing and monitoring supplies for diabetes. OMI is a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 13 consecutive years.

ConocoPhillips (COP) | Yield: 3.3% | Growth: 13.2%
ConocoPhillips Co. is the fourth largest integrated oil company in the world. COP is a member of the S&P 500 a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1934 and has increased its dividend payments for 10 consecutive years.

Target Corp. (TGT) | Yield: 2.0% | Growth: 15.5%
Target Corp. operates about 1,500 Target and 250 SuperTarget general merchandise stores across the U.S. TGT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1965 and has increased its dividend payments for 43 consecutive years.

Southside Bancshares Inc. (SBSI) | Yield: 3.2% | Growth: 16.6%
Southside Bancshares Inc. primarily provides financial services to individuals, businesses, municipal entities, and non-profit organizations. SBSI is a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1969 and has increased its dividend payments for 12 consecutive years.

Walgreen Co. (WAG) | Yield: 1.7% | Growth: 18.5%
Walgreen Co is the largest U.S. retail drug chain in terms of revenues, this company operates more than 8,000 drug stores throughout the U.S. and Puerto Rico. WAG is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1933 and has increased its dividend payments for 36 consecutive years.

Casey’s General Stores Inc. (CASY) | Yield: 1.4% | Growth: 19.8%
Casey’s General Stores Inc. has over 1,500 convenience stores in the Midwest, selling food, beverage, health and automotive products. CASY is a member of the Broad Dividend Achievers™ Index. The company has paid a cash dividend to shareholders every year since 1990 and has increased its dividend payments for 10 consecutive years.

Conclusion

If time is on your side, you should investigate if certain lower yielding stocks with a dividend growth rate fits into your long-term investment strategy. When making this evaluation, it is important to note that the sustainability of the dividend growth rate must be evaluated on a go-forward basis. Like high-yield stocks, there is increasing risk as the dividend growth rises.

Full Disclosure: Long GD, WMT, CL, OMI, COP. See a list of all my income holdings here.

(Photo Credit)

These 11 Dividend Stocks Could Make You Wealthy *

D4L — Wed, 02 Mar 2011 07:30:03 +0000

It seems the older I get the more I fight with my weight. I know how to lose weight – I have done it several times. The formula is not difficult, eat less and exercise more. My problem, like many others, is in the implementation. In much the same way, the formula to building wealth is rather simple – spend less than you earn and invest the difference. Once again implementation is where many people come up short. With the right focus and some positive feedback, building wealth can be much easier than shedding the spare tire around your mid-section. Here’s how to do it…

Fad Diets and Fad Investing Plans Rarely Work

Forget about those ‘Make 534% On Every Trade’ ads that you see on many financial websites. Real wealth is built with sweat equity and a sound financial plan. The only people making money off fad investments are the people selling them. To understand what will and will not work in the future you must understand the concepts that have worked in the past. Granted, each success story is different, but there are common traits as Philip E. Humbert noted when he studied successful people and came up with the “Top 10 Traits of Highly Successful People.” Here are 3 traits that we can apply to our investments:

1. Highly successful people work hard

They get up early, rarely complain. They expect high performance from others, but they expect extraordinary performance from themselves. Success starts with a recognition that hard work pays off. Highly successful investors don’t waste time trying to find an quick and easy way to get rich in the stock market.

2. Highly successful people are self-reliant and take responsibility

How many times have you heard, ‘I am fat because of my genes, my thyroid, my wife, my husband, …’ Or how many times have you heard, ‘I am broke because, I don’t make enough (my boss’ fault), things are so expensive (companies’ fault), Social Security will fund for my retirement, …’

3. Highly successful people “look over the horizon” to see the future

We live in a society of instant gratification. There is no planning for the future and certainly no foresight what the future will bring. A successful retirement just doesn’t happen – it is build with a plan over many decades.

Dividend Stocks To Help Grow Your Wealth

A long-term buy-and-hold investing approach focusing on quality dividend growth stocks has has provided the means for many investors to enjoy a comfortable retirement. If you start early enough, you will go beyond a comfortable retirement into the realm of building long-term wealth. For starters, you might consider these dividend stocks that have been rewarding their investors with growing dividends for 40 or more consecutive years:

Sysco Corporation (SYY) | Growth Yrs: 40 | Yield: 3.7%
Sysco Corporation is a large distributor of food and related products, primarily to the food-service or food-away-from-home industry.

Black Hills Corporation (BKH) | Growth Yrs: 40 | Yield: 4.7%
Black Hills Corp. is a South Dakota-based holding company that encompasses electric utility and integrated energy businesses.

California WaterService Group (CWT) | Growth Yrs: 43 | Yield: 3.4%
California Water Service Group operates regulated water utilities in California, Washington, New Mexico and Hawaii, and provides other non-regulated services.

Hormel Foods Corp. (HRL) | Growth Yrs: 45 | Yield: 1.9%
Hormel Foods Corp. company is a leading processor of branded, convenience meat products (primarily pork) for the consumer market.

Colgate-Palmolive (CL) | Growth Yrs: 47 | Yield: 2.6%
Colgate-Palmolive Company (Colgate) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.

Coca-Cola Company (KO) | Growth Yrs: 48 | Yield: 2.7%
The Coca-Cola Company is the world’s largest soft drink company, KO also has a sizable fruit juice business.

Johnson & Johnson (JNJ) | Growth Yrs: 48 | Yield: 3.5%
Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries.

Cincinnati Financial (CINF) | Growth Yrs: 50 | Yield: 4.7%
Cincinnati Financial Corp. markets primarily property and casualty coverage. It also conducts life insurance and asset management operations.

3M Company (MMM) | Growth Yrs: 52 | Yield: 2.3%
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.

Procter & Gamble (PG) | Growth Yrs: 54 | Yield: 3.1%
The Procter & Gamble Company is a leading consumer products company that markets household and personal care products in more than 180 countries.

Emerson Electric Co. (EMR) | Growth Yrs: 55 | Yield: 2.3%
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.

Conclusion

If losing weight and building wealth were easy, there wouldn’t be people wanting to sell you the secret. Notice there aren’t any seminars on how to yawn (though several accounting seminars have caused me to do it.) The first step toward success is deciding to take responsibility for our future. With a little planning, effort and the right dividend growth stocks, we can be well on our way to creating long-term wealth.

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

(Photo Credit)

Hormel Foods Corp. (HRL) Dividend Stock Analysis *

D4L — Tue, 22 Feb 2011 07:30:21 +0000

This article originally appeared on The DIV-Net February 14, 2011.

Linked here is a detailed quantitative analysis of Hormel Foods Corp. (HRL). Below are some highlights from the above linked analysis:

Company Description: Hormel Foods Corp. company is a leading processor of branded, convenience meat products (primarily pork) for the consumer market.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

HRL is trading at a premium to all four valuations above. The stock is trading at a 8.9% premium to its calculated fair value of $47.09. HRL did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

HRL earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The company has paid a cash dividend to shareholders every year since 1928 and has increased its dividend payments for 45 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

HRL earned a Star in this section for its NPV MMA Diff. of the $514. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as HRL has. If HRL grows its dividend at 10.6% per year, it will take 8 years to equal a MMA yielding an estimated 20-year average rate of 3.9%.

Memberships and Peers: HRL is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: Cal-Maine Foods, Inc. (CALM) with a 3.0% yield, Kraft Foods Inc. (KFT) with a 3.7% yield and ConAgra Foods, Inc. (CAG) with a 4.1% yield.

Conclusion: HRL did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks HRL as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $51.68 before HRL’s NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 45 years of consecutive dividend increases. At that price the stock would yield 1.97%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 10.5%. This dividend growth rate is slightly below the 10.6% used in this analysis, thus providing virtually no margin of safety. HRL has a risk rating of 1.00 which classifies it as a low risk stock.

Being from the south, I knew what Spam was even before Al Gore invented the internet. HRL has defined a niche on which it converts commodity meats to value-added packaged products. This has allowed the company to achieve superiour results when compared with other meat processors. HRL has a relatively strong balance sheet, with minimal debt and generates stong cash flows (even during the recession). Like most in the industry, the company has a high sensitivity to changes in commodity costs. With a NPV MMA Diff. close to it target and trading close to a 9% premium to my calculated fair value, I will wait for a more opportune time to take a closer look at the stock. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I held no position in HRL (0.0% of my Income Portfolio). See a list of all my income holdings here.

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2 Dividend Stocks Building Future Yield and 10 Going Ex-Dividend in January *

D4L — Fri, 07 Jan 2011 07:30:53 +0000

Driven by computers that cost more than the average person will earn in their lifetime the investment markets move at light speed. To keep pace hedge funds, mutual funds, institutional investors and multi-billion dollar money managers spend large sums of money on high-tech tools to give them an edge. So, what chance does a small individual investor have?

Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules and focus on quality blue chip dividend growth stocks and long-term, buy-and-hold and investing strategy.

Below are two companies building future yield with increased cash dividends for their shareholders:

Spectra Energy (SE) in an integrated natural gas holding company engaged in gas gathering and processing, and gas transportation and storage, in the U.S. and Canada, and provides retail gas distribution to 1.3 million customers in Ontario, Canada. January 3rd the company increased its quarterly dividend 4% to $0.26/share. The dividend is payable on March 14, 2011, to shareholders of record at the close of business on February 11, 2011. The ex-dividend date is February 9, 2011. The yield based on the new payout is 4.2%.

Bank of the Ozarks (OZRK) owns Bank of the Ozarks, which provides retail & commercial banking products and services via 70 banking and two loan production offices in AR, TX, NC (Dec. 31, 2007). January 3rd the company raised its quarterly cash dividend 6.25% to $0.17/share. The dividend is payable January 21, 2011 to shareholders of record as of January 14, 2011. The Company has increased its quarterly dividend in four of the last five quarters. OZRK is a Dividend Achiever and has raised its dividend for 16 consecutive years. The yield based on the new payout is 1.5%.

In addition to the above, the following stocks are will go Ex-dividend in January:

- Urstadt Biddle Properties (UBA) went Ex-dividend on 1/3/2011, Yield: 5.1%
- Erie Indemnity Company (ERIE) went Ex-dividend on 1/3/2011, Yield: 3.1%
- ABM Industries Inc. (ABM) went Ex-dividend on 1/4/2011, Yield: 2.1%
- AT&T Inc. (T) went Ex-dividend on 1/5/2011, Yield: 5.8%
- Sysco Corp. (SYY) went Ex-dividend on 1/5/2011, Yield: 3.5%
- NSTAR (NST) went Ex-dividend on 1/5/2011, Yield: 4.0%
- Universal Corp. (UVV) went Ex-dividend on 1/6/2011, Yield: 4.8%
- Graco Inc. (GGG) will go Ex-dividend on 1/14/2011, Yield: 2.1%
- Hormel Foods Corp. (HRL) will go Ex-dividend on 1/20/2011, Yield: 2.0%
- Pentair Inc. (PNR) will go on Ex-dividend on 1/27/2011, Yield: 2.1%

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends or are ex-dividend in January; 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 T, SYY. See a list of all my income holdings here.

(Photo Credit)

The 2011 Dividend Aristocrats *

D4L — Wed, 15 Dec 2010 07:30:21 +0000

The S&P 500 Dividend Aristocrats is the most prestigious list of dividend stocks. The Dividend Aristocrats index is designed to measure the performance of S&P 500 constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. This index is a member of the S&P Dividend Aristocrats index series.

Dividend Aristocrats constituents exhibit the following characteristics:

- Underlying Indices – S&P 500
- Weighting – Equally weighted; Constituents re-weighted quarterly
- Reconstitution – Reviewed annually in December

Among others, Dividend Aristocrats include these highly recognizable names, with years of consecutive dividend increases shown:

- 3M Co. (MMM) – 52 years
- Abbott Laboratories (ABT) – 38 years
- Clorox Co (CLX) – 35 years
- Coca-Cola Co (KO) – 48 years
- Exxon (XOM) – 28 years
- Johnson & Johnson (JNJ) – 48 years
- McDonald’s Corp (MCD) – 34 years
- Procter & Gamble (PG) – 54 years
- Wal-Mart Stores (WMT) – 36 years

Members may be deleted during the December rebalance if calendar-year dividends did not increase from the previous year, or intra-year if the stock is removed from the underlying S&P 500.

On December 2nd, S&P announced changes to the Dividend Aristocrats Index. Standard & Poor’s will perform the annual reconstitution of the S&P 500 Dividend Aristocrats Index after the close of trading on Friday, December 17, 2010.

The following stocks will be added to the Dividend Aristocrats:

- McCormick & Company (MKC)
- Hormel Foods Corp. (HRL)
- Ecolab Inc. (ECL)

The following stocks will be dropped from the Dividend Aristocrats:

- Eli Lilly And Company (LLY)
- SUPERVALU Inc. (SVU)
- Integrys Energy Group, Inc. (TEG)

After last year’s significant decline, it is good see the membership number level off. The previous two years were difficult for dividend stocks, but that is not necessarily a bad thing. During good times it is easy for companies to increase dividends, and many companies were added to the index. It is during times of adversity that we learn who the real aristocrats are.

Full Disclosure: Long MMM, ABT, CLX, KO, JNJ, LLY, MCD, PG, TEG, WMT. See a list of all my income holdings here.

(Photo Credit)

12 Stocks Not Missing Their Opportunity To Increase Dividends *

D4L — Fri, 26 Nov 2010 07:30:30 +0000

In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, ‘We’re number 2, we’re number 2′, while holding two fingers in the air. The same is true when selecting dividend stocks. One attribute of the very best dividend stocks is a long history of consecutive dividend increases.

Below are several dividend stocks that did not miss their opportunity increase cash dividends:

Donaldson Co. (DCI) operates as a worldwide manufacturer of filtration systems and replacement parts. November 19th the company increased its quarterly dividend 4% to $0.13/share. The dividend is payable December 17, 2010, to shareholders of record as of December 6, 2010. The ex-dividend date is December 2, 2010. DCI is a Dividend Achiever and has raised its dividend for 24 consecutive years. The yield based on the new payout is 1%.

South Jersey Industries (SJI) is an energy services holding company that provides energy related products and services. November 22nd the company raised its quarterly dividend 10.6% to $0.365/share. The dividend is payable December 29, 2010 to shareholders of record at the close of business December 10, 2010. The ex-dividend date is December 8, 2010. SJI is a Dividend Achiever and has raised its dividend for 11 consecutive years. The yield based on the new payout is 2.9%.

York Water (YORW) impounds, purifies and distributes water in York County and Adams County, Pennsylvania. November 22nd the company increased quarterly dividend 2.3% to $0.131/share. The dividend is payable January 14, 2011 to shareholders as of record date December 31, 2010. The ex-dividend date is December 29, 2010. The yield based on the new payout is 3.3%.

Hormel Foods (HRL) is a leading processor of branded, convenience meat products (primarily pork) for the consumer market. November 22nd the company raised its quarterly dividend to $0.25/share. The quarterly dividend is payable Feb. 15, 2011, to stockholders of record at the close of business on Jan. 23, 2011. The yield based on the new payout is 2.1%.

Becton, Dickinson & Co. (BDX) provides a wide range of medical devices and diagnostic products used in hospitals, doctors’ offices, research labs and other settings. November 23rd the company increased quarterly dividend 10.8% to $0.41/share. The dividend will be payable on December 31, 2010 to holders of record on December 10, 2010. The ex-dividend date is December 8, 2010. BDX is a Dividend Aristocrat and has raised its dividend for 37 consecutive years. The yield based on the new payout is 2.1%.

Ship Finance Int’l (SFL) owns an international fleet of crude oil tankers, which are leased under long-term, fixed-price charters. November 23rd the company raised its quarterly dividend 2.9% to $0.36/share. The dividend is payable on or about December 30, 2010 to shareholders of record as of December 8, 2010. The ex-dividend date will be December 6, 2010. The yield based on the new payout is 6.2%.

RGC Resources (RGCO) distributes and sells natural gas in Virginia to residential, commercial and industrial users through underground mains and service lines. November 23rd increased quarterly dividend 3% to $0.36/share. The dividend will be paid on February 1, 2010 to shareholders of record on January 14, 2011. The ex-dividend date is January 12, 2010. The yield based on the new payout is 4.4%.

Guess? (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. November 23rd the company raised increased its quarterly dividend to $0.20/share. The yield based on the new payout is 1.6%.

Raymond James (RJF) offers securities brokerage, investment banking, financial planning, banking and investment advisory and related financial services. November 23rd the company raises its quarterly dividend by 18% to $0.13/share. November 23rd the company raised its quarterly dividend by 18% to $0.13/share. The dividend is payable on Jan. 19 to shareholders of record on Jan. 3. The yield based on the new payout is 1.81%.

McCormick (MKC) manufactures, marketing and distribution of spices, herbs, seasonings, specialty foods and flavors to the entire food industry. November 23rd raised its quarterly dividend 8% from to $0.28/share. The dividend is payable on Jan. 14 to shareholders of record on Dec. 31. The ex-dividend date is Dec. 29. MKC is a Dividend Achiever and has raised its dividend for 24 consecutive years. The yield based on the new payout is 2.5%.

Oriental Financial (OFG) provides a range of financial products and services primarily in Puerto Rico and Florida. November 24th the company increased its quarterly dividend 25% to $0.05/share. The dividend is payable on Jan. 14 to shareholders of record on Dec. 31. The ex-dividend date is Dec. 29. The yield based on the new payout is 1.68%.

Abington Bancorp (ABBC) owns Abington Savings Bank, d/b/a Abington Bank, which provides various financial products and services in Pennsylvania. November 24th the company increased quarterly dividend 20% to $0.06/share. The dividend is payable on Dec. 21 to shareholders of record on Dec. 7. The ex-dividend date is Dec. 3. The yield based on the new payout is 2.02%.

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

(Photo Credit)

9 Dividend Stocks Working Hard During The Holidays *

D4L — Fri, 27 Nov 2009 10:30:07 +0000

As we officially head into the holiday season, many of us in the U.S. did not have to go into work today in observance of the Thanksgiving holiday. Though not much is happening at the office, there are still many working for me today. Not people, but my Dividend Stocks. It is great to know while I am relaxing with family and watching the big game, those stocks are hard at work providing me an additional income stream.

Several companies this week provided their investors a Thanksgiving bonus in the form of higher cash dividends:

Roper (ROP) makes high-tech industrial equipment and analytical instruments, primarily for oil and gas producers, semiconductor equipment makers, and industrial companies. November 23rd the company increased its quarterly dividend 15% to $0.095/share. The dividend is payable on January 29, 2010, to stockholders of record as of January 08, 2010. The ex-dividend date is January 6. ROP is a Dividend Achiever and has increased its dividend for 16 consecutive years. The yield based on the new payout is 0.71%.

United Bankshares (UBSI) is a multi-bank holding company operates 114 full service offices in West Virginia, Virginia, Maryland, Ohio and Washington, DC. November 23rd the company raised its quarterly dividend 3.4% to $0.30/share. The dividend is payable on January 4 to shareholders of record on December 11. The yield based on the new payout is 6.87%.

Haynes International (HAYN) develops, manufactures and markets technologically advanced, high-performance alloys used in aerospace, chemical processing and land-based gas turbine industries. November 23rd the company declared its first quarterly dividend. of $0.20/share. The dividend is payable to stockholders of record at the close of business on December 3, 2009. The yield based on the new payout is 3.13%.

Hormel Foods (HRL) is a leading processor of branded, convenience meat products
(primarily pork) for the consumer market. November 24th the company boosted its quarterly dividend 15% to $0.21/share. The dividend will be paid February 15, 2010, to stockholders of record at the close of business on January 23, 2010. The ex-dividend date is January 2010. HRL is a Dividend Achiever and has increased its dividend for 43 consecutive years. The yield based on the new payout is 2.20%.

Becton, Dickinson (BDX) provides a wide range of medical devices and diagnostic products
used in hospitals, doctors’ offices, research labs and other settings. November 24th the company increased its quarterly dividend 12.1% to $0.37/share. The dividend will be payable on January 4, 2010 to holders of record on December 14, 2009. BDX is a Dividend Aristocrat and has increased its dividend for 36 consecutive years. The yield based on the new payout is 1.96%.

York Water (YORW) impounds, purifies and distributes water in York County and Adams County, Pennsylvania. November 24th the company raised its quarterly dividend to $0.128/share. The dividend is payable January 15, 2010 to shareholders as of record date December 31, 2009. The ex-dividend date is December 29, 2009. The yield based on the new payout is 3.53%.

RGC Resources (RGCO) distributes and sells natural gas in Virginia to residential, commercial and industrial users through underground mains and service lines. November 24th the company raised its quarterly dividend to $0.33/share. The dividend will be paid on February 1, 2010 to shareholders of record on January 15, 2010. The ex-dividend date is January 13, 2009. The yield based on the new payout is 4.77%.

Oritani Financial (ORIT) owns Oritani Savings Bank, which operates 19 offices in Bergen, Hudson and Passaic Counties in New Jersey. November 24th the company boosted its quarterly dividend to $0.075/share. The dividend will be payable to stockholders of record as of December 7, 2009 and will be paid on December 21, 2009. The ex-dividend date is December 17, 2009. The yield based on the new payout is 2.33%.

McCormick (MKC) produces spices, seasonings and flavorings for the retail food, food service and industrial markets. November 24th the company increased its quarterly dividend 8.3% to $0.26/share. The dividend is payable January 15, 2010 to shareholders of record December 31, 2009. MKC is a Dividend Achiever and has increased its dividend for 23 consecutive years. The yield based on the new payout is 2.86%.

Stocks that work the hardest for you are those that consistently grow their dividends. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned securities. 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)

NIKE (NKE), Donaldson (DCI), Hormel (HRL), McCormick (MKC) and Others Increase Dividends *

D4L — Fri, 28 Nov 2008 11:30:00 +0000

Dividend investing in the classic implementation focuses on identifying solid companies with a record of growing their dividends each year; and an expectation that it will continue into the future. The focus is not solely on yield but a combination of yield and dividend growth. Often it is the lower yield, higher growth, security that will provide the best return over time.

Here are several stocks living up to shareholders’ expectations by raising their cash dividends:

NIKE (NKE) Boosts Dividend by 8.7% to $0.25/share (2.07%)
Donaldson (DCI) Boosts Qtr. Dividend 5% to $0.115/share (1.53%)
South Jersey Industries (SJI) Raises Dividend 10% to $0.2975/share (3.11%)
United Bankshares (UBSI) Increases Dividend 3% to $0.29/share (3.41%)
Hormel Foods (HRL) Raises Annual Dividend 2.6% to $0.76/share (2.89%)
Becton, Dickinson and Company (BDX) Boosts Qtr. Dividend by 15.8% to $0.33/share (2.08%)
RGC Resources (RGCO) Increases Dividend by 10% to $0.32/share (4.97%)
The York Water Company’s (YORW) Boosts Qtr. Dividend by 4.1% to $0.126/share(4.48%)
McCormick & Company (MKC) Boosts Dividend 9% to $0.24/share (3.23%)
Landauer (LDR) Increases Dividend 5% to $0.525/share (3.47%)

After running these companies through my D4L-PreScreen.xls model, DCI and BDX, both Dividend Achievers, had NPV of MMA Differentials close enough to earn a more complete evaluation. HRL, MKC and LDR had positive NPV of MMA Differentials, but below the level required level for a more detailed evaluation. None of the others warranted additional consideration.

Disclosure: No position in the aforementioned stocks.

(Photo: Steve Woods)

Hormel Foods Corp. (HRL) Dividend Stock Analysis

D4L — Mon, 01 Oct 2007 06:00:10 +0000

This article originally appeared on The DIV-Net February 14, 2011.

Linked here is a detailed quantitative analysis of Hormel Foods Corp. (HRL). Below are some highlights from the above linked analysis:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

HRL is trading at a premium to all four valuations above. The stock is trading at a 8.9% premium to its calculated fair value of $47.09. HRL did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

1. NPV MMA Diff.
2. Years to > MMA

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 10.5%. This dividend growth rate is slightly below the 10.6% used in this analysis, thus providing a virtually no margin of safety. HRL has a risk rating of 1.00 which classifies it as a low risk stock.

Full Disclosure: At the time of this writing, I held no position in HRL (0.0% of my Income Portfolio). See a list of all my income holdings here.

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