This article originally appeared on The DIV-Net June 8, 2009.
Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food service industry in the United States and Canada.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
SYY is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuations and average the remaining two, SYY is trading at a 13.1% discount. SYY 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:
SYY earned one Star in this section for 3.) above. SYY has paid a cash dividend to shareholders every year since 1970 and has increased its dividend payments for 38 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:
SYY earned both of the available Stars in this section. The NPV MMA Diff. of the $22,357 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as SYY has. If SYY grows its dividend at 12.2% per year, it will take 1 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.06%. SYY earned a Star since its Years to >MMA of 1 is less than 5 years.
Other: SYY is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. SYY operates in a relatively stable industry and is considered to have the largest market share. Some analysts believe the company is gaining share during these difficult times. Restaurants accounted for approximately 63% of fiscal 2008 sales. SYY should continue to see growth from acquisitions and internally generated. Risks include slowing of growth rates, sharp increases in fuel prices, and a prolonged slowdown in restaurant sales due to economic conditions.
Conclusion: SYY earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of four Stars. This quantitatively ranks SYY as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $43.11 before SYY's NPV MMA Differential fell to the $3,000 that I like to see for a stock with 38 consecutive years of dividend increases. At that price the stock would yield 2.13%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 4.3%. This dividend growth rate is well below the 12.2% used in this analysis, thus providing a significant margin of safety. SYY has a risk rating of 1.25 which classifies it as a low risk stock.
I have held SYY since January 2008. During that time it has decreased 17.5% on a dividend adjusted basis compared a 31.0% decrease for the S&P 500. Long-term, I like SYY's prospects. However, near-term SYY will continue to face pressure in its restaurants' end-market due to weak consumer discretionary spending. I will look for opportunities to judiciously increase my position in SYY when the stock is trading below my buy price of $27.56. 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 SYY (2.9% of my Income Portfolio).
What are your thoughts on SYY?
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Linked here is a PDF copy of my detailed analysis of Sysco Corp (SYY) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food-service industry in the United States and Canada.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
SYY is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuations and average the remaining two, SYY is trading at a 12.6% discount. SYY 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:
SYY earned one Star in this section for 3.) above. SYY has paid a cash dividend to shareholders every year since 1970 and has increased its dividend payments for 37 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:
SYY earned one Star in this section for 1.) above. The NPV MMA Diff. of the $4,488 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as SYY has. If SYY grows its dividend at 7.3% per year, it will take 5 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: SYY is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. SYY has the largest player in its industry, and some analysts believe SYY is gaining share during these difficult times. Restaurants accounted for approximately 63% of fiscal 2008 sales. SYY should continue to see internally generated growth and growth from acquisitions. Risks include slowing of growth rates, sharp increases in fuel prices, and a prolonged slowdown in restaurant sales due to worsening economic conditions..
Conclusion: SYY earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of three Stars. This quantitatively ranks SYY as a 3 Star-Hold.
Using my D4L-PreScreen.xls model, I determined the share price could drop to $24.91 for SYY's NPV MMA Differential to be around the $3,000 that I like to see. At that price the stock would yield 3.53%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the $3,000 NPV MMA Differential I'm looking for, the calculated rate is 6.2%. This dividend growth rate is slightly below the 7.3% used in this analysis.
As my allocation allows, I will continue to add to SYY shares when its price is below $24.91.
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 SYY (2.2% of my Income Portfolio) .
What are your thoughts on SYY?
Recent Stock Analyses:
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Linked here is a PDF copy of my detailed analysis of Sysco Corp (SYY) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada.
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 and 4.) Graham Number. SYY is trading at a discount 1.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, SYY is trading at a slight premium (2.1%). A Star is added since SYY 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 and 5.) Payout 15% of avg. SYY earned all available Stars in this section. SYY's rolling 4-yr dividend growth averaged over 15%, it has grown dividends for at least 10 years (20+ years) and its 1-year growth rate is greater than its 5-year growth rate.
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. and 2.) Years to >MMA. SYY earned one Star in this section. SYY's NPV MMA Diff. is $18,568, which is in excess of the $10,000 I look for.
Other: SYY is a member of the S&P 500, is not an Aristocrat, but is an Achiever. SYY is the largest U.S. marketer and distributor of foodservice products. It should continue to grow internally and via acquisitions. Even amidst of the difficult consumer discretionary environment, it is believed that SYY is gaining market share.
Conclusion: SYY earned a Star in the Fair Value section, picked up four Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of six Stars. However, my scale tops out at five Stars, which rates SYY as a 5-Star BUY.
SYY is a good, stable performer. Over the last 10 years it has averaged 18.1% dividend growth, with double-digit growth in every year except 2001, when it grew at only 4.5%. I will continue to add to my position as my allocation and SYY's valuation allows.
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 SYY (2.7% of my Income Portfolio).
What are your thoughts on SYY?
Recent Stock Analyses:
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This article originally appeared on The DIV-Net January 4, 2010. Full Disclosure: At the time of this writing, I was long in SYY (3.9% of my Income Portfolio). What are your thoughts on SYY?
Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food service industry in the United States and Canada.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
SYY is trading at a discount to 1.) and 3.) above. The stock is trading at a 19.3% premium to its calculated fair value of $23.42. SYY did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
SYY earned three Stars in this section for 1.), 2.) and 3.) 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%. SYY earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1970 and has increased its dividend payments for 39 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:
SYY earned a Star in this section for its NPV MMA Diff. of the $919. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as SYY has. If SYY grows its dividend at 6.5% per year, it will take 1 year to equal a MMA yielding an estimated 20-year average rate of 3.72%. SYY earned a check for the Key Metric 'Years to >MMA' since its 1 year is less than the 5 year target.
Other: SYY is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Conclusion: SYY did not earn any Stars in the Fair Value section, earned three 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 SYY as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $33.61 before SYY's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 39 years of consecutive dividend increases. At that price the stock would yield 2.92%.
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 4.7%. This dividend growth rate is less than the 6.5% used in this analysis, thus providing a margin of safety. SYY has a risk rating of 1.25 which classifies it as a low risk stock.
SYY operates in a relatively stable industry in which it is the market leader. Its size, product diversification and scale continue to help it to weather the economic downturn better than its competitors. A focus on cost reduction has helped its margin. Though SYY is trading above my buy price of $23.42, it is one I will continue to purchase base on its quality as my allocation and its dividend fundamentals allow. 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.
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Linked here is a PDF copy of my analysis of Sysco Corp (SYY) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food service industry in the United States and Canada.
Fair Value: 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 and 4.) Graham Number. SYY is trading at a discount to two of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, SYY is trading at a 9.8% premium. SYY gets a Star for being fairly valued. However, since it is trading at a premium, there are some mixed signals here.
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 and 5.) Payout 15% of avg. SYY scored a grand-slam home run in this section, earning all 4 available Stars. This is the type of performance I look for in my dividend stocks.
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. and 2.) Years to >MMA. SYY earned a Star for 1.) above with a $19,472 (per $1,000 invested) 20-year NPV differential to a MMA earning 5.11%.
Other: SYY raised its dividend in 2008 to $0.22/share from $0.19/share in 2007. This is a 15.8% increase. I like to see increase in excess of 15% - at that level a stock's yield on cost will double every 5 years. From S&P: We expect results of this leading U.S. food distributor to include both internal growth and additional acquisitions, with SYY increasing its market share. Over time, we look for SYY's profitability to benefit from an increased amount of consolidated purchasing, the addition of regional distribution centers, improved management of freight costs, and better inventory management.
Conclusion: SYY earned one Star in the Fair Value section, a perfect four Stars in the Dividend Analytical Data section and one Star in the Dividend Income vs. MMA section for a total of Six Stars, one more than my scale allows, which rates it as a 5-Star Strong Buy. Even at these valuations, I plan to add to my position in SYY during 2008.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 SYY in my IRA.
What are your thoughts on SYY?
Recent Stock Analyses:
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Linked here is a detailed quantitative analysis of Sysco Corporation (SYY). Below are some highlights from the above linked analysis: Company Description: Sysco Corporation is a large distributor of food and related products, primarily to the foodservice or food-away-from-home industry.
SYY operates in a relatively stable industry and has the largest market share in the United States and Canada. SYY has developed an extensive distribution network that no other competitor has been able to replicate. SYY consults with its customers on how they can drive sales and minimize costs. SYY did not earn any Stars in the Fair Value section, earned one Star in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of one Star. This quantitatively ranks SYY as a...
Source: Dividend Growth Stocks
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I am not a stock trader; I am a dividend and value based long-term buy-and-hold investor. When I add a stock to my dividend portfolio, it is my intention to hold the stock forever. I am not smart enough to time the daily gyrations of the stock market. However, I have one hard and fast rule about selling stocks: When an individual stock held as a dividend investment lowers its dividend, immediately sell it.
Here are several stocks that are trying to stay in good favor with their shareholders by raising their cash dividends:
After running these companies through my D4L-PreScreen.xls model, RLI with a NPV of MMA Differential of $3,404 and 33 consecutive year record of raising dividends certainly qualifies for a more complete evaluation. DHT has only paid a dividend since 2006. NST had positive NPV of MMA Differentials, but below the level that would warrant a more detailed evaluation. SYY was reviewed on Wednesday.
Disclosure: Long SYY.
(Photo: Steve Woods)
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Linked here is a detailed quantitative analysis of Sysco Corporation (SYY). Below are some highlights from the above linked analysis: Company Description: Sysco Corporation is a large distributor of food and related products, primarily to the foodservice or food-away-from-home industry.
SYY did not earn any Stars in the Fair Value section, did not earn any Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of zero Star. This quantitatively ranks SYY as...
Source: Dividend Growth Stocks
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Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. Related Articles:
The weak economy has led to weak consumer discretionary spending. In 2009, 62% of SYY’s sales were to restaurants; thus they have felt the full brunt of the downturn. This has carried over to the company’s financials. With a 116% free cash flow payout, SYY is treading water hoping the economy will turn soon. Although SYY is trading close to my buy price of $30.59, I plan to wait on its free cash flow payout to improve before adding to my position.
Source: Dividends Value
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With the dramatic market declines over the last 18 months, most dividend stocks appear to be fairly priced on a historic basis. However, when you consider the record number of dividend cuts and near-term prospects, many of the lower valuations are justified. So how do you sort through the massive Dividend Stock list to find the companies worthy of consideration?
One method is to use a stock screen to focus on the stocks with characteristics that we are looking for. Let's put together a stock screen with the following criteria:
Entering the above in the MSN Money Stock Screener (works only with Internet Explorer), returns the following 25 companies:
The next step is to pick through the list an eliminate companies that are not Aristocrats or Achievers. In addition, I also eliminated one company that was on the list, but failed to raise its dividend over the last 12 months and I eliminated one company whose debt-to-equity ratio was in excess of 1.00. This left us with 14 companies.Sym Company Name Yield Payout Debt to Eq. CVX Chevron Corp 3.71 21.6 0.10 JNJ Johnson & Johnson 3.48 38.8 0.28 VFC VF Corp 4.00 42.3 0.34 MRO Marathon Oil Corp 3.48 19.3 0.34 GD General Dynamics Corp 3.53 22.2 0.40 NUE Nucor Corp 3.41 32.3 0.42 CBE Cooper Industries Ltd 3.62 28.4 0.47 ITW Illinois Tool Works Inc 3.83 38.2 0.48 HAS Hasbro Inc 3.17 36.4 0.52 DOV Dover Corp 3.61 24.3 0.55 SYY Sysco Corp 4.02 46.4 0.60 EMR Emerson Electric Co 4.46 38.3 0.63 ABT Abbott Laboratories 3.45 47.1 0.65 ROK Rockwell Automation Inc 4.67 29.5 0.67 PG Procter & Gamble Co 3.28 37.6 0.67 MMM 3M Co 4.00 40.4 0.68 UTX United Technologies Corp 3.39 25.8 0.72 SUN Sunoco Inc 4.16 17.8 0.76 MCD McDonald's Corp 3.57 42.3 0.76 HON Honeywell International Inc 3.98 29.2 1.17 LMT Lockheed Martin Corp 3.14 22.9 1.33 JWN Nordstrom Inc 3.60 34.4 2.08 IFF International Flavors and Fragrances Inc 3.16 33.1 2.19 AVP Avon Products Inc 4.18 39.0 3.69 K Kellogg Co 3.62 43.1 3.77
Low debt is good, but it is even better when the company is generating significant free cash flows. To further trim the list, I only kept the companies where 2008 free cash flows were the highest over the last 10 years. This left the following 7 companies, listed in ascending order based on their free cash flow compound growth rate (CAGR) from 1999-2008:
Emerson Electric Co (EMR) - FCF CAGR: 9.5%
EMR primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. (Analysis)
Sysco Corp (SYY) - FCF CAGR: 10.1%
SYY is the largest U.S. marketer and distributor of foodservice products. (Analysis)
Dover Corp (DOV) - FCF CAGR: 10.4%
DOV manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment. (Analysis)
United Technologies Corp (UTX) - FCF CAGR: 14.1%
This aerospace-industrial conglomerate's portfolio includes Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators, and Carrier air conditioners, among other products. (Analysis)
General Dynamics Corp (GD) - FCF CAGR: 16.4%
GD is the world's sixth largest military contractor and also one of the world's biggest makers of corporate jets. (Analysis)
McDonald's Corp. (MCD) - FCF CAGR: 19.5%
MCD is the largest fast-food restaurant company in the world, with about 32,000 restaurants in 118 countries. (Analysis)
Procter & Gamble Co (PG) - FCF CAGR: 21.3%
PG is a leading consumer products company markets household and personal care products in more than 180 countries. (Analysis)
The above are certainly not buy recommendations, but a good list of candidates worthy of additional analysis. When the market isn't giving you any breaks, a great way to manage risk is to focus on low-debt blue chip dividend stocks.
Full Disclosure: Long SYY, UTX, MCD, PG(Photo: Steve Woods)
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Recent gyrations in the market have caused more than one investor some heartburn. Each day I hear disgruntled comments due to losses and see many people looking for an out. "The fact is people are scared and the only thing they're doing is selling," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working."(a) As a dividend and value investor, these are the times we live for - value priced stocks and golden dividends.
Below are four stocks that recently dipped below my target buy prices (before adding any quality premiums; yields, closing prices and, NPV MMA Diff. are as of 10/06/2008):
Sysco Corp (SYY) - 2.96% yield
Buy Below: $32.62
10/06 Close: $29.41
NPV MMA Diff: $21,180
I last discussed SYY on August 28, 2008 when it's yield was 2.79%.
Eli Lilly and Co (LLY) - 4.55% yield
Buy Below: $42.97
10/06 Close: $38.42
NPV MMA Diff: $6,922
When I last discussed LLY on September 23, 2008, it was trading at $46.69 with a $45.12 buy below price (including a 5% quality premium).
PepsiCo, Inc. (PEP) - 2.46% yield
Buy Below: $70.61
10/06 Close: $66.64
NPV MMA Diff: $5,155
PEP was last reviewed on May 24, 2008 and was trading at $68.26 at that time.
Johnson & Johnson (JNJ) - 2.78% yield
Buy Below: $67.70
10/06 Close: $64.50
NPV MMA Diff: $3,766
I last discussed JNJ on August 28, 2008 when it's yield was 2.60%.
Fear, panic and market meltdowns are good for the long-term investor. It provides the perfect circumstances for us to purchase shares in quality companies at discounted prices - if we are willing to seize the opportunity.
As always, you should do your own research and reach your own conclusion before buying or selling any security.
Disclosure: Long in SYY, LLY, PEP and JNJ
(a) Source: AP via Yahoo Finance
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This is an article that I started to write several times, but would always stop after getting mired in the details. My natural tendency is make every question an analytical exercise and solve it by modeling and crunching numbers.
This time, I will show some restraint and take a little different approach by relying more on my subjective instincts. To that end, here are my selections for the 10 best U.S. dividend stocks:
10. Automatic Data Processing Inc. (ADP) - Analysis
ADP is one of the world's largest independent computing services companies, provides a broad range of data processing services. The last slot was the most difficult to fill, due to the number of worthy companies. I considered all the Honorable Mentioned companies listed below and it came down to ADP and GPC. ADP gt the nod due its historic low debt levels and dividend payout.
9. Wal-Mart Stores (WMT) - Analysis
WMT Inc. is the largest retailer in North America. Great management, business plan and execution. It would have ranked higher, but WMT's dividend yield tends to be lower end of my acceptable range.
8. The Coca-Cola Company (KO) - Analysis
KO is the world's largest soft drink company. The Coca-Cola name is the world's most recognizable trademark. For those who see no value in intangibles, try selling carbonated sugar water under another name.
7. McDonald's Corporation (MCD) - Analysis
MCD is the largest fast-food restaurant company in the world. This company has grown its dividends at an incredible rate. Unfortunately, that is likely to slow, but MCD's international presence will benefit to its shareholders in the future.
6. Abbott Laboratories (ABT) - Analysis
Abbott Laboratories is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products. Not the biggest or most well known drug company, but the one that arguably has one of the better track records.
5. Emerson Electric Co. (EMR) - Analysis
EMR primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. Industrials are not supposed to do well in recessions. Someone forgot to tell EMR. It has endured some bumps in the road, but has held up quite well.
4. SYSCO Corporation (SYY) - Analysis
SYY through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. This is a company that continues to perform in the face of expert predictions that it won't.
3. 3M Co. (MMM) - Analysis
MMM is a diversified technology company with a presence in various businesses. This is a company I really like. Problem is so do a lot of other people and institutions. It is a stock you have to watch for the right entry point. I bought in March when the stock was trading in the high 40's, it is now trading in the low 70's.
2. The Procter & Gamble Company (PG) - Analysis
PG is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries. Good management capable of adjusting when necessary. Currently working to adjust to new market dynamics of the economic downturn.
1. Johnson & Johnson (JNJ) - Analysis
JNJ engages in the manufacture and sale of various products in the health care field worldwide. This was an easy selection for my top spot. Though not perfect the company has a history of making good decisions and executing on them.
The following companies earned an Honorable Mention:
That's my 10 best U.S. dividend stocks. These are based on what stocks I believe will perform well as income investments over-time. Most are not good buys today, but are ones that I am always watching. Obviously, there is a great deal of subjectivity in a list like this. I would love to see your 10 best dividend stocks (doesn't have to be U.S.)
Full Disclosure: Long ABT, WMT, KO, MCD, ADP, EMR, SYY, MMM, PG, JNJ, GPC, UTX, NUE, PEP. See a list of all my income holdings here.
(Photo Credit)
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Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules. In a recent Wall Street Journal article, Jason Zweig noted that:From the point of view of an investor, all this frantic trading is just noise. In 1976, the great financial analyst Benjamin Graham declared that "the stock market resembles a huge laundry in which institutions take in large blocks of each other's washing ... without rhyme or reason." Mr. Graham died that year, but today he would laugh at the speed of the spin cycle. He would then ignore the momentary vibrations in a company's stock price and go right back to analyzing the value of its business.
Contrary to what many are now saying, buy-and-hold and investing in quality blue chip stocks is not dead. Consider the following stocks:
As an investor, you are free to choose your own time horizon. If other people want to try earning a few fractions of a penny a few thousand times a day, you should wish them well -- and refuse to join them.
Abbott Laboratories (ABT) is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics. The company has a strong new product pipeline, with possible significant launches in both the medical device and pharmaceutical areas. ABT has increased its dividend for the last 37 years and the stock is currently yielding 3.10%. See the most recent Analysis.
Emerson Electric Co. (EMR) primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. The company has a strong competitive position in several major product categories. EMR has increased its dividend for the last 52 years and the stock is currently yielding 3.20%. See the most recent Analysis.
Johnson & Johnson (JNJ) engages in the manufacture and sale of various products in the health care field worldwide. The company enjoys competitive advantages and has products that are largely immune from economic cycles. JNJ has increased its dividend for the last 47 years and the stock is currently yielding 3.20%. See the most recent Analysis.
3M Co. (MMM) is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications. The company has a leading position in many of the markets it serves and a strong balance sheet with a relatively little debt. MMM has increased its dividend for the last 51 years and the stock is currently yielding 2.71%. See the most recent Analysis.
PepsiCo, Inc. (PEP) is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The company enjoys relatively stable end markets, strong cash flows, leading global market positions and trend-setting product innovations. PEP has increased its dividend for the last 37 years and the stock is currently yielding 2.87%. See the most recent Analysis.
SYSCO Corporation (SYY), through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. The company operates in a relatively stable industry, in which it has the largest market share. SYY has increased its dividend for the last 39 years and the stock is currently yielding 3.57%. See the most recent Analysis.
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. The company enjoys dominant market share positions, price leadership and strong cash flows. WMT has increased its dividend for the last 35 years and the stock is currently yielding 2.13%. See the most recent Analysis.
If your goal is to build an ever-increasing revenue stream from income investments, the above seven dividend stocks will give your income a boost over time. The key is to wait for the right entry point and let time take care of the rest.
Full Disclosure: Long ABT, EMR, JNJ, MMM, PEP, SYY, WMT. See a list of all my income holdings here.(Photo Credit)
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Other Articles
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:
Articles I enjoyed reading included (in no particular order):
Carnival of Financial Planning published: Sysco (SYY) Raises Qtr. Dividend by 9% and Others
The DIV-Net Featured Articles
Articles From DIV-Net Members
The Wealth, Money & Life Network Featured Articles
There are some really good articles here, please take time and read a few of them.
(Photo: Sachin Ghodke)
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Yield does not come without a price. The five options looked at in prior weeks carry some form of added risk and/or complexity. Ultimately, dividend growth investors realize that long-term and sustainable high-yield investments are grown over time. This is accomplished by purchasing high-quality dividend investments with a reasonable yield and a long history of growing their dividends, and waiting for the yield on cost to grow. Consider the following stocks:
Sysco Corp. (SYY)
- Current Yield: 3.36%
- Assumed Dividend Growth Rate: 6.52%
- Yield On Cost in 10 Years: 6.32%
- Yield On Cost in 20 Years: 11.89%
Coca Cola Co. (KO)
- Current Yield: 3.22%
- Assumed Dividend Growth Rate: 7.32%
- Yield On Cost in 10 Years: 6.53%
- Yield On Cost in 20 Years: 13.22%
Abbott Labs (ABT)
- Current Yield: 3.25%
- Assumed Dividend Growth Rate: 8.27%
- Yield On Cost in 10 Years: 7.20%
- Yield On Cost in 20 Years: 15.93%
Raven Industries Inc. (RAVN)
- Current Yield: 1.85%
- Assumed Dividend Growth Rate: 15.00%
- Yield On Cost in 10 Years: 7.49%
- Yield On Cost in 20 Years: 30.31%
Kimberly Clark Corp. (KMB)
- Current Yield: 4.20%
- Assumed Dividend Growth Rate: 6.67%
- Yield On Cost in 10 Years: 8.02%
- Yield On Cost in 20 Years: 15.30%
United Technologies Corp. (UTX)
- Current Yield: 2.09%
- Assumed Dividend Growth Rate: 15.00%
- Yield On Cost in 10 Years: 8.46%
- Yield On Cost in 20 Years: 34.24%
Harleysville Group Inc (HGIC)
- Current Yield: 4.09%
- Assumed Dividend Growth Rate: 8.00%
- Yield On Cost in 10 Years: 8.83%
- Yield On Cost in 20 Years: 19.07%
Cardinal Health Inc (CAH)
- Current Yield: 1.98%
- Assumed Dividend Growth Rate: 15.00%
- Yield On Cost in 10 Years: 8.00%
- Yield On Cost in 20 Years: 32.34%
Nucor Corp. (NUE)
- Current Yield: 3.15%
- Assumed Dividend Growth Rate: 15.00%
- Yield On Cost in 10 Years: 12.76%
- Yield On Cost in 20 Years: 51.60%
McDonalds Corp. (MCD)
- Current Yield: 3.27%
- Assumed Dividend Growth Rate: 15.00%
- Yield On Cost in 10 Years: 13.23%
- Yield On Cost in 20 Years: 53.53%
The growth rates rates used above are the minimum of the compound annual dividend growth rate for the last 1, 3, 5, 7, 10 years or 15% if dividends grew on average in excess of 15% for each consecutive 4 year period, within the last 10 years. The growth rates are for illustrative purposes only. Obviously, no one can definitively say what any stock's future dividend growth rate will be. However, there were dividend growth superstars over the past 10-years and, needless to say, there will be several in the next 10 years.
Below are links to the other five options to increase the yield in our income portfolio:
1. Increasing Dividend Yield Part I: Utilities
2. Increasing Dividend Yield Part II: REITs
3. Increasing Dividend Yield Part III: Preferred Stock
4. Increasing Dividend Yield Part IV: Bonds
5. Increasing Dividend Yield Part V: MLPs
Full Disclosure: Long SYY, KO, ABT, KMB, UTX, HGIC, NUE, MCD. See a list of all my income holdings here.(Photo Credit)
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Each month the Wealth, Money & Life Network chooses a topic for that month's theme. Since our members are a diverse group, the selected topic is usually broad, allowing each of us an opportunity to address it from our perspective. This month, Missed Opportunities was selected as our topic.
When most people hear the phrase "missed opportunities" they tend to reflect on past events and what could have been. By nature I am forward looking, so "missed opportunities" for me is the present and the future.
At some point in the future will we look back on our actions today and refer to them as our greatest missed opportunity? There is a lot of fear today. Fuel prices have soared driving up the prices of everything that is transported. The economy is slowing and some fear that they may lose their jobs. Many are posturing themselves in a defensive stance, moving money out of equities into cash and bonds. With that, consider the following stocks (data as of mid-day 8/27/08):
AFLAC Inc (AFL): Its average P/E and dividend yield between 1998 and 2007 was 18.8 and 0.95%, respectively. It is currently trading with a P/E of 14.8 and a dividend yield of 1.79%.
BB&T Corporation (BBT): Its average P/E and dividend yield between 1998 and 2007 was 15.8 and 3.30%, respectively. It is currently trading with a P/E of 9.1 and a dividend yield of 6.66%.
Consolidated Edison, Inc. (ED): Its average P/E and dividend yield between 1998 and 2007 was 14.5 and 5.47%, respectively. It is currently trading with a P/E of 10.0 and a dividend yield of 5.69%.
General Electric (GE): Its average P/E and dividend yield between 1998 and 2007 was 25.4 and 2.24%, respectively. It is currently trading with a P/E of 13.2 and a dividend yield of 4.39%.
Johnson & Johnson (JNJ): Its average P/E and dividend yield between 1998 and 2007 was 23.9 and 1.77%, respectively. It is currently trading with a P/E of 17.1 and a dividend yield of 2.60%.
Lowe's Companies, Inc. (LOW): Its average P/E and dividend yield between 1998 and 2007 was 22.0 and 0.37%, respectively. It is currently trading with a P/E of 14.0 and a dividend yield of 1.38%.
Sysco Corp (SYY): Its average P/E and dividend yield between 1998 and 2007 was 26.4 and 1.48%, respectively. It is currently trading with a P/E of 17.4 and a dividend yield of 2.79%.
By most measures, many blue-chip stocks are trading at a historical discount. Are you going to buy now or pay full-price or a premium price later? Unlike the perpetual going-out-of-business sale at the local furniture store, this sale will end suddenly and without warning.
Full Disclosure: Long in AFL, BBT, ED, GE, JNJ and SYY.
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The recent turbulence in the market has provided income investors first hand experience in managing their income portfolio in a declining market. For some, this may be their first significant and prolonged downturn. Here are some things that will help you succeed and thrive during this bear market:
I. Remember Why You Are An Income Investor
The goals of an income portfolio are different than those of a capital appreciation based portfolio. The good news is an income portfolio consisting of dividend stocks can not only succeed, but excel during a down market.
The goal of dividend investors is to build a steady stream of rising income from solid companies. While everyone else is panicked about their portfolio's decline, income investors see the downturn as an incredible buying opportunity.
II. When The Chips Are Down, Go For The Blue Ones
In what seems to be a perpetually declining market, one of the true bright spots is the ability to strategically pickup some bargains in the bluest of blue chip stocks. Normally, these stocks are difficult to buy due to a built in "safety" premium for times like these. Over-allocate safe stocks and save the risker investments for when they are needed (more later). Here are some traditional dividend stocks that that have a RQ rating of A3 or better with their buy below price:
III. Sometimes You Will Misfire
As hard as we may try to pick all winners, sometimes a good stock will go bad, cut its dividend, and we'll have to sell it. Often it is one of our higher yielding stocks, leaving a large void in our annual dividend income. How do we manage this? Here is what I do:
Over the last 2 months, I have had the opportunity to put the above principles into practice. For the year, I have sold five stocks after they cut their dividend. Fortunately, I was able to replace them without suffering a loss in income. As your income portfolio grows, you will not always be able to replace the lost income, but the above principles will help you minimize the decline.
IV. Don't Let Fear Derail Your Long-Term Plan
Someone once said, 'Your emotions are the best inverse indicator of what you should be doing in the market'. Many people are selling it all and walking away from the market. They'll be back though - when the market is reaching all time highs, only to get out when it begins to fall with no end in sight. This is a long-term recipe for disaster. For those of us who still have time before retirement, the market is presenting us with a golden opportunity; what are we going to do with it?
Full Disclosure: Long CNI, ITW, JNJ, KO, PEP, PG, SYY and UTX
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