Dividends Value » WMT

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)

1 Company Announced A Higher Dividend, 7 To Pay Higher Dividends in April *

D4L — Fri, 01 Apr 2011 07:30:11 +0000

A stock with a high yield doesn’t mean much if the dividend is cut or eliminated, and the stock price declines significantly. Sometimes it is desirable to accept higher risk for a higher yield. Other times we may be accepting higher risk and are not being adequately compensated for the additional risk. One measure of dividend sustainability is the ability of management to consistently raise their dividends each year.

This week only one company announced raised the dividend growth bar one year by increasing its cash dividends paid:

International Paper (IP) is a global paper and packaging company with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. March 29th the company increased its quarterly dividend 40% to $0.2625/share. The dividend is payable on June 15, 2011 to shareholders of record on May 17, 2011. The yield based on the new payout is 3.6%.

The following companies will pay higher dividends in April:

Chubb Corporation (CB) as 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. April 5th the company will pay its quarterly dividend of $0.39/share. This dividend is 5.4% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1902 and has increased its dividend payments for 47 consecutive years. The yield based on the new payout is 2.6%.

The Coca-Cola Company (KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. April 1st the company will pay its quarterly dividend of $0.47/share. This dividend is 7% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 49 consecutive years. The yield based on the new payout is 3.0%.

Family Dollar Stores Inc. (FDO) operates a chain of over 6,800 retail discount stores in 44 states across the U.S. April 15th the company will pay its quarterly dividend of $0.18/share. This dividend is 16% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 35 consecutive years. The yield based on the new payout is 1.4%.

Genuine Parts Co. (GPC) is a distributor of automotive replacement parts in the U.S., Canada and Mexico. April 1st the company will pay its quarterly dividend of $0.45/share. This dividend is 10% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 55 consecutive years. The yield based on the new payout is 3.4%.

Kimberly Clark Corp. (KMB) is a global consumer products company that produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark. April 4th the company will pay its quarterly dividend of $0.70/share. This dividend is 17% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1935 and has increased its dividend payments for 38 consecutive years. The yield based on the new payout is 4.3%.

Piedmont Natural Gas (PNY) is an energy services company primarily engaged in the distribution of natural gas to more than one million residential, commercial and industrial utility customers in North Carolina, South Carolina and Tennessee. April 15th the company will pay its quarterly dividend of $0.29/share. This dividend is 3.6% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1956 and has increased its dividend payments for 33 consecutive years. The yield based on the new payout is 3.9%.

Wal-Mart Stores, Inc. (WMT) serves customers and members more than 200 million times per week at 8,970 retail units under 60 different banners in 15 countries. April 5th the company will pay its quarterly dividend of $0.3650/share. This dividend is 21% higher than the previous quarter. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 36 consecutive years. The yield based on the new payout is 2.8%.

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 KO, GPC, KMB, PNY, WMT. See a list of all my income holdings here.

(Photo Credit)

Don’t Touch These 5 Dividend Stocks! *

D4L — Wed, 23 Mar 2011 07:30:23 +0000

Has someone near and dear to you responded with a ‘I was only trying to help’ after royally messing something up? Have you ever tinkered with a computer, smart phone or something else only to learn it no longer works and you are not sure how to fix it? Our dividend stock investments can suffer the same fate if we provide them with too much of the wrong type of attention. Here are some things to remember to keep your income investments on the straight and narrow…

Avoid Irrelevant Information

I tire of hearing the stock reports that sound like a horse race, ‘After early mixed results, the Dow edged up two points today despite a government report indicating unemployment is running at two-tenths of a percent above previous estimates…’ Will any of this have meaning in 10 years? 5 years? 1 year? In a month or a week? If you tune in to the same program tomorrow, you will likely hear an equally irrelevant, and possibly contrary, rant. Successful investing is a marathon, not a 40 yard dash.

Avoid Excess Trading

The investment community is geared toward trading. The media with their incessant play-by-play call of the market creates a sense of urgency. If the market is going up, you are made to feel like you are missing out on enormous gains, while market declines leave the investor feeling the need to sell before losing it all. The common thread here is the investor is being pushed to trade. Excessive buying and selling will at best mute a portfolio’s return and at worse, will deplete it.

Buy And Hold

Its ironic that buy-and-hold (through dividend and value investing) is seeing a resurgence, while concurrently being attacked on many fronts as being dead and no longer valid. Some attacks are a result of ignorance on the part of those not fully understanding the concept. Buy-and-hold is not buy-and-forget. All investment strategies should have a well-defined exit plan. Making a quick buck is not part of the exit strategy of long-term buy-and-hold dividend and value investors. Instead, it is our desire to hold the stock forever, assuming the stock continues to meet out investing criteria. When the stock no longer performs as anticipated, such as cutting its dividend, it is immediately sold.

Dividend Stocks Worth Waiting On

If our investment horizon is forever, we must do our due diligence up front and select only the very best stocks. Below are several stocks that have earned the patience of many dividend growth investors:

Johnson & Johnson (JNJ) | Yield: 3.7%
Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries. JNJ 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 1944 and has increased its dividend payments for 49 consecutive years.

McDonald’s Corp. (MCD) | Yield: 3.2%
McDonald’s Corporation is the largest fast-food restaurant company in the world, with about 32,500 restaurants in 117 countries. MCD 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 1976 and has increased its dividend payments for 35 consecutive years.

The Coca-Cola Company (KO) | Yield: 2.9%
The Coca-Cola Company is the world’s largest soft drink company, KO also has a sizable fruit juice business. KO 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 1893 and has increased its dividend payments for 48 consecutive years.

Procter & Gamble Co. (PG) | 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. PG 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 1891 and has increased its dividend payments for 54 consecutive years.

Wal-Mart Stores Inc. (WMT) | Yield: 2.8%
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.

Conclusion

We live in an action-oriented world. In a microwave society that provides us instant everything, we look for immediate feedback for our actions. Sometimes it is hard to abide by the old adage ‘if it’s not broke, don’t fix it’, but when it comes to our dividend growth investments, we need to allow time to work its wonders on our portfolio.

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

(Photo Credit)

Walgreen Co. (WAG) Dividend Stock Analysis *

D4L — Mon, 21 Mar 2011 07:30:07 +0000

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

Linked here is a detailed quantitative analysis of Walgreen Co. (WAG). Below are some highlights from the above linked analysis:

Company Description: 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.

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

WAG is trading at a discount to only 1.) above. The stock is trading at a slight discount to its calculated fair value of $42.98. WAG 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%

WAG earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. WAG earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2001-2004, 2002-2005, 2003-2006, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1933 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

WAG earned a Star in this section for its NPV MMA Diff. of the $4,080. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as WAG has. If WAG grows its dividend at 18.5% per year, it will take 6 years to equal a MMA yielding an estimated 20-year average rate of 3.9%.

Memberships and Peers: 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’s peer group includes: CVS Caremark Corporation (CVS) with a 1.5% yield, Rite Aid Corp. (RAD) with a 0.0% yield and Wal-Mart Stores Inc. (WMT) with a 2.8% yield.

Conclusion: WAG 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 WAG as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $85.71 before WAG’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 0.82%.

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 12.1%. This dividend growth rate is well below the 18.5% used in this analysis, thus providing a margin of safety. WAG has a risk rating of 1.00 which classifies it as a Low risk stock.

With over 7,700 drugstores, WAG offers unmatched convenience with one of the the most recognized brand names in the retail pharmacy business. The company enjoys a strong market share within the relatively stable U.S. retail drug industry. However, pressures from non-traditional competitors and potential adverse legislation could quickly weaken WAG’s advantages. Although the stock is trading slightly below my $42.98 fair value price, the 1.7% dividend yield will prevent any near–term purchases. 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 WAG (0.0% of my Income Portfolio). See a list of all my income holdings here.

List of 195 Dividend Stocks Every Income Investor Should Know About *

D4L — Wed, 09 Mar 2011 07:30:16 +0000

In 2009, I introduced the Stock Ideas list and it has proven to be immensely popular. The list consists of Dividend Aristocrats, US Broad Dividend Achievers and U.S. Dividend Champions. Duplications in the above lists are eliminated and stocks are crossed out when I learn that they have either cut their dividend or fail to raise it. Here is some information on each of the constituent lists and some highlights on this year’s changes:

Dividend Aristocrats: Companies in the S&P 500 that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. As the name denotes, these are the best of the best – the blue blood stocks, including names like:

US Broad Dividend Achievers: Is comprised of companies incorporated in the United States or its territories, trade on the NYSE, NASDAQ or AMEX, and have increased their annual regular dividend payments for the last ten or more consecutive years. Notable names on this list include:

The U.S. Dividend Champions: Is maintained by Dave Fish of MoneyPaper. The list is updated monthly and located at the The Drip Investing Resource Center. Like the Dividend Aristocrats above the Dividend Champions list looks for companies that have increased their dividend for at least 25 consecutive years. However, since S&P 500 membership is not a requirement, the list is larger than the Dividend Aristocrats list and also includes small-cap companies.

- Bowl America (BWL.A) | Yield: 5.0%
- Conn. Water Service (CTWS) | Yield: 3.8%
- Weyco Group Inc. (WEYS) | Yield: 2.6%

Membership in the Stock Ideas list declined in this edition, but it was significantly less than what was experience in the prior year. Overall the number of constituents fell to 198 in the 2011 Stock Ideas list from 218 stocks in the 2010 list. There were 319 stocks in 2009. There were 28 companies that fell off the list, including these prominent stocks:

- Eli Lilly & Co. (LLY)
- Paychex Inc. (PAYX)
- Progress Energy Inc. (PGN)
- SUPERVALU Inc. (SVU)
- Integrys Energy Group, Inc. (TEG)

The news wasn’t all bad. Partially offsetting the 28 companies that fell off the list were 5 new companies joining the Dividend Stock Ideas List. Some of these aren’t household names, not yet at least, but here are some names we will likely be seeing in the future:

You can see the entire Dividend Stock Idea List here. Remember, not every stock listed here is a great dividend investment, but virtually all great dividend investments are on this list.

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

(Photo Credit)

10 Dividend Stocks Raising Their Payouts And Yields *

D4L — Fri, 04 Mar 2011 07:30:18 +0000

When you purchase individual stocks, risk is inherit. Sometimes bad things happen to good stocks. Eventually, every investor will hold a stock that falls out of favor and endures a double-digit decline. Understanding this from the onset makes it easier to deal with. To minimize the risk of significant declines, your core portfolio should focus on blue-chip dividend growth stocks.

Listed below are select companies that have recently elected to raise their payout and yield by increasing their cash dividends to shareholders:

Wal-Mart Stores, Inc. (WMT) serves customers and members more than 200 million times per week at 8,970 retail units under 60 different banners in 15 countries. March 3nd the company increased its quarterly dividend 21 percent increase to $0.3650/share. The dividend is payable on April 4, 2011 to shareholders of record on March 11, 2011. The yield based on the new payout is 2.8%.

WGL Holdings, Inc. (WGL) engages in the delivery and sale of natural gas, and provides energy-related products and services in the District of Columbia, Maryland, Virginia, and Delaware. March 3nd the company increased its quarterly dividend 2.6% to $0.3875/share. This annual increase is the 35th consecutive year that WGL Holdings, Inc. has increased the cash dividend on its common stock. The new quarterly dividend is payable May 1, 2011, to shareholders of record on April 8, 2011. The yield based on the new payout is 4.0%.

General Dynamics (GD) is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. March 2nd the company increased its quarterly dividend 12% to $0.47/share. The dividend is payable May 6, 2011, to shareholders of record on April 8. The yield based on the new payout is 2.5%.

Fred’s, Inc. (FRED) operates 676 discount general merchandise stores, including 24 franchised Fred’s stores, in the southeastern United States. March 2nd the company increased its quarterly dividend 25% to $0.05/share. The dividend is payable on March 15, 2011, to shareholders of record as of March 10, 2011. The yield based on the new payout is 1.5%.

Waste Management, Inc. (WM) is the leading provider of comprehensive waste management services in North America. March 1st the company increased its quarterly dividend 7.9% to $0.34/share. The dividend is payable March 25, 2011 to stockholders of record on March 11, 2011. The yield based on the new payout is 3.7%.

National Interstate Corporation (NATL) is the holding company for a specialty property-casualty insurance group which differentiates itself by offering products and services designed to meet the unique needs of niche markets. March 1st the company increased its quarterly dividend 12.5% to $0.09/share. The dividend is payable on March 18, 2011 to shareholders of record of the Company’s common stock as of the close of business on March 9, 2011. The yield based on the new payout is 1.7%.

The Hanover Insurance Group, Inc. (THG) offers a wide range of property and casualty products and services to individuals, families and businesses through an extensive network of independent agents. March 1st the company increased its quarterly dividend 10% to $0.275/share. The dividend is payable March 29, 2011, to shareholders of record at the close of business on March 15, 2011. The yield based on the new payout is 2.4%.

UniSource Energy Corporation (UNS), through its subsidiaries, operates as an electric utility in Arizona. February 28th the company increased its quarterly dividend 7.7% to $0.42/share. The dividend is payable on March 23, 2011 to common shareholders of record as of March 11, 2011. In 2010. The yield based on the new payout is 4.6%.

CBL & Associates Properties, Inc. (CBL) is one of the largest and most active owners and developers of malls and shopping centers in the United States. February 28th the company increased its quarterly dividend 5% to $0.21/share. The dividend is payable on April 15, 2011, to shareholders of record as of March 30, 2011. The yield based on the new payout is 4.7%.

Weingarten Realty (WRI) is a commercial real estate owner, manager and developer. February 28th the company increased its quarterly dividend 5.8% to $0.275/share. The dividend is payable in cash on March 15, 2011 to shareholders of record on March 8, 2011. The yield based on the new payout is 4.3%.

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

(Photo Credit)

Who Owns The Top Dividend Stocks? *

D4L — Wed, 12 Jan 2011 07:30:51 +0000

The internet provides investors with so much useful and interesting information. I could not imagine going back a decade or so and trying to analyze stocks without the internet – waiting for quarterly reports to be mailed for owned companies and calling the investor relations contacts for information on unowned companies. One of my job responsibilities is the statutory reporting for the corporation I work for. Filing 10-Ks, 10-Qs and other such required reports is often tedious, but it gives me a great appreciation of what information is available, including who owns some of the top dividend stocks…

In the U.S., the Securities and Exchange Commission (SEC) requires institutional investment managers who exercise investment discretion over $100 million or more in Section 13(f) securities to report their holdings on Form 13F with the SEC. Because of this required filing we can analyze the holdings of Berkshire Hathaway (Warren Buffett’s holding company) or any other large institution. However, once the Form 13Fs are aggregated, we can see who the large shareholders are for any public company, including these high profile dividend growth companies:

Johnson & Johnson (JNJ) | Yield: 3.5%
- 62.44% Institutional Ownership (%)
- 20.20% Top 10 Institutions (%)
- 00.79% 5%/Insider Ownership (%)
- 4.9% State Street Global Advisors (US)
- 3.8% Vanguard Group, Inc.
- 3.3% BlackRock Institutional Trust Company, N.A.
- 1.6% Berkshire Hathaway Inc.
- 1.4% State Farm Insurance Companies

The Coca-Cola Company (KO) | Yield: 2.8%
- 62.87% Institutional Ownership (%)
- 29.60 Top 10 Institutions (%)
- 04.68% 5%/Insider Ownership (%)
- 8.6% Berkshire Hathaway Inc.
- 3.7% Vanguard Group, Inc.
- 3.6% State Street Global Advisors (US)
- 3.2% Fidelity Management & Research
- 3.1% BlackRock Institutional Trust Company, N.A.

Procter & Gamble Co. (PG) | Yield: 3.0%
- 57.01% Institutional Ownership (%)
- 20.00% Top 10 Institutions (%)
- 00.34% 5%/Insider Ownership (%)
- 3.9% State Street Global Advisors (US)
- 3.8% Vanguard Group, Inc.
- 3.5% BlackRock Institutional Trust Company, N.A.
- 2.7% Berkshire Hathaway Inc.
- 1.5% Fidelity Management & Research

For the above I used MSN MoneyCentral, but many other services provide the same information. Obviously, large index mutual funds, such as the Vanguard Group, Inc. and Fidelity, will hold significant positions in S&P 500 companies, and those in other indexes. Insurance companies, such as Berkshire Hathaway Inc. and State Farm, will always have large sums invested in equities. The above three popular dividend growth stocks are all held by Berkshire Hathaway Inc. (BRK.A). As you can see from BRK.A’s latest 13F on the SEC’s website, they are also holding these other dividend growth stocks:

Buffett is a renowned value investor. As such, BRK.A’s 13F is one of the most viewed each quarter when it is filed. Investors want to know what the Oracle has bought and sold. Many websites use this information to set up a Buffett Tracking Portfolio, along with other respected investors. There is a great deal of information freely available to investors. Sometimes we just need to detour from our familiar paths to discover it.

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

(Photo Credit)

10 Under-Valued Dividend Stocks *

D4L — Wed, 05 Jan 2011 07:30:59 +0000

By many measures, 2010 was a great year for dividend growth stocks. There were far fewer dividend cuts and fewer companies that failed to raise their dividends at the expected time. From a valuation standpoint dividend stocks performed quite well, with many income portfolios outperforming the S&P 500.

The down side to this is that great values are harder to find. However, that is not to say they aren’t still out there. Of the 198 stocks I track, only 29 (15%) are trading below my calculated fair value, up from 7% this time last year. Here are some of the more interesting ones…

Becton, Dickinson and Co. (BDX) provides a wide range of medical devices and diagnostic products used in hospitals, doctors’ offices, research labs and other settings.
Fair Value: $109.88 | Recent Price: $84.73 | Yield: 1.6%

Owens & Minor, Inc. (OMI) 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.
Fair Value: $35.94 | Recent Price: $29.56 | Yield: 2.4%

Wal-Mart Stores, Inc. (WMT) 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: $63.69 | Recent Price: $54.56 | Yield: 2.2%

Abbott Laboratories (ABT) is a diversified life science company and is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.
Fair Value: $55.43 | Recent Price: $47.82 | Yield: 3.6%

Colgate-Palmolive (CL) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.
Fair Value: $91.57 | Recent Price: $79.79 | Yield: 2.5%

Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries.
Fair Value: $70.24 | Recent Price: $62.82 | Yield: 3.4%

Walgreen Company (WAG) 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.
Fair Value: $43.77 | Recent Price: $39.32 | Yield: 1.50%

Medtronic Inc. (MDT) is a global medical device manufacturer with leadership positions in the pacemaker, defibrillator, orthopedic, diabetes management, and other medical markets.
Fair Value: $41.34 | Recent Price: $37.41 | Yield: 2.4%

Harleysville Group Inc. (HGIC) underwrites a broad array of personal and commercial coverages. These insurance coverages are marketed primarily in the Eastern and Midwestern United States.
Fair Value: $41.10 | Recent Price: $37.39 | Yield: 3.6%

Microsoft Corporation (MSFT) is the world’s largest software company, develops PC software, including the Windows operating system and the Office application suite.
Fair Value: $28.55 | Recent Price: $27.98 | Yield: 2.3%

I calculate Fair Value weighing The Mid-2 Price and the NPV MMA Price. The wieght depends on where we are in the cycle. Currently it is weighted as 25% Mid-2 price + 75% NPV MMA price. The Mid-2 Price considers four fair value calculations, Avg. High Yield Price, 20-Year DCF Price, Avg. P/E Price and Graham Number, the highest and lowest fair values are excluded and the remaining two calculations are averaged to calculate the Mid-2 price. The NPV MMA Price is where the NPV MMA value equals the NPV MMA target.

Needless to say, we need to consider a lot more than just valuation when making a stock purchase. As dividend growth investors, I would argue that dividend fundamentals are more important than valuation. As long-term buy and hold investors, we can over-come paying too much for a great stock with time. However, time is unlikely to help a fairly valued stock with poor dividend fundamentals.

Full Disclosure: Long OMI, WMT, ABT, CL, JNJ, MDT, HGIC. 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.

(Photo Credit)

Dividend Stocks vs. a Safe Distribution Rate *

D4L — Wed, 29 Dec 2010 07:30:39 +0000

One of the most interesting questions that often comes up is “How much can you safely withdraw each year from your retirement portfolio?” In 1995, Peter Lynch wrote that a 7% annual withdrawal rate would be prudent for an all-stock portfolio. He later retracted his analysis when financial columnist Scott Burns proved that a 7% withdrawal rate could put you back into the work force just to make ends meet.

There is not a lot of research in this area since most people spend their time contemplating capital accumulation, not spending it. However, there are a few studies on “safe” withdrawal rates. Let’s look at a few of them and consider what could be a better alternative…

The Bengen Study

In February 1997, the Wall Street Journal columnist Jonathan Clements reported on a study by San Diego based financial planner William Bengen. Bengen looked at year-by-year returns since 1925 for a 50/50 stock/bond portfolio. He assumed half the portfolio was in the S&P 500 and half in intermediate term government bonds. Using a 30 year holding period, he calculated that a 4.1% withdrawal rate would allow you to survive the worst market declines.

The Harvard Study

In 1973, Harvard University did a study to determine how much they could safely withdraw from their endowment fund without eroding the principal. Assuming a portfolio of 50% stocks and 50% bonds and cash, Harvard’s analysts calculated they could withdraw 4% the first year and then adjust the subsequent year’s withdrawals for inflation. For example, if there was 10% inflation, the second year’s withdrawal would be 4.4% of the initial (i.e., first year) asset value.

The Trinity Study

Dallas Morning News columnist Scott Burns has written extensively on a “safe” withdrawal study by three Trinity University researchers. The Trinity Study measures the “success rate” of various portfolios from 1926 to 1995. The “success rate” is the percent of time a retiree could sustain a given withdrawal rate without depleting his retirement assets. The optimal asset mix is 75% stock/25% long term corporate bonds. For a 30 year payout period and a 4% withdrawal rate, this mix had a 98% success rate. At a 3% withdrawal rate, the 75/25 mix had a 100% success rate. Interpolating these results would give you a “safe” withdrawal rate of slightly less than 4%, virtually identical to the Harvard study.

So it seems that 4% is the number that all these studies are pointing to based on on historical data. But is it a safe number if you retire today? More recently Burns wrote:

The established safe-withdrawal-rate rules of thumb are based on long periods of time in which yields were higher than they are today and stock valuations were lower. A growing school of thought believes future withdrawal rates should be reduced to reflect expected lower future returns. This would knock another 1.5 to 2 percentage points off the safe withdrawal rate.

You must also consider is that these studies are based on investment returns before expenses. If you’re paying an investment advisor an annual fee of 2% of assets and he has you invested in no-load mutual funds with a 0.5% expense ratio, your annual expenses are 2.5%. Your “safe” withdrawal rate is is now 2.5% lower than what you previously thought.

Dividend Growth Stocks: A Better Way

When I retire, I want a high degree of assurance that I won’t run out of money, have to start a second career or develop a taste for cheap dog food. I plan on achieving my goal of an ever growing income with a diversified portfolio of high-quality dividend stocks. Why would I settle for trying to live on as little as 1.5% to 4% of my portfolio, when I can build a portfolio of dividend paying stocks that will provide for my needs without depleting the principle. Here are several stocks that I plan to rely on for decades to come:

Abbott Laboratories (ABT) | Dividend Growth: 8.3%| Yield: 3.6%
ABT is a diversified life science company and is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.

Genuine Parts Co. (GPC) | Dividend Growth: 2.5%| Yield: 3.2%
GPC is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.

Harleysville Group Inc. (HGIC) | Dividend Growth: 8.0%| Yield: 3.7%
HGIC underwrites a broad array of personal and commercial coverages. These insurance coverages are marketed primarily in the Eastern and Midwestern United States.

Johnson & Johnson (JNJ) | Dividend Growth: 8.4%| Yield: 3.4%
JNJ is a leader in the pharmaceutical, medical device and consumer products industries.

The Coca-Cola Company (KO) | Dividend Growth: 7.3%| Yield: 2.7%
KO is the world’s largest soft drink company, KO also has a sizable fruit juice business. Its bottling interests include a 34% stake in NYSE-listed Coca-Cola Enterprises (CCE).

McDonald’s Corporation (MCD) | Dividend Growth: 15.0%| Yield: 2.9%
MCD is the largest fast-food restaurant company in the world, with about 32,500 restaurants in 117 countries.

Medtronic Inc. (MDT) | Dividend Growth: 9.4%| Yield: 2.4%
MDT is a global medical device manufacturer with leadership positions in the pacemaker, defibrillator, orthopedic, diabetes management, and other medical markets.

PepsiCo, Inc. (PEP) | Dividend Growth: 6.5%| Yield: 2.9%
PepsiCo, Inc. is a major international producer of branded beverage and snack food products.

The Procter & Gamble Company (PG) | Dividend Growth: 7.0%| Yield: 3.0%
PG is a leading consumer products company markets household and personal care products in more than 180 countries.

Wal-Mart Stores, Inc. (WMT) | Dividend Growth: 11.0%| Yield: 2.3%
WMT 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.

Not all of these stocks are a buy today, but they are ones you will eventually want to add to your dividend portfolio. Retirement planning doesn’t have to be difficult. A financially successful retirement requires planning, discipline and execution. The sooner you start, the easier it is. Don’t risk running out of money before you run out of life.

Full Disclosure: Long ABT, GPC, HGIC, JNJ, KO, MCD, MDT, PEP, PG, WMT. See a list of all my income holdings here.

Sources: Dallas News, Retire Early, passionsaving.com