Dividends Value » TGT

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)

10 Stocks Expected to Grow Their Dividends in 2011 *

D4L — Fri, 31 Dec 2010 07:30:47 +0000

In this space we normally look at companies that have recently raised their dividends. However, as the year draws to a close there were very few companies of note increasing their dividends this week. With that, I thought it would be interesting to see who were the big dividend raisers in 2010 and what we might see in 2011. Here are ten companies for your consideration:

Abbott Laboratories (ABT) in April 2010 raised its dividend 10% to $0.44/share from $0.40/share. In April 2009 it raised its dividend 11%. ABT has increased its dividend for 38 consecutive years and I expect them to do so again next year. The 2011 increase should be similar to the 2010 increase, or possibly higher, since the company’s 12-month trailing free cash flow is up significantly compared to 2009. I project a 2011 increase of 10%. The stock is currently yielding 3.7%.

Kimberly-Clark Corp. (KMB) in March 2010 raised its dividend 10% to $0.66/share from $0.60/share. In 2009 it raised its dividend 3.4%. KMB has increased its dividend for 38 consecutive years and I expect them to do so again next year. I project 2011 be lower than the 2010 increase since the company’s 12-month trailing free cash flow is down from the 2009 high. I project a 2011 increase of 8%. The stock is currently yielding 4.2%.

Clorox Company (CLX) in July 2010 raised its dividend 10% to $0.55/share from $0.50/share. In 2009 it raised its dividend 8.7%. CLX has increased its dividend for 33 consecutive years and I expect them to do so again next year. I project the 2011 increase will be similar to the 2010 increase since the company’s 12-month trailing free cash flow is flat with 2009. I project a 2011 increase of 10%. The stock is currently yielding 3.5%.

Johnson & Johnson (JNJ) in May 2010 raised its dividend 10.2% to $0.54/share from $0.49/share. In 2009 it raised its dividend 6.5%. JNJ has increased its dividend for 48 consecutive years and I expect them to do so again next year. I project the 2011 increase will be higher than the 2010 increase since the company’s 12-month trailing free cash flow is up from 2009. I project a 2011 increase of 12%. The stock is currently yielding 3.5%.

McDonald’s Corp. (MCD) in November 2010 raised its dividend 10.9% to $0.61/share from $0.55/share. In 2009 it raised its dividend 10%. MCD has increased its dividend for 34 consecutive years and I expect them to do so again next year. I project the 2011 increase will be lower than the 2010 increase since the company’s 12-month trailing free cash flow growth is less than the 2010 dividend increase. I project a 2011 increase of 7%. The stock is currently yielding 3.5%.

Wal-Mart Stores Inc. (WMT) in March 2010 raised its dividend 11% to $0.3025/share from $0.2725/share. In 2009 it raised its dividend 14.7%. WMT has increased its dividend for 36 consecutive years and I expect them to do so again next year. I project the 2011 increase will be lower than the 2010 increase since the company’s 12-month trailing free cash flow growth is less than the 2010 dividend increase. I project a 2011 increase of 5%. The stock is currently yielding 2.3%.

Eaton Vance Corp. (EV) in October 2010 raised its dividend 12.5% to $0.18/share from $0.16/share. In 2009 it raised its dividend 3.2%. EV has increased its dividend for 30 consecutive years and I expect them to do so again next year. I project the 2011 increase will be similar to the 2010 increase since the company’s 12-month trailing free cash flow is similar to 2010. I project a 2011 increase of 12%. The stock is currently yielding 2.3%.

Colgate-Palmolive Co. (CL) in March 2010 raised its dividend 20% to $0.53/share from $0.44/share. In 2009 it raised its dividend 10%. CL has increased its dividend for 47 consecutive years and I expect them to do so again next year. I project the 2011 increase will be lower than the 2010 increase since the company’s 12-month trailing free cash flow growth is lower that 2010′s growth. I project a 2011 increase of 15%. The stock is currently yielding 2.6%.

Walgreen Company (WAG) in March 2010 raised its dividend 27% to $0.175/share from $0.1375/share. In 2009 it raised its dividend 22%. WAG has increased its dividend for 35 consecutive years and I expect them to do so again next year. I project the 2011 increase will be lower than the 2010 increase since the company’s 12-month trailing free cash flow growth is less than the 2010 dividend increase. I project a 2011 increase of 12%. The stock is currently yielding 1.8%.

Target Corp. (TGT) in August 2010 raised its dividend 47% to $0.25/share from $0.17/share. In 2009 it raised its dividend 6.2%. TGT has increased its dividend for 43 consecutive years and I expect them to do so again next year. I project the 2011 increase will be lower than the 2010 increase since the company’s 12-month trailing free cash declined from the the 2010 level. I project a 2011 increase of 7%. The stock is currently yielding 1.7%.

Obviously, the above increases are pure speculation on my part. But in a world where cash is king, somehow great companies always find a way to increase their dividends each year.

Full Disclosure: Long ABT, KMB, CLX, JNJ, MCD, WMT, CL. See a list of all my income holdings here.

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Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis *

D4L — Mon, 25 Oct 2010 07:30:37 +0000

This article originally appeared on The DIV-Net October 18, 2010.

Linked here is a detailed quantitative analysis of Wal-Mart Stores, Inc. (WMT). Below are some highlights from the above linked analysis:

Company Description: Wal-Mart Stores, Inc. is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam’s Club, and International.

Fair Value: I consider 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

WMT is trading at a discount to 1.) and 3.) above. The stock is trading at a 12.1% discount to its calculated fair value of $60.72. WMT earned a Star in this section since it is trading at a fair value.

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%

WMT 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 1973 and has increased its dividend payments for 36 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

WMT earned a Star in this section for its NPV MMA Diff. of the $1,163. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as WMT has. If WMT grows its dividend at 11.0% per year, it will take 5 years to equal a MMA yielding an estimated 20-year average rate of 3.4%.

Memberships and Peers: WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company’s peer group includes: Costco Wholesale (COST) with a 1.3% yield, Target Corp (TGT) with a 1.85% yield, and PriceSmart Inc (PSMT) with a 1.68% yield.

Conclusion: WMT earned one Star 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 four Stars. This quantitatively ranks WMT as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $70.61 before WMT’s NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 36 years of consecutive dividend increases. At that price the stock would yield 1.71%.

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 8.4%. This dividend growth rate is below the 11.0% used in this analysis, thus providing a margin of safety. WMT has a risk rating of 1.25 which classifies it as a low risk stock.

WMT enjoys dominant positions in most markets where it competes. The company continues to gain market share aided by the economic downturn as consumers choose WMT over higher-cost competitors and take advantage of its convenience. Its unmatched scale leads to favorable terms on everything from the products it sells to store leases and distribution agreements. I plan to add to my position as my allocation allows and while the stock is trading below my buy price of $60.72. 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 was long in WMT (3.6% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:

- The Clorox Company (CLX) Dividend Stock Analysis
- HCC Insurance Holdings Inc. (HCC) Dividend Stock Analysis
- Universal Health Realty Income Trust (UHT) Dividend Stock Analysis
- Cardinal Health, Inc. (CAH) Dividend Stock Analysis
- More Stock Analysis

We Were Dividends, Before Dividends Were Cool *

D4L — Wed, 20 Oct 2010 07:30:55 +0000

It seems nowadays that every investing article ends with the same conclusion – you should be buying dividend stocks. They are all quoting studies citing the performance edge that dividends have enjoyed over the long-term and the value of a semi-fixed return generated from periodic dividend payments. However, you should beware of some of the information provided. Beyond the simple concepts, some of the writers are making really bad recommendations and cross-breeding dividend investing with their preferred form of investing.

Dividend growth investing is not about exit points, momentum swings, relative strength, sector rotation; instead it is about studying fundamentals, selecting superior stocks and building a portfolio with a long-term horizon. When we buy a dividend stock, we hope to hold it forever. What makes a good dividend stock? Here are some of the things I look for:

Good Business Model

Sell things that people want or need, and do it in such a way that it is difficult or impossible for others to duplicate. There is a reason that pharmaceutical companies, such as Abbott Laboratories (ABT), are so profitable. With effective drugs under patent that sustain or enhance people’s life these companies have a deep moat. Consumer goods companies like Procter & Gamble Co. (PG) and Kimberly-Clark Corporation (KMB) manufacture products such as soap, detergent and toilet paper that we just can’t do without. Sure, there may be generic substitutes, but over the years many of these products have endeared themselves to consumers who are willing to pay a few cents more for the name brand.

Strong Free Cash Flow

Dividends are paid with cash remaining after paying the operating expenses and replacement capital (free cash flow). If a company has trouble meeting these basic needs, then its dividend is perilously at risk. Companies with a low free cash flow payout (FCF) payout are well-positioned to sustain their dividend. Such companies include: Target Corporation (TGT) at 13.85% FCF Payout, Diebold, Inc. (DBD) at 17.21%, International Business Machines Corp. (IBM) at 19.48% and Walgreen Company (WAG) at 22.71%.

Acceptable Debt Level

Generating a strong free cash flow is not enough – cash has to be available to be paid as dividends. As a result of the economic downturn, many companies are feeling pressure to reduce debt to stay within their covenants and try to maintain their debt rating. If a company’s excess cash is being used to service debt, there may not be any left over to increase dividends. Companies with a low debt to total capital include: T. Rowe Price Group Inc. (TROW) at 0.00% Debt to Total Capital, Automatic Data Processing Inc. (ADP) at 0.69%, Harleysville Group Inc. (HGIC) at 13.19% and Genuine Parts Company (GPC) at 15.76%.

Good Balance between Dividend Yield and Growth

There is usually a reason why a stock’s yield is above average. Often it is the market’s way of saying it doesn’t believe the company can maintain the dividend. Most people understand this risk. However, there is also risk to a stock that has a high dividend growth rate. To maintain a high dividend growth rate the company has to grow cash available for dividends at the same rate. This is often difficult to do. Here are several companies with a good balance between dividend yield and dividend growth rate: The Coca-Cola Company (KO) 2.94% yield and 7.32% dividend growth rate, UGI Corporation (UGI) 3.06% yield and 5.70% growth, The Clorox Company (CLX) 3.24% yield and 9.35% growth, Johnson & Johnson (JNJ) 3.31% yield and 8.42% growth and Corporate Office Properties (OFC) 4.25% yield and 5.22% growth.

For those of us that have invested in dividends for years (decades for some), we know dividend growth investing is not a passing fad to be “played” then move on the next hot investment strategy. Part of me will be glad when dividend investing falls out of favor and the masses moves on.

Full Disclosure: Long ABT, PG, ADP, HGIC, CLX, GP, JNJ, KMB, KO. See a list of all my income holdings here.

(Photo Credit)

What Determines A Dividend Stock’s Yield *

D4L — Wed, 16 Jun 2010 07:30:11 +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. Below are several important factors that influence a stock’s yield, along with some illustrative examples:

Industry

Have you ever noticed that stocks within an industry often have similar yields? This makes sense when you consider they often have like operations with similar processes, cost structures and margins. This is evident when you look at retailers who buy similar products, resell them in a physical location and have fairly low margins due to the intense competition. Note the yield similarity of Target Corp. (TGT) with a 1.3% yield and Costco (COST) with a 1.5% yield. Even WalMart (WMT) with their economies of scale and focus on efficiency has a yield only slightly higher at 2.4%. The same analysis could be done with The Coca-Cola Company (KO) with a 3.4% yield and Pepsico, Inc. (PEP) with a 3.1% yield.

Maturity and Growth Potential

When Microsoft (MSFT) and Intel (INTC) were formed they paid no dividend. Instead they funneled all their cash back into growing the business. As they matured and growth slowed, each began to pay a very nominal dividend. Today, as they have continued to mature, their yields have continued to increase with MSFT paying 2.0% and INTC paying 3.0%.

Legal Considerations

Real Estate Investment Trusts (REIT), such as Realty Income Corp. (O) and HCP, Inc. (HCP), are not taxed as standalone entities. Instead, they are legally required each year to pay out a certain percentage of their profits as dividends. In effect this forces the shareholders to incur the tax as earnings are generated, leaving the company very little to fund growth. To pay for growth, REIT’s usually have to issue debt and/or equity. All of this combined usually results in REITs having a higher than average yield, for example O yields 5.8% and HCP yields 6.2%.

Risk

Risk still plays an important role in setting the yield for a company. Consider these energy companies with a similar yields: Chevron Corp. (CVX) with a 4.0% yield, Exxon Mobil Corp. (XOM) with a 3.0% yield and ConocoPhillips (COP) with a 4.1% yield. Then there is BP plc (BP) with a 9.0% yield. Is there any question which of these is the more risky stock to own?

The above list is not meant to be an exhaustive, but highlights some of the more common drivers of yield. When we see a yield that appears to be too good to true, we need to ask ourselves why is the yield so high, and is it sustainable?

Full Disclosure: Long CVX, JNJ, ABT, MCD, PG, KO. See a list of all my income holdings here.

(Photo Credit)

9 Stocks With A Vision Of Higher Dividends *

D4L — Fri, 11 Jun 2010 07:30:44 +0000

A vision is taking the time to contemplate and anticipate, in detail, what the future will bring. A financial vision needs to consider future earnings, savings and economic issues such as inflation. Then based on your vision, you formulate an action plan to ensure the best possible outcome given your unique circumstances. You can’t have a retirement plan until you have a retirement vision. It would seem to me that there are a lot or retirement plans out there but very few retirement visions.

A portion of my retirement planning includes dividend growth investments. Here are a few select companies that have recently followed through on their vision of providing increased cash dividends to their shareholders:

Flowers Foods (FLO) is one of the largest producers and marketers of bakery products in the United States. June 4th the company increased its quarterly dividend 14.3% to $0.20/share. The dividend is payable on July 2 to shareholders of record on June 18. The ex-dividend date is June 16. The yield based on the new payout is 3.22%.

Universal Health Realty (UHT) invests in healthcare and human service related facilities. June 4th the company raised its quarterly dividend to $0.605/share. The dividend is payable on June 30, 2010 to shareholders of record as of June 16, 2010. The ex-dividend date is June 14, 2010. UHT is a Dividend Achiever and has raised its dividend for 23 consecutive years. The yield based on the new payout is 7.59%.

Tri-Continental (TY) one of the largest publicly traded diversified U.S. closed-end funds. June 4th the fund increased its quarterly distribution 11% to $0.05/share. The dividend is payable on July 1 to shareholders of record on June 14. The ex-dividend date is June 10. The yield based on the new payout is 1.77%.

Communications Systems (JCS) provides modular connecting and wiring devices for voice and data communications and media and rate conversion products for telecommunications networks. June 7th the company raised its quarterly dividend 7% to $0.15/share. The dividend is payable on July 1 to shareholders of record on June 21. The ex-dividend date is June 17. The yield based on the new payout is 5.75%.

Caterpillar (CAT) is the the world’s largest producer of earth-moving equipment, is also a big maker of electric power generators and engines used in petroleum markets. June 9th the company increased its quarterly dividend to $0.44/share. The dividend is payable August 20, 2010, to stockholders of record at the close of business, July 20, 2010. The ex-dividend date is July 16. CAT is a Dividend Achiever and has raised its dividend for 17 consecutive years. The yield based on the new payout is 3.10%.

Target (TGT) operates about 1,490 Target and 250 SuperTarget general merchandise stores across the U.S. June 9th the company raised its quarterly dividend 47% to $0.25/share. The dividend is payable on September 10 to shareholders of record on August 20. The ex-dividend date is August 18. TGT is a Dividend Aristocrat and has raised its dividend for 43 consecutive years. The yield based on the new payout is 1.90%.

American Eagle (AEO) is a specialty retailer of casual apparel, accessories and footwear primarily for young men and women between the ages of 15 and 25. June 9th the company increased its quarterly dividend 10% to $0.11/share. The dividend is payable on July 9, 2010 to stockholders of record at the close of business on June 28, 2010. The ex-dividend date is June 24. The yield based on the new payout is 3.60%.

Del Monte (DLM) is one of the largest producers, distributors and marketers of premium quality, branded food and pet products for the U.S. retail market. Also produces private label food and pet products. June 10th the company raised its quarterly dividend 80% to $0.09/share. The yield based on the new payout is 2.29%.

National Fuel Gas (NFG) is an integrated energy company with six operating segments: utility, pipeline & storage, exploration & production, international, energy marketing, and timber. June 10th the company raised its quarterly dividend 3% to $0.345/share. The dividend is payable on July 15 to shareholders of record on June 30. The ex-dividend date is June 28. NFG is a Dividend Champion and has raised its dividend for 40 consecutive years. The yield based on the new payout is 2.80%.

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.

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Nine Stocks Giving Shareholders A Raise In The Second Quarter *

D4L — Fri, 03 Jul 2009 10:30:39 +0000

In 1985 I graduated from college and took my first job as a staff accountant with a $21,000 annual salary. Now I am over the same department that I was hired into and entry level staff accountants start with a base salary of $56,500 per year. That equates to a 4.2% annual increase. Just as employees expect an annual raise, so do dividend investors.

Understanding the importance of increasing dividends, these big-name companies raised their dividends in the second quarter:

Cardinal Health (CAH) – Yield: 2.28% – Analysis
Clorox (CLX) – Yield: 3.53% – Analysis
Del Monte Foods (DLM) – Yield: 2.08%
IBM (IBM) – Yield: 2.10%
Johnson & Johnson (JNJ) – Yield: 3.43% – Analysis
PepsiCo (PEP) – Yield: 3.18% – Analysis
Target (TGT) – Yield: 1.76%

Just this last week these two companies rewarded their shareholders with increased cash dividends:

General Mills (GIS) is a major producer of packaged consumer food products, including Big G cereals and Betty Crocker desserts/baking mixes. On June 29th, the company announced a 9% increase to its dividend to $0.47/share. The dividend is payable August 3, 2009, to shareholders of record July 10, 2009. At the new rate, the stock is yielding 3.23%.

MFA Financial (MFA) is a real estate investment trust that invests in secured by pools of mortgages on single family residences. This week MFA increased it quarterly dividend by 13.6% to $0.25/share. The ex-dividend date is July 9, 2009 and the dividend will be paid on July 31, 2009 to stockholders of record on July 13, 2009. At the new rate, the stock is yielding 14.29%.

The first step to identify excellent income stocks is to look for those that increase their dividend each year. For stocks with a long string of consecutive dividend increases, see this list.

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

(Photo Credit)

distributes and markets private label food and pet products.

Wal-Mart Has Gone Shopping *

D4L — Fri, 12 Jun 2009 10:30:24 +0000

What do you do when the economy tanks and the stock market follows suit, but you are still generating a lot of cash? Many people would look for bargains in the market. Wal-Mart (WMT) [analysis] has done just that.

On June 5th, WMT announced a new share repurchase program that gives the company authorization to repurchase $15 billion of its shares. The new plan replaces the previous $15 billion program, which was announced June 1, 2007 and had approximately $3.4 billion of remaining authorization.

CEO Mike Duke said, “We remain committed to returning value to our shareholders through share repurchase and dividends.” In the last five years Wal-Mart has repurchased approximately $21 billion worth of its shares, Duke said. In addition, WMT raised its dividend in 2009 by 15% to $1.09/share.

Below are some companies rewarding their shareholders with increasing cash dividends:

VSE Corporation (VSEC) increased its dividend to $0.20/share annually, yielding 0.76%
Oil-Dri Corporation (ODC) raised its dividend 7% to $0.15/share, yielding 3.00%
Florida Public Utilities (FPU) bumped its quarterly dividend 2.1% to $0.12/share, yielding 3.71%
C. R. Bard (BCR) boosted its quarterly dividend 6% to $0.17/share, yielding 0.93%
Clorox (CLX) increased its dividend 8.7% to $0.50/share, yielding 3.73% – Analysis
Target (TGT) raised its quarterly dividend 6% to $0.17/share, yielding 1.72%
National Fuel Gas (NFG) bumped its quarterly dividend by 3.1% to $0.335/share, yielding 3.76%

One sign of confident and competent management is willingness and ability to raise their company’s dividend during a severe economic downturn. For companies with a long string of consecutive dividend increases, see this list.

Full Disclosure: Long WMT, CLX. See a list of all my income holdings here.

(Photo Credit)

The Few, The Proud, The Dividend Raisers! *

D4L — Fri, 13 Mar 2009 10:30:45 +0000

This last week was similar to each of the two prior weeks in that we saw another large bank slash its dividend by more than 80%. Last Friday, Wells Fargo & Company (WFC) cut its dividend by 85% to $0.05. The company said it would help them retain an additional $5 billion in common equity each year.

During the week several big name companies declared dividends, including:

Safeway (SWY) $0.0828/share – yield 1.87%
General Mills (GIS) $0.43/share – yield 3.46%
Microsoft (MSFT) $0.13/share – yield 3.43% – (Analysis)
Heinz (HNZ) $0.415/share – yield 5.40%
Target (TGT) $0.16/share – yielding 2.35% - (Analysis)
Kraft (KFT) $0.29/share – yield 5.25% - (Analysis)

It is great when companies, like those above, follow through and pay their regular dividends at the appointed time. But it is even more important for companies to follow through and raise their dividend at the appropriate time. Unfortunately, fewer companies are increasing their dividends. This week there were only two to note:

Piedmont Natural Gas Company Inc. (PNY) is an energy services company that distributes natural gas to 1,016,000 residential, commercial and industrial customers in portions of North Carolina, South Carolina and Tennessee. On March 6th, the company declared a 3.8% increase in its quarterly dividend of $0.27/share. The dividend is payable April 15, 2009, to shareholders of record at the close of business on March 25, 2009. The stock now yields 4.85%. This is the 31st consecutive year PNY has raised its dividend. The company is a dividend Achiever and a dividend Champion.

Warwick Valley Telephone Company (WWVY) provides telephone, Internet and video services to customers in the towns of Warwick, Goshen and Wallkill, New York and West Milford and Vernon townships, New Jersey. On March 10th, the company increased its quarterly cash dividend by 10% to $0.22/share up from $0.20/share. The dividend will be paid on March 31, 2009 to shareholders of record as of March 20, 2009. Wisner H. Buckbee, Chairman of the Board, said “This dividend increase demonstrates the Board’s confidence in the continued strong performance of WVT’s business, our cash generation capabilities, and our firm commitment to our shareholders.” The stock now yields 9.78%.

For more companies around the world with a long string of consecutive dividend increases, see Dividends Value’s Stock Ideas page.

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

(Photo: Steve Woods)

Stock Analysis: Target Corp (TGT) *

D4L — Wed, 27 Aug 2008 10:30:00 +0000

Linked here is a PDF copy of my detailed analysis of Target Corp. (TGT). Below are some highlights from the above linked analysis:

Company Description: Target Corp operates general merchandise and food discount stores in the United States, which include Target and SuperTarget stores. The Company offers both everyday essentials and fashionable differentiated merchandise.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

Avg. High Yield Price
20-Year DCF Price
Avg. P/E Price
Graham Number

TGT is trading at a discount to 1.), 2.) and 3.) above. If I exclude the high and low valuations and average the remaining two, TGT is trading at a 13.7% discount. TGT earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:

Rolling 4-yr Div. > 15%
Dividend Growth Rate
Years of Div. Growth
1-Yr. > 5-Yr Growth
Payout 15% of avg.

TGT earned one Star in this section for 3.) above. TGT has paid a cash dividend to shareholders every year since 1965 and has increased its dividend payments for 40 consecutive years.

NPV MMA Diff.
Years to >MMA

TGT earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in TGT you would earn $2,597 less than a MMA earning a 20-year average rate of 4.61%. If TGT grows its dividend at 12.8% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.

Other: TGT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. TGT has produced fairly consistent earnings and cash flows over the last decade. However, some analysts are concerned about the potential loss of market share this year resulting from lackluster merchandising and aggressive pricing by competitors. Food and other consumables generate less traffic for TGT than Wal-Mart (WMT). TGT apparel and home assortments lack differentiation relative to moderate-price department stores..

Conclusion: TGT earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of one Star. This quantitatively ranks TGT as a 1 Star-Very Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $26.99 before TGT’s NPV MMA Diff. increases to the $3,000 NPV MMA Diff. that I like to see. At that price TGT would yield 2.22%. With a Graham value of $35.77, it would be a value play well before I could justify it as a dividend buy.

Full Disclosure: At the time of this writing, I had no position in TGT (0.0% of my Income Portfolio) and was long in WMT (1.6% of my Income Portfolio).

What are your thoughts on TGT?