Over the last couple of years we have seen companies fail to raise their dividend, cut their dividend and some even decided to stop paying their dividend. In some cases their financials did not warrant the change. One way to weed these out is to look for companies with a dividend culture. Below are 10 companies that have paid a dividend for over 100 years and have increased their dividend for at least 20 years. They are presented here in descending rank of how long they have paid a dividend:

#10 Chubb Corp. (CB) 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.
Paid since: 1902 | Consecutive increases: 45 | Yield: 2.92%

#9 PPG (PPG) is a leading manufacturer of coatings and resins, flat and fiber glass, and industrial and specialty chemicals.
Paid since: 1899 | Consecutive increases: 36 | Yield: 3.55%

#8 Colgate-Palmolive Company (CL) is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products.
Paid since: 1895 | Consecutive increases: 45 | Yield: 2.13%

#7 The Coca-Cola Company (KO) is the world's largest soft drink company. It engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates, fruit juices and syrups worldwide.
Paid since: 1893 | Consecutive increases: 47 | Yield: 3.02% | [Analysis]

#6 The Procter & Gamble Company (PG) is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries.
Paid since: 1891 | Consecutive increases: 53 | Yield: 2.92% | [Analysis]

#5 UGI Corp. (UGI) operates propane distribution, gas and electric utility, energy marketing and related businesses through subsidiaries.
Paid since: 1885 | Consecutive increases: 23 | Yield: 3.20%

#4 Consolidated Edison, Inc. (ED), through its subsidiaries, provides electric, gas, and steam utility services in the United States serving parts of New York, New Jersey and Pennsylvania.
Paid since: 1885 | Consecutive increases: 36 | Yield: 5.42%

#3 Eli Lilly and Company (LLY) discovers, develops, manufactures and sells prescription drugs that offers a wide range of treatments for neurological disorders, diabetes, cancer, and other conditions. The company also sells animal health products.
Paid since: 1885 | Consecutive increases: 42 | Yield: 5.52% | [Analysis]

#2 Exxon Mobil Corp. (XOM) is engaged in the exploration, production, and sale of crude oil, natural gas, petroleum products and petrochemicals. XOM is the world's largest publicly owned integrated oil company.
Paid since: 1882 | Consecutive increases: 27 | Yield: 2.51%

#1 Stanley Works (SWK) is a worldwide producer of tools, hardware and specialty hardware for home improvement, consumer, industrial and professional use.
Paid since: 1877 | Consecutive increases: 42 | Yield: 2.44%

A strong dividend culture is a great place to start looking, but before buying we must also consider other factors such as: dividend fundamentals, ability to cover their dividend and fair value.

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

(Photo Credit)

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Summary only...

What separates income investors from dividend investors is the concept of a growing dividend. This dividend growth is the life-blood of a thriving dividend portfolio. The income derived from a quality, well-diversified portfolio is much more predictable than capital gains and the good companies routinely raise their dividends well in excess of the inflation rate.

Recently, the following companies announced increased cash dividends:

PPG Industries (PPG) is a global supplier of protective and decorative coatings. October 16th the company increased its dividend 2% to $0.54/share. The dividend is payable on Dec. 11 to shareholders of record Nov. 10. The ex-dividend date is November 6. PPG is a Dividend Aristocrat and has increased its dividend for 38 consecutive years. The yield based on the new payout is 3.62%.

El Paso Pipeline Partners L.P. (EPB) owns and operates natural gas transportation pipelines, storage and other midstream assets. October 19th the company raised its quarterly cash distribution 6% to $0.35/unit. The distribution will be paid November 13, 2009 on all unitholders of record as of the close of business on October 30, 2009. The ex-dividend date is October 28. The yield based on the new payout is 6.15%

Plains All American Pipeline (PAA) engages in interstate and intrastate crude oil transportation, terminalling and storage, as well as crude oil gathering and marketing. October 19th the company boosted its quarterly distribution 2% to $0.92/unit. The distribution is payable on November 13, 2009, to unitholders of record at the close of business on November 3, 2009. The yield based on the new payout is 7.38%

Universal Forest Products (UFPI) engineers, manufactures, treats, distributes and installs lumber, composite, plastic and other building products. October 19th the company bumped its quarterly dividend to to $0.20/share. The dividend is payable on December 15, 2009, to shareholders of record on December 1, 2009. The ex-dividend is November 27, 2009. The yield based on the new payout is 1.03%.

Stepan Co. (SCL) produces specialty and intermediate chemicals. October 20th the company increased its quarterly dividend 9.1% to $0.24/share. This dividend is payable December 15, 2009, to shareholders of record on November 30, 2009. The ex-dividend date is November 26, 2009. SCL is a Dividend Achiever and has increased its dividend for 42 consecutive years. The yield based on the new payout is 1.49%.

Shenandoah Telecom (SHEN) is a diversified telecommunications holding company. October 20th the company raised is dividend to $0.32/share. The dividend will be payable December 1, 2009, to shareholders of record on November 10, 2009. The ex-dividend date is November 6, 2009. SHEN is a Dividend Achiever. The yield based on the new payout is 1.89%.

Ecology and Environment (EEI) is an environmental consulting and testing firm. October 20th the company bumped to $0.21/share. The dividend is payable on or before December 30, 2009, to shareholders of record as of December 8, 2009. The ex-dividend is December 4, 2009. The yield based on the new payout is 2.66%.

Hanover Insurance Group (THG) is an insurance and financial services company. October 20th the company increased its annual dividend 67% to $0.75/share. The dividend is payable December 9, 2009, to shareholders of record at the close of business on November 25, 2009. The board also authorized a change in the company's dividend payment schedule from a single annual cash dividend to quarterly dividend payments beginning in fiscal year 2010. The yield based on the new payout is 0.71%.

Artesian Resources (ARTNA) distributes and sells water, including water for public and private fire protection. October 20th the company increased its quarterly dividend 5% to $0.1873/share. The dividend is payable November 20, 2009 to shareholders of record at the close of business on November 10, 2009. The yield based on the new payout is 4.52%.

Visa (V) operates a retail electronic payments network. October 21st the company bumped its quarterly dividend by 19% to $0.125/share. The dividend is payable on December 1, 2009 to shareholders of record as of November 16, 2009. The ex-dividend date is November 12. The yield based on the new payout is 0.66%.

Brown & Brown (BRO) is a diversified insurance agency, wholesale brokerage, insurance programs and service organization. October 21st the company increased its quarterly dividend by 3.3% to $0.0775/share. The dividend is payable on November 18, 2009, to shareholders of record on November 4, 2009. The ex-dividend date is November 2. BRO is a Dividend Achiever and has increased its dividend for 17 consecutive years. The yield based on the new payout is 1.66%.

Eaton Vance (EV) is engaged in managing investment funds and providing investment management and counseling services to high-net-worth individuals and institutions. October 21st the company raised its quarterly dividend 3% to $0.16/share. The dividend is payable on November 13, 2009 to shareholders of record on October 30, 2009. The ex-dividend date is November 11. EV is a Dividend Achiever and has increased its dividend for 29 consecutive years. The yield based on the new payout is 1.66%.

Peabody Energy (BTU) is a coal company. October 22nd the company bumped its quarterly dividend 17% to $0.07/share. The dividend is payable on Nov. 27, 2009, to shareholders of record on Nov. 5, 2009. The ex-dividend date is November 3. The yield based on the new payout is 0.64%.

Holly Energy (HEP) operates a system of refined product and crude oil pipelines, storage tanks and distribution terminals. October 22nd the company bumped its quarterly 1.3% to $0.795/unit. The distribution will be paid November 13, 2009, to unitholders of record November 2, 2009. The ex-dividend date is October 29. The yield based on the new payout is 7.93%.

Matthews Int'l (MATW) is a designer, manufacturer and marketer principally of memorialization products and brand solutions. October 22nd the company increased its quarterly dividend 7.7% to $0.07/share. The dividend payable November 16, 2009 to stockholders of record November 2, 2009. The ex-dividend date is October 29. The yield based on the new payout is 7.07%.

Real dividend growth investors are not looking for a flash in the pan, but instead for stocks that can deliver consistent dividend growth. For a list of stocks with a long string of consecutive dividend increases, see this list.

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

(Photo: sanja gjenero)


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Summary only...

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) requires a company to recognize expenses today for cash payments that may not occur for decades or even centuries. 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 the company 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. 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 simply 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)


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Summary only...

A vision is taking the time to think of (anticipate) in detail what the future will bring. You would need to consider future earnings, savings and economic issues such as inflation. Then based on what you foresee in the future, you would 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 investing. One of the beauties of dividend investing is it provides you continuous feedback. As the years and decades go by you can see your earnings steadily grow as you invest your money in dividend stocks. Here are a few select companies that have recently provided their shareholders positive feedback by raising their cash dividends:

• Matthews Int'l (MATW) Boosts Qtr. Dividend by 1.5% to $0.065/Share (0.06%)
• VF Corp. (VFC) Boosts Qtr. Dividend 2% to $0.59/Share (4.32%)
• PPG Industries (PPG) Boosts Qtr Dividend 2% to $0.53/Share (4.20%)
• Goodrich (GR) Boosts Qtr. Dividend by 11% to $0.25/Share (2.71%)
• UMB Financial (UMBF) Boosts Qtr. Dividend by 6% to $0.175/Share (1.31%)
• Home BancShares (HOMB) Increases Qtr. Dividend 55% to $0.065/Share (1.31%)
• Stepan Company (SCL) Boosts Qtr. Dividend by 4.7% to $0.22/Share (2.25%)
• The Eastern Company (EML) Raises Qtr. Dividend by 12.5% to $0.09/Share (2.89%)

After running these companies through my D4L-PreScreen.xls model, VFC and PPG both had a positive NPV of MMA Differential, but fell short of the $3,000 I look for from a company that is a Dividend Aristocrat. None of the others achieved the necessary NPV of MMA Differential to justify a full evaluation.

Disclosure: No position in the aforementioned stocks.

(Photo: Steve Woods)


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Summary only...

How Would You Grade Your Money Management Skills?

Each Friday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Below are the carnivals that I participated in this week, along with a link to my article:

• Investing Carnival published: Stock Analysis: PPG Industries, Inc. (PPG)
• Festival of Stocks published: iStar Financial Inc. (SFI) Update
• Carnival of Financial Planning published: Stock Analysis: Consolidated Edison, Inc. (ED)
• Carnival of Money Hacks published: The Perfect Dividend Stock [Editor's Pick]
• Carnival of Everything Finance published: Stock Analysis: Sherwin-Williams Co (SHW)

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• Dividend Growth Investor presented The importance of investing for retirement as early as possible
• The Div Guy presented Dividends: How to Get Paid Regularly
• Disciplined Approach to Investing presented Dividend Focused Equity Portfolio Maintains Real Purchasing Power In Retirement
• Dividends4Life presented Stock Analysis: Stanley Works (SWK)
• The Dividend Guy presented My Best Investing Mistake
• the moneygardener presented The Future of Canadian Dividend Growth I
• The Stock Market Prognosticator presented Barrett Business Services (BBSI) – A Follow Up

Articles From DIV-Net Members

• The Dividend Guy presented Keeping Investing Simple: Only 2 Real Reasons Why We Invest
• Dividend Growth Investor presented My Dividend Growth Plan - Diversification
• the moneygardener presented added more Sun Life
• Stock Market Prognosticator presented Quote of the Day - Centex Corp. (CTX)
• The Div Guy presented Dividend Stock Update: American Capital (ACAS)
• Disciplined Approach to Investing presented Dividend Aristocrats Holding Up Well In Tough Market
• Living Off Dividends & Passive Income presented Lessons From WCI’s Bankrupcy
• Old School Value presented Recommended Reading - August 1, 2008
• The Dividend Investing Blog
• Triaging My Way To Financial Success presented Taking Stock in IGM, Part I:
• Dividend Money presented How To Invest Profitably In Undervalued Stocks
• Bullish Dividends presented Dividend Stock Analysis: Finning International (TSE: FTT)
• The Digerati Life presented How Would You Grade Your Money Management Skills?

The Wealth, Money & Life Network Featured Articles

• Dollar Frugal presented A Cheaper Way to Diet - Part Deux
• Her Every Cent Counts presented Moving on Down, and Saving My Pennies
• How I Save Money presented Money In the UK
• Saving For A Home Of My Own presented August Goals

Other Articles

• Deep Value Dividends presented Dow Jones Select Dividend Index Fund ETF (DVY) Analysis
• FIRE Finance presented Digging for Gold - Online!
• Contrarian Profits presented Ride Out the Market Storm with Cash and T-Bills
• Money Blue Book presented List Of the Best Online Discount Brokers
• MagicDiligence presented Manitowoc (MTW) - 30% Growth, P/E of 9
• Circle of Competence presented A couple of bargains
• Street Capitalist presented Joel Greenblatt on Finding Bargain Stocks
• Contrarian Value Investing presented Fairholme Fund 2008 Semi-Annual Report Released

There are some really good articles there, please take time and read a few of them.

(Photo: Sachin Ghodke)

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Summary only...

Linked here is a PDF copy of my detailed analysis of M&T Bank Corporation (MTB) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: M&T Bank Corporation operates as the holding company for M&T Bank and M&T Bank, National Association, which provides commercial and retail banking services.

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

MTB is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation and average the remaining two, MTB is trading at a 8.0% discount. MTB 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:

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

MTB earned one Star in this section for 3.) above. MTB has paid a cash dividend to shareholders every year since 1979 and has increased its dividend payments for 25+ consecutive years. Last year's dividend payout was 44%, up from 31% in 2006. Since the increase was in excess of 15 points, a Star is deducted, leaving a net of zero Stars in this section.

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

MTB earned both of the available Stars in this section. The NPV MMA Diff. of the $5,590 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as MTB has. If MTB grows its dividend at 7.7% per year, it will take 4 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%. MTB earned a Star since its Years to >MMA of 4 is less than 5 years.

Other: MTB is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. MTB's loan portfolio has a history of profitability and is considered to have good credit quality. The company operates in a highly competitive and fragmented industry, but
is able to produce relatively stable financial results. As assets reprice at lower rates, MTB's net interest margin will come under pressure in 2008. Some analysts believe that MB will have to take an impairment charge on its 20% stake in BayView Lending, a commercial lender
that securitizes loans. BayView Lending earnings have been declining.

Conclusion: MTB earned a Star in the Fair Value section, earned a net of zero Stars in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of 3 Stars. This quantitatively rates MTB as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price could go up to $81.65 before MTB's NPV MMA Diff. drops to the $3,000 NPV MMA Diff. I like to see. At that price MTP would yield 3.43%. I placed MTB "On The Shelf" earlier this year. In effect, I am not making any additional purchases until MTB proves itself to be a worthy investment or as a stock that needs to be sold. To date, I have seen nothing that change this classification.

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 owned shares of MTB (0.9% of my Income Portfolio).

What are your thoughts on MTB?


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• Stock Analysis: Kimberly-Clark Corporation (KMB)
  
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Summary only...

This article originally appeared on The DIV-Net July 28, 2008.

Linked here is a PDF copy of my detailed analysis of Kimberly-Clark Corporation (KMB) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: This leading consumer products company's global tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.

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

KMB is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation and average the remaining two, KMB is trading at a 5.9% premium. KMB had a Star deducted for trading at a premium in excess of 5%.

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

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

KMB earned one Star in this section for 3.) above. KMB has paid a cash dividend to shareholders every year since 1935 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.

KMB earned both available Stars in this section. With a NPV MMA Diff. of $8,952, KMB is well above the $3,000 I look for in a company that is both an Achiever and an Aristocrat. KMB's current yield of 4.19%, exceeds the 20-year expected MMA rate of 4.61%.

Other: KMB is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. The generally static demand for household and personal care products are usually not affected by changes in the economy or political events. KMB's 2008 earnings should benefit from the 2005 strategic cost reduction program, but for the most part, it will be over shadowed by higher commodity costs.

Conclusion: KMB lost a Star in the Fair Value section, earned a Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a net total of 2 Stars. This quantitatively rates KMB as a 2 Star-Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price could go up to $73.97 before KMB's NPV MMA Diff. drops to the $3,000 NPV MMA Diff. I like to see. At that price KMP would yield 3.14%. Like the analysis on LLY earlier this month, KMB is a 2 Star-Weak stock that is very close to being a 4 Star-Buy. Given KMB's strong NPV MMA Diff., I would be very comfortable initiating a position at $55.50, or 5% above the $52.87 calculated fair value. This would be a $0.49 or 0.9% decrease from KMB recent price of $55.99.

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 do not own shares of KMB (0.0% of my Income Portfolio).

What are your thoughts on KMB?


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• Stock Analysis: PPG Industries, Inc. (PPG)
  
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Read More...

Summary only...

Linked here is a PDF copy of my detailed analysis of Sherwin-Williams Co (SHW) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: Sherwin-Williams Co (SHW) is the largest U.S. producer of paints, is also a major seller of wallcoverings and related products primarily in North and South America with additional operations in the United Kingdom, Europe, India and China.

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

SHW is trading at a discount to 1.), 2.) and 3.) above. If I exclude the high and low valuation and average the remaining two, SHW is trading at a 12.0% discount. SHW 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:

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

SHW earned one Star in this section for 3.) above. SHW has paid a cash dividend to shareholders every year since 1979 and has increased its dividend payments for 29 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.
   

SHW earned one Star in this section. With a NPV MMA Diff. of $3,722, SHW is above the $3,000 I look for in a company that is both an Achiever and an Aristocrat. With SHW's current yield of 2.70% and its dividend is growing at 11.1%, it would take 10 years for SHW's dividend earnings exceed the earnings from a hypothetical money market account earning 4.61%.

Other: SHW is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. SHW's business is cyclical in nature. It relies primarily on new housing starts and remodeling. From a risk perspective, SHW is exposed to lead pigment litigation. However, with the Rhode Island Supreme Court overturning a verdict against SHW relating to lead paint, makes future negative rulings less likely.

Conclusion: SHW earned a Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and one Star in the Dividend Income vs. MMA section for a net total of 3 Stars. This quantitatively rates SHW as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price could go up to $54.22 before SHW's NPV MMA Diff. drops to the $3,000 NPV MMA Diff. I like to see. At that price SHW would yield 2.58%. I have added SHW to my watch list.

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 do not own shares of SHW (0.0% of my Income Portfolio).

What are your thoughts on SHW?


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This article originally appeared on The DIV-Net July 21, 2008.

Linked here is a PDF copy of my detailed analysis of Consolidated Edison, Inc. (ED) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: Consolidated Edison, Inc., through its subsidiaries, provides electric, gas, and steam utility services in the United States serving parts of New York, New Jersey and Pennsylvania.

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

ED is trading at a discount to 1.), 3.) and 4.) above. If I exclude the high and low valuation and average the remaining two, ED is trading at a 14.8% discount. ED 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:

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

ED earned one Star in this section for 3.) above. ED has paid a cash dividend to shareholders every year since 1885 and has increased its cash dividend payment for 35 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.

ED earned both available Stars in this section. With a NPV MMA Diff. of $4,321, ED is well above the $3,000 I look for in a company that is both an Achiever and an Aristocrat. ED's current yield of 6.16%, exceeds the 20-year expected MMA rate of 4.61%.

Other: ED is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. As a regulated electric and gas utility, ED produces a strong and steady cash flows. It has a solid balance sheet, an A- credit rating and operates in a historically supportive regulatory environment.

Conclusion: ED earned a Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a net total of 4 Stars. This quantitatively rates ED as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price could go up to $41.39 before ED's NPV MMA Diff. drops to the $3,000 NPV MMA Diff. I like to see. At that price ED would yield 5.65%. I would be very comfortable adding to my position at the current price of $38.48 and a 6+% yield.

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 own shares of ED (2.9% of my Income Portfolio).

What are your thoughts on ED?


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Linked here is a PDF copy of my detailed analysis of PPG Industries, Inc. (PPG) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: PPG is a leading manufacturer of coatings and resins, flat and fiber glass, and industrial and specialty chemicals.

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

PPG is trading at a discount to 3.) and 4.) above. If I exclude the high and low valuation and average the remaining two, PPG is trading at a 8.7% discount. PPG 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:

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

PPG earned one Star in this section for 3.) above. PPG has paid a cash dividend to shareholders every year since 1899 and has increased its quarterly cash 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.

PPG earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. In effect, if you invested equal amounts in a MMA earning of an average of 4.61% for 20 years and PPG stock with a dividend yield of 3.41% and growing at 2.0% annually, you would end up with $1,424 less in PPG dividend earnings per $1,000 invested.

Other: PPG is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. The company has a diversified business mix and large market shares in key products. However, commodity chemicals business and auto supply business are highly cyclical in nature. The SigmaKalon purchase expanded PPG's coatings business, while the planned sale of the auto glass businesses would reduce its exposure to the domestic auto market.

Conclusion: PPG earned a 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 rates PPG as a 1 Star-Very Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $39.62, or its dividend growth rate would have to increase to 7.8%, before PPG obtained the $3,000 NPV MMA Diff. I like to see. I don't see either happening in the near-term, so PPG won't be getting an invitation to join my portfolio.

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 do not own shares of PPG (0.0% of my Income Portfolio).

What are your thoughts on PPG?


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