I have always had a requirement for a minimum dividend yield, whenever I have analyzed and purchased dividend stocks. The reason for this requirement was to provide with at least some dividend income in case the stock stopped increasing distributions for some reason. If a stock stopped raising distributions I would put it on my hold list and would stop contributing new funds to the position, while reinvesting dividends in other more promising candidates. I do require at least a decade of consistent annual dividend increases, before even looking at a stock. This decreases the size of my watch list to less than 300 stocks.

My entry yield requirement has ranged from a low of 2% in 2008 to a high of 3% since 2009. After analyzing some of the most successful dividend stocks such as Wal-Mart (WMT), Johnson & Johnson (JNJ), McDonald’s (MCD) and Becton Dickinson (BDX) I have come to realize that a minimum yield requirement could have been a detriment to acquiring those stocks when they first became dividend achievers.

Source: Dividend Growth Investor

Related Articles:

• Never Confuse Desires With Goals
• High Yield, High Risk Dividend Stocks
• Best Stocks For 2010
• Six Great Dividend Stocks, But...
• 10 Dividend Stocks With Above Target Returns

Read More...

Summary only...

Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company is member of the S&P 500, Dow Jones Industrials Average and the S&P Dividend Aristocrats indexes. Wal-Mart Stores has consistently increased dividends every year for 36 years. The company announced an 11% dividend raise in March 2010.

Currently Wal-Mart Stores is trading at 14.20 times earnings, yields 2.20% and has an adequately covered dividend payment. The company does spend a lot of its cash flow on stock buybacks, which could prove beneficial in the long run since it could provide above average dividend growth over time for the same effort.

Source: Dividend Growth Investor

Related Articles:

• Dividend Investing in a Bear Market
• Rev-up Your Portfolio With Asset Allocation
• Seven Stingy Dividend Stocks
• The 2010 Dividend Stock Ideas List
• 7 Investor Traits to Achieve Success

Read More...

Summary only...

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

WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. WMT enjoys dominant positions in most markets where it competes. The company continues to gain market share aided by the economic downturn as consumers choose WMT over higher-cost competitors and take advantage of its convenience. Its unmatched scale leads to favorable terms on everything from the products it sells to store leases and distribution agreements. These advantages are demonstrated in the company's strong free cash flow of $3.63/share for FY 2010, up over 23% from FY 2009 and 2.7 times FY 2008's comparative number of $1.33. The company recently announced an 11% increase in its cash dividend. ...

Source: Dividends Value

Related Articles:

• Stock Analysis: McGrath RentCorp [MGRC]
  
• Stock Analysis: Kimberly Clark Corp. [KMB]
  
• Stock Analysis: Leggett & Platt Inc. [LEG]
  
• Stock Analysis: Meridian Bioscience Inc. [VIVO]
• More Stock Analyses

Read More...

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:

Southwest Gas Corp. (SWX) is engaged in the business of purchasing, distributing, and transporting natural gas in portions of Arizona, Nevada, and California. February 26th the company increased its quarterly dividend 5.3% to $0.25/share. The dividend is payable June 1, 2010, to shareholders of record as of May 17, 2010. The yield based on the new payout is 3.38%.

PPL Corp. (PPL) is a holding company for PPL Utilities also has holdings in the U.K. February 26th the company increased its quarterly dividend 1.4% to $0.35/share. The dividend is payable on April 1 to shareholders of record on March 10. The ex-dividend date is March 8. PPL is a Dividend Achiever and has raised its dividend for 11 consecutive years. The yield based on the new payout is 4.83%.

Piedmont Natural Gas (PNY) distributes natural gas to 1,016,000 residential, commercial and industrial customers in portions of North Carolina, South Carolina and Tennessee. February 26th the company raised its quarterly dividend 3.7% to $0.28/share. The dividend is payable April 15, 2010, to shareholders of record at the close of business on March 25, 2010. The ex-dividend date is March 23. PNY is a Dividend Achiever and has raised its dividend for 32 consecutive years. The yield based on the new payout is 4.25%.

The Andersons (ANDE) operates in the agriculture and transportation markets in the U.S. February 26th the company increased its quarterly dividend 3% to $0.09/share. The dividend is payable April 22, 2010, to shareholders of record on April 1, 2010. The ex-dividend date is March 30, 2010. The yield based on the new payout is 1.08%.

Hanover Insurance (THG) offers insurance and financial products and services in the areas of risk management and asset management. February 26th the company raised its quarterly dividend 33% to $0.25/share. The dividend is payable March 22, 2010, to shareholders of record at the close of business on March 8, 2010. The yield based on the new payout is 2.34%.

Fred's (FRED) operates about 650 company-owned general merchandise stores and markets goods and services to 24 franchised Fred's stores in the southeastern U.S. February 26th the company raised its quarterly dividend 33% to $0.04/share. The dividend is payable on March 15, 2010, to shareholders of record as of March 5, 2010. The ex-dividend date is March 3, 2010. The yield based on the new payout is 1.50%.

Qualcomm (QCOM) focuses on developing products and services based on its advanced wireless broadband technology. March 1st the company raised its quarterly dividend to $0.19/share and announced that it will buyback up to $3 billion in common stock. The yield based on the new payout is 1.95%.

General Dynamics (GD) is the world's sixth largest military contractor and also one of the world's biggest makers of corporate jets. March 3rd the company increased its quarterly dividend 10.58% to $0.42/share. The dividend is payable May 7, 2010, to shareholders of record on April 9. The ex-dividend date is April 7, 2010. The yield based on the new payout is 2.30%.

Wal-Mart (WMT) operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets; and is the largest retailer in North America. March 4th the company raised its annual dividend 11% to $1.21/share. The next quarterly dividend will be paid on April 5, 2010 to shareholders of record on March 12, 2010. The ex-dividend date is March 10. WMT is a Dividend Aristocrat and has raised its dividend for 36 consecutive years. The yield based on the new payout is 2.24%. [Analysis]

American Greetings (AM) is the world's largest publicly owned greeting card company with operations in more than 70 countries. March 4th the company raised its quarterly dividend by 17% to $0.14/share. The quarterly dividend will be paid on April 5, 2010 to shareholders of record at the close of business on March 23, 2010. The yield based on the new payout is 2.71%.

WGL Holdings (WGL) provides natural gas service in theWashington, DC, metropolitan area and surrounding regions, including Maryland and Virginia. March 4th the company raised its quarterly dividend 2.7% to $0.3775/share. The new dividend is payable May 1, 2010, to shareholders of record on April 9, 2010. The ex-dividend date is April 7, 2010. The yield based on the new payout is 4.52%.

Not all dividend paying companies take pride in raising their dividends each year. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

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

(Photo Credit)


Related Articles:

• Who is David Dodd and Why Should We Listen to Him
• Five High-Yield Positive Return Investments
• 7 Dividend Stocks To Slay The Wall Street Giants
• Bogle Still Believes In Buy And Hold
• 4 Dividend Stocks For The Social Security Blues

Read More...

Summary only...

Last year 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 are 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:

- Clorox Co (CLX) | Yield: 3.30%
- Coca-Cola Co (KO) | Yield: 2.90% | Analysis
- Emerson Electric (EMR)| Yield: 2.80% | Analysis
- Exxon Mobil (XOM)| Yield: 2.60%
- Johnson & Johnson (JNJ)| Yield: 3.10% | Analysis
- McDonald’s Corp (MCD)| Yield: 3.40% | Analysis
- Procter & Gamble (PG)| Yield: 2.80% | Analysis
- Wal-Mart Stores (WMT) | Yield: 2.00% | Analysis

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:

- Chevron Corporation (CVX) | Yield: 3.70%
- Donaldson Company (DCI) | Yield: 1.10%
- McCormick & Co. (MKC) | Yield: 2.80%
- Nucor Corp. (NUE) | Yield: 3.20% | Analysis
- Raven Industries, Inc. (RAVN) | Yield: 1.90% | Analysis

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: 4.50%
- Conn. Water Service (CTWS) | Yield: 4.00%
- Weyco Group Inc. (WEYS) | Yield: 2.70%

Needless to say, last year saw many companies fall off the list. Overall the number of constituents fell to 218 stocks in 2010 from 319 in 2009. What made last year so unusual were the numbers of big-name companies, some that had paid increasing dividends for decades, including:

- American International Group, Inc. (AIG)
- Bank of America Corporation (BAC)
- General Electric Co. (GE)
- The Home Depot, Inc. (HD)
- Johnson Controls Inc. (JCI)
- Pfizer Inc. (PFE)
- US Bancorp (USB)

The news wasn't all bad. Partially offsetting the 133 companies that fell off the list were 32 new companies joining Dividend Stock Ideas List. For the most part, these aren't household names, not yet at least, but here are some names we will likely be seeing in the future:

- Arrow Financial Corporation (AROW) | Yield: 3.90%
- Energy Transfer Partners L.P. (ETP) | Yield: 7.80%
- Federated Investors, Inc. (FII) | Yield: 3.70%
- Getty Realty Corp. (GTY) | Yield: 8.50%
- Hudson City Bancorp, Inc. (HCBK) | Yield: 4.60%
- Investors Real Estate Trust (IRET) | Yield: 7.80%
- NSTAR (NST) | Yield: 4.60%
- Northeast Utilities (NU) | Yield: 3.80%
- Plains All American Pipeline LP (PAA) | Yield: 6.80%
- Suburban Propane Partners LP (SPH) | Yield: 7.30%

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 CLX, KO, EMR, JNJ, MCD, PG, WMT, CVX, NUE. See a list of all my income holdings here.

(Photo Credit)

Related Articles:

• Reaching Your 10-Year Investing Goal
• A Two Step Process To Follow After A Dividend Freeze
• Who is Charles Mangum and Why Should We Listen to Him?
• 4 Dividend Stocks For The Social Security Blues
• 7 Dividend Stocks To Take The Emotion Out Of Investing

Read More...

Summary only...

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 might be the big dividend raisers in 2010. Here are seven companies for your consideration:

Procter & Gamble Co. (PG) in April 2009 raised its dividend 10% to $0.44/share from $0.40/share. PG has increased its dividend for 53 consecutive years and I expect them to do so again next year. 2010's increase may not be as strong since 2009's free cash flow was down 8.5% from 2008. However, it is still strong and the trailing 12-months is above the 2008 level. Also, PG's 2009 share count is down in and its cash balance is up. Given this, I project a 2010 increase of 6-8%. The stock is currently yielding 2.9%. [Analysis]

Colgate-Palmolive Co. (CL) in April 2009 also raised its dividend 10% to $0.44/share from $0.40/share. CL has increased its dividend for 46 consecutive years and I expect them to do so again next year. The 2010 increase should be higher then 2009's since the company's 12-month trailing free cash flow is up over 41% compared to 2008. The company's most recet cash balance is up 52% and shares outstanding are down. I project a 2010 increase of 10-12%. The stock is currently yielding 2.1%.

W.W. Grainger Inc. (GWW) in May 2009 raised its dividend 15% to $0.46/share from $0.40/share. GWW has increased its dividend for 38 consecutive years and I expect them to do so again next year. The 2010 increase could be higher since the company's 12-month trailing free cash flow is up over 62% compared to 2008 and its most recent cash balance is up nearly 70%. I project a 2010 increase of 15-17%. The stock is currently yielding 1.8%. [Analysis]

Abbott Laboratories (ABT) in April 2009 raised its dividend 11% to $0.40/share from $0.36/share. ABT has increased its dividend for 37 consecutive years and I expect them to do so again next year. The 2010 increase should be similar to the 2009 increase since the company's 12-month trailing free cash flow is down slightly (2%) compared to 2008, but it is currently sitting on 18% more cash. I project a 2010 increase of 10%. The stock is currently yielding 2.9%. [Analysis]

Wal-Mart Stores Inc. (WMT) in March 2009 raised its dividend 15% to $0.2725/share from $0.2375/share. WMT has increased its dividend for 35 consecutive years and I expect them to do so again next year. This cash generating machine continues to hum with a 10% increase (12-month trailing) in free cash flow compared to 2008. The more impressive statistic is the 12-month trailing cash flow is 2.4 time higher than the 2008 amount. I project a 2010 increase of 10%. The stock is currently yielding 2.0%. [Analysis]

Walgreen Company (WAG) in August 2009 raised its dividend 22% to $0.1375/share from $0.1125/share. WAG has increased its dividend for 34 consecutive years and I expect them to do so again next year. This is another cash generating machine that saw a 2009 free cash flow increase of 168% compared to 2008 and the 2009 ending cash balance is 4.7 time higher than 2008's. I project a 2010 increase of 15-20%. The stock is currently yielding 1.5%. [Analysis]

AFLAC Inc. (AFL) in February 2009 raised its dividend 17% to $0.28/share from $0.24/share. AFL has increased its dividend for 27 consecutive years and I expect them to do so again next year. In spite of all the negative publicity aimed at the financial sector, AFL's free cash flow has grew approximately 15% the last 12 months compared to 2008 and its most recent cash balance has nearly doubled from the 2008 level. I project a 2010 increase of 10%. The stock is currently yielding 2.4%. [Analysis]

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, AFL, PG, WMT. See a list of all my income holdings here.

(Photo Credit)

Related Articles:

• Are ETFs and CEFs Good Income Investments?
• The Will to Win
• All Investing Involves Risk
• Pre-Screening Dividend Stocks - Epilogue
• Warren Buffett's Dividend Stocks

Read More...

Summary only...

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

Dividend Aristocrats constituents exhibit the following characteristics:

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

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

• Clorox Co (CLX) - 32 years
  
• Coca-Cola Co (KO) - 47 years - [Analysis]
  
• Exxon (XOM) - 27 years
  
• Johnson & Johnson (JNJ) - 47 years - [Analysis]
  
• McDonald’s Corp (MCD) - 33 years - [Analysis]
  
• Procter & Gamble (PG) - 53 years - [Analysis]
  
• Wal-Mart Stores (WMT) -35 years - [Analysis]
  

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

On December 4th, S&P announced changes to the Dividend Aristocrats Index. Standard & Poor’s will perform the annual reconstitution of the S&P 500 Dividend Aristocrats Index after the close of trading on Friday, December 18, 2009.

The following stocks will be added to the Dividend Aristocrats:

• Brown-Forman Corporation (BF.B)
  
• Cintas Corp. (CTAS)
  

The following stocks will be dropped from the Dividend Aristocrats:

• Avery Dennison Corporation (AVY)
  
• BB&T Corp. (BBT)
  
• Gannett Co., Inc. (GCI)
  
• General Electric Co. (GE)
  
• Johnson Controls Inc. (JCI)
  
• Legg Mason Inc. (LM)
  
• M&T Bank Corp. (MTB)
  
• Pfizer Inc. (PFE)
  
• State Street Corp. (STT)
  
• US Bancorp (USB)
  

As the number of drops vs. adds indicates, the last two years were difficult for dividend stocks, but that is not necessarily a bad thing. During good times it is easy for companies to increase dividends, and many companies were added to the index. It is during times of adversity that we learn who the real aristocrats are.

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

(Photo Credit)

Related Articles:

• Optimizing Your Asset Allocation
• Bonds: The Next Bubble to Burst?
• Five Dividend Stocks With Different Reasons Not To Buy
• A Winning Investment Strategy
• Dividend Investing With ETFs

Read More...

Summary only...

There are certainly many ways to categorize the different styles of investing in dividend stocks, including yield, risk, growth, etc. An investment strategy based on any of these could be successful, if implemented within the framework well-crafted plan. Over the years, I have found that most dividend investing styles fall into one of the three major categories listed below:

High Yield/Low Growth

I would classify dividend stocks with a yield over 5% and dividend growth less than 2% in this group. This is probably the most popular group, particularly among those new to income investing. It is human nature to want it now and lots of it, and high yield stocks appear to deliver that desire. However, there is often a reason the stock's yield is so high and many times the investor learns the hard way the yield is not always sustainable. Examples of stocks in the high yield/low growth group include:

• National Retail Properties, Inc. (NNN) - Yield: 7.12 - Dividend Growth: 1.4%
• Integrys Energy Group, Inc. (TEG) - Yield: 6.63 - Dividend Growth: 1.5%
• Realty Income Corporation (O) - Yield: 6.61 - Dividend Growth: 2.1%
• CenturyTel Inc. (CTL) - Yield: 5.97 - Dividend Growth: 0.0%

Low Yield/High Growth

I would classify dividend stocks with a yield less than 2.5% and dividend growth greater than 7.5% in this group. Low yield and high growth dividend stocks are the other extreme of high yield and low growth stocks. Their long-term risk is associated with growing the yield-on-cost over time. If the dividend growth rate is cut, the investor's future earnings and yield will also be cut. Stocks in this group would include:

• Aflac Incorporated (AFL) - Yield: 2.44 - Dividend Growth: 16.7% [Analysis]
• United Technologies Corp. (UTX) - Yield: 2.25 - Dividend Growth: 15.0% [Analysis]
• Eaton Vance Corp. (EV) - Yield: 2.05 - Dividend Growth: 15.0%
• Colgate-Palmolive Company (CL) - Yield: 2.02 - Dividend Growth: 10.3%
• Wal-Mart Stores, Inc. (WMT) - Yield: 2.01 - Dividend Growth: 11.3% [Analysis]
• Canadian National Railway Company (CNI) - Yield: 1.63 - Dividend Growth: 15.0%
• Lowe's Companies, Inc. (LOW) - Yield: 1.53 - Dividend Growth: 15.0% [Analysis]

Moderate Yield/Moderate Growth

I would classify dividend stocks with a yield between 2.5% to 5% and a dividend growth rate between 2% to 7.5% in this group. This is a good compromise between the above too extremes. It is an approach focusing on a moderate yield and dividend growth rate. Keeping these two metrics at a reasonable level will help reduce the likelihood of either being cut. Companies in this group are your traditional dividend growth stocks, as seen from the list below:

• Chubb Corp. (CB) - Yield: 2.88 - Dividend Growth: 6.1% [Analysis]
• The Procter & Gamble Company (PG) - Yield: 2.81 - Dividend Growth: 7.3% [Analysis]
• Johnson & Johnson (JNJ) - Yield: 3.00 - Dividend Growth: 7.5% [Analysis]
• Automatic Data Processing Inc. (ADP) - Yield: 3.09 - Dividend Growth: 5.5% [Analysis]
• Emerson Electric Co. (EMR) - Yield: 3.13 - Dividend Growth: 6.4% [Analysis]
• Chevron Corporation (CVX) - Yield: 3.41 - Dividend Growth: 5.1%
• SYSCO Corporation (SYY) - Yield: 3.39 - Dividend Growth: 4.3% [Analysis]

In my personal investing strategy, I incorporate measured participation in each of the above groups. My primary focus is on the Moderate Yield/Moderate Growth stocks, believing that over time this group carriers the highest probability of success. The remaining two groups offer the potential for above average returns - as long as they continue to perform at the estimated level, which is often difficult to do over time.

Full Disclosure: Long NNN, TEG, O, CTL, AFL, UTX, WMT, CNI, CB, PG, JNJ, ADP, EMR, CVX, SYY. See a list of all my income holdings here.

(Photo Credit)

Related Articles:

• Dividend Stocks: A Disciplined Approach
• Who is Irving Kahn and Why Should We Listen to Him?
• Seven Important Reasons for Dividend Investing
• Is Your Portfolio Average?
• In Dividend Investing, Cash Is King

Read More...

Summary only...

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

Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules. 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.

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.

Contrary to what many are now saying, buy-and-hold and investing in quality blue chip stocks is not dead. Consider the following stocks:

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)

Related Articles:

• What's Your Retirement Vision?
• Searching the World For The Best Dividend Stocks
• Harvest the Fruit
• A Two Step Process To Follow After A Dividend Freeze
• Yield on Cost: Measuring for Success

Read More...

Summary only...

Those that have read this space for any period of time are well aware of my enthusiasm for using dividend growth stocks as a vehicle for building long-term wealth and income. However, with that said, a successful investor must do more that just buy stocks that pay a growing dividend, or more that focusing on a single metric such as dividend yield. Not all dividend stocks are created equal - there is a discipline to selecting good dividend growth stocks.

Understand Your Goal

What is your portfolio trying to accomplish? As odd is it may seem, many investors never define this and their overall goal. Are you buying stocks like First Industrial Realty Trust, Inc (FR) with a 22% yield, Capstead Mortgage Corporation (CMO) with a 17% yield, Annaly Capital Management, Inc. (NLY) with a 16% yield or Apollo Investment Corp. (AINV) with a 12% yield? If your goal is short-term income these might work, and then again they might not.

Before buying buying any stock you should write down your investing goal and determine if purchasing that stock will bring you closer to your goal or take you further away. My goal is to generate an ever-increasing income stream from dividends. Thus, I will sacrifice some current income in favor of future growth and income stability.

Understand and Measure the Risk

No stock is 100% safe. Each stock has its own set of risks that need to be considered. The stocks listed above are considered high risk. In exchange for above average current income, you may encounter above average dividend cuts and/or loss of capital.

Gauging the relative risk of one stock compared to another is important when deciding which stock to buy or how much to weight a stock within your portfolio. I prefer lower risk stocks such as Johnson & Johnson (JNJ) [Analysis], Procter & Gamble Co. (PG) [Analysis]and Wal-Mart Stores, Inc. (WMT) [Analysis].

A Disciplined Approach

For me and my income portfolio, I have have chosen to follow a conservative and disciplined approach. This means I will seek out dividend stocks with a proven track record and good future prospects. These stocks will have a long history (10 or more years) of consecutive dividend increases, low debt, low free cash flow payout and excellent other dividend metrics. In addition, I will follow time proven valuation techniques to select an entry point that will provide a good value.

Stay The Coarse

There is always a temptation to stray from a disciplined approach of selecting good dividend stocks. Often I receive questions like, 'AT&T Inc. (T) is making a fortune off the iPhone, why aren't you buying it?' or 'Kraft Foods Inc. (K) is a great consumer staple, why aren't you buying it?' The short answer is that neither currently can pass the entry exam to gain access to my income portfolio.

It is easy to become caught up with the current hot stock that everyone loves. The key to success is to buy before everyone else falls in love with it. Selecting good dividend growth stocks is not difficult, being disciplined enough to do it is difficult for many investors.

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

(Photo Credit)


Related Articles:

• All Investing Involves Risk
• My Unique Investing Process
• Three Dividend Stocks With A Perfect Risk Score
• Seven Important Reasons for Dividend Investing
• In Dividend Investing, Cash Is King

Read More...

Summary only...

What makes a good dividend stock? Every dividend growth investor is looking for a stock that will increase its dividend each and every year at a rate that makes the stock a better investment than fixed income alternatives. I have found that stocks that are able to do this share some common characteristics.

Brand Recognition/Low Price

During an economic downturn consumers may flee many popular brands if their cost is high and generic alternatives are substantially cheaper. Procter & Gamble Co. (PG) [Analysis] has seen this occur in some of their premium brands like Pampers and Tide. However, most people aren't willing to save a few pennies on a generic soda of unknown quality when a Coca Cola Co. (KO) [Analysis] or Pepsico Inc. (PEP) [Analysis] is available.

Value-Priced Convenience

In addition to Brand Recognition/Low Price some companies also provide convenience. If you have been out shopping all day and are tired, you are likely to stop on the way home and pick up something that is quick and inexpensive. There seems to be a McDonald's (MCD) [Analysis] on every corner. A stop there provides the guest with a known commodity - clean restrooms, quick service and an inexpensive meal.

A Superior Operating Model

How do you compete with a company like Wal-Mart (WMT) [Analysis]? As most of their competitors have learned, you can't beat WMT at providing brand name, quality merchandise at rock bottom prices. During the good times, some people don't mind paying premium prices at an upscale store, but there are plenty of us value conscious people that keeps WMT humming. Where WMT really shines is during an economic downturn. When losing your job is a real option, $120 sneakers just don't quite seem as important as they once were.

A Pseudo Monopoly

If you are the only company in the world that is allowed to sell a product that people's lives depend on, you will likely have a robust profit margin. This is the world that pharmaceutical companies operate in. Granted companies like Abbott Laboratories (ABT) [Analysis] and Eli Lilly and Co. (LLY) [Analysis] have to keep coming up with new products as old patents expire, and have to deal with government regulation, but the good ones not only survive, they thrive.

Sell What People Want and Need

Sounds simple, but so few companies have mastered it. Consumer staples seem to be the best at it. When you consider the longevity of Johnson & Johnson's (JNJ) [Analysis] products such as Band-Aid, Johnson Baby Products, Listerine, Rolaids, Tylenol, Motrin, Benadryl and many others, it is easy to conclude that the company has identified what people want/need and are providing it at a reasonable cost. Although some of Procter & Gamble Co.'s (PG) premium products are struggling, management has taken action to focus on the company's bargain-priced alternatives and those are seeing some success.

They Got a Name for the Winners in the World

Just as in life, companies that are winners separate themselves from the others. They won't settle for second best, instead they continue to look for advantages that will them keep a few steps ahead of the competition. Warren Buffet would describe many of the above advantages as wide moats. If you want to buy and hold a stock forever, make sure it has a competitive advantage that is not easily duplicated.

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

(Photo Credit)


Related Articles:

• International Diversification Begins At Home
• Nucor Corp. (NUE): Forging A Different Path
• Managing The Risk Of A Dividend Cut With Allocations
• Five Stocks With A Low Debt To Total Capital
• Are Defense Stocks Good Defensive Stocks?

Read More...

Summary only...

This article originally appeared on The DIV-Net October 12, 2009.

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

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

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

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

WMT is trading at a discount to 1.) and 3.) above. The stock is trading at a 7.9% premium to its calculated fair value of $46.31. WMT did not earn any Stars in this section.

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

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

WMT earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 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
   

WMT earned a Star in this section for its NPV MMA Diff. of the $922. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as WMT has. If WMT grows its dividend at 11.3% per year, it will take 6 years to equal a MMA yielding an estimated 20-year average rate of 3.9%.

Other: WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.

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

Using my D4L-PreScreen.xls model, I determined the share price would need to drop to $59.68 before WMT's NPV MMA Differential increased to the $500 that I like to see for a stock with 35 years of consecutive dividend increases. At that price the stock would yield 1.83%.

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 9.6%. This dividend growth rate is less than the 11.3% used in this analysis, thus providing a slight margin of safety. WMT has a risk rating of 1.00 which classifies it as a low risk stock.

WMT is a quality company with a sound strategic plan. At 2.18%, WMT's dividend is lower than I prefer. However, given the quality of the company, I try to purchase some shares each year during a pullback. Its currently trading at a 8% premium to its buy price of $46.31. For additional information, including the stock's dividend history, please refer to its data page.

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

Full Disclosure: At the time of this writing, I was long in WMT (2.4% of my Income Portfolio). What are your thoughts on WMT?

Related Articles:

• Stock Analysis: Automatic Data Processing Inc. [ADP]
  
• Stock Analysis: RPM International Inc. [RPM]
• Stock Analysis Leggett & Platt Inc. [LEG]
• Stock Analysis: Lowe’s Companies, Inc. [LOW]
  
• More Stock Analyses

Read More...

Summary only...

In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, 'We're number 2, we're number 2', while holding two fingers in the air. The same is true when selecting dividend stocks.

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:

• Genuine Parts Co. (GPC) - Analysis
  
• United Technologies Corp. (UTX) - Analysis
  
• Nucor Corporation (NUE) - Analysis
  
• PepsiCo, Inc. (PEP) - Analysis
  

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)


Related Articles:

• Refining Risk Measurement Of Dividend Stocks
• Elite Dividend Stocks
• 12 Dividend Stocks With A 5-Star Strong Buy Rating
• Ten Dividend Stocks Beating The S&P 500
• Dividend Stocks Are My Conviction

Read More...

Summary only...

In late 2007 when I starting writing about dividend investing I had two primary motives in mind: 1. Put myself in a position where there is some public accountability. 2. Interact with knowledgeable investors and expose myself to new ideas. In response a recent post "How Much Money Will You Need For Retirement?", two readers introduced me to a concept that hadn't considered up to that point.

First, some background. As a result of massive and growing deficits in The United States and our willingness to print enormous sums money meet our increasing obligations, many have called for the collapse of the U.S. dollar. Tim Hanson in a recent article quoted the following:

• Swiss banker Dr. Konrad Hummler wrote "It's time to take advantage of the recovery of the U.S. dollar to get one's currency diversification in order." (i.e. get out of dollars)
• Warren Buffett wrote in the NY Times "Fiscally, we are in uncharted territory" and concluded that "Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar's destiny lies with Congress."
• Bill Gross of Pacific Investment Management Co. (PIMCO), which manages the biggest bond fund in the world, advises investors to sell dollar investments 'before the central banks and sovereign wealth funds do'.
• Commodities specialist Jim Rogers announces his new favorite currency -- the Chinese yuan.

I have long recognized the importance of holding international investments. In addition, to international funds held outside my income portfolio, I hold individual dividend stocks with large global presences such as: The Coca-Cola Company (KO) - Analysis, Johnson & Johnson (JNJ) - Analysis, The Procter & Gamble Company (PG) - Analysis, McDonald's Corporation (MCD) - Analysis and Wal-Mart Stores, Inc. (WMT) - Analysis.

However, when it comes to debt I am 100% invested in U.S. debt funds. In response to the article referenced in the opening paragraph, two readers who read it on Seeking Alpha left some intriguing comments as follows in part:

Mad Hedge Fund Trader said "A number of readers have asked me to come up with a safe, high yielding investment in which to hide out in case the equity markets swoon again. That means they are looking for a security that offers a high fixed return, denominated in a strong currency that will benefit from future upgrades that will boost the principal over time. All of that is another name for the Invesco PowerShares Emerging Market Sovereign Debt ETF (PCY). The fund [...] pays a handy 6.42% dividend. This beats the daylights out of the nine basis points you currently earn for cash, the 3.40% yield on 10 year Treasuries, and still exceeds the 6.42% dividend on the iShares Investment Grade Bond ETN (LQD), which buys predominantly single “A” US corporates. The big difference here is that foreign bonds are issued in strong foreign currencies instead of weak dollars, and have a rosy future of further credit upgrades to look forward to.

Old Trader added "TEI and GIM are a couple of other foreign debt funds to consider. Templeton Emerging Markets Income Fund (TEI) is primarily emerging markets, Templeton Global Income Fund (GIM) is global sovereign...both are run by Templeton. "

You can read their full comments and others here.

Up to this point I had assumed that non-U.S. debt would have the same variability as non-U.S. dividends, which I deemed as unacceptable for my income portfolio. I ran some quick numbers on PCY's dividend comparing it to LQD. Surprisingly, its standard deviation from 11/07 to 9/09 was 0.01489 compared to 0.02817 for LQD over the same period (Yahoo data + iShares to fill in some LQD blanks). LQD is one of my core bond holdings, but it is quickly approaching full allocation, so I've been looking for some other alternatives. A higher yield and lower standard deviation on its dividend makes PCY worth looking into. I also plan to spend some time looking at TEI and GIM.

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

(Photo: ilker)


Related Articles:

• Five Stocks With A Low Debt To Total Capital
• 3 Simple Steps For A Successful Retirement
• Never Confuse Desires With Goals
• Bonds: The Next Bubble to Burst?
• Elite Dividend Stocks

Read More...

Summary only...

A good system continues to improve itself. I maintain an extensive database with a minimum of 10 years of information on each of the 110+ stocks that I track. This data is gathered from various sources deemed reliable. Most data is generic and can be pulled from various sites. That is except some S&P risk and quality information (RQ).

Gauging the relative risk of one stock compared to another is important when deciding which stock to buy or how much to weight a stock within your portfolio. Recently, during a scheduled site maintenance event on my broker's site, S&P reports were temporarily unavailable. This made me question if I really wanted to rely on propriety financial information that was not readily available from multiple sources. Ultimately, I decided it was not a good thing. To remedy this situation, the RQ portion of my risk calculation was modified as such:

For the Risk portion, I opted to focus on consecutive dividend increases. The logic here is the longer a company raises its divided, the more committed it is to dividend increases and is less likely to stop unless dire financial circumstances dictate it. Instead of relying on S&P's Qualitative Risk Assessment (Low, Medium and High) to assign a risk rating, I will now use the following to assign the A, B or C risk rating:

• A Risk Rating is assigned to companies that have increased their dividends for greater than 25 years.
• B Risk Rating is assigned to companies that have increased their dividends for 15-25 years.
• C Risk Rating is assigned to companies that have increased their dividends for less than 15 years.

As for the Quality portion, I decided on use the company's financial quality by focusing on Free Cash Flow payout and Debt to Total Capital. Instead of using S&P's Quality Ranking (A+, A, A, B+, B, B-, C, D and Not Ranked) to assign a quality rating, I will now use the following to assign the 1, 2 or 3 quality rating:

• 1 Quality Rating is assigned to companies if their Free Cash Flow Payout % is less than 60% and if their Debt to Total Capital is less than 45%.
• 2 Quality Rating is assigned to companies if the sum of their Free Cash Flow Payout % plus their Debt to Total Capital is less than 100%.
• 3 Quality Rating is assigned to companies if the sum of their Free Cash Flow Payout % plus their Debt to Total Capital is greater than 100%.

Making this change to the 110+ companies I track. Here is what I found:

• Overall the new method produces lower risk scores.
• The overall risk rating on my income portfolio went from 1.78 (medium) to 1.68 (medium).
• High risk stocks went from 7 stocks to 4 stocks.
• Medium risk stocks went from 77 stocks to 54 stocks.
• Low risk stocks went from 27 stocks to 53 stocks.

Excellent, low risk stocks evaluate the same under both systems. For example, the following three companies had a perfect 1.00 score under both systems:

• Johnson & Johnson (JNJ) - Analysis
  
• Procter & Gamble Co. (PG) - Analysis
• Wal Mart Stores Inc. (WMT) - Analysis

While 60 companies improved their position, 19 companies ratings slipped under the new system. Below are some of the more notable changes:

• Pepsico Inc. (PEP) went from a 1.00 (low) to 1.25 (low) - Analysis
• United Technologies Corp. (UTX) went from a 1.25 (low) to 1.50 (low) - Analysis
• Exxon Mobil Corp. (XOM) went from 1.50 (low) to 1.75 (medium)
• Colgate Palmolive Co. (CL) went from 1.50 (low) to 1.75 (medium)
• International Business Machines (IBM) went from 1.75 (medium) to 2.00 (medium)

The RQ portion of the risk rating is 50% of the calculation. The remaining two pieces are Current Price vs. Calculated Price and Dividend Yield. These are unchanged and their part of the risk rating calculation is discussed in Refining Risk Measurement Of Dividend Stocks.

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

(Photo: sean carpenter)


Related Articles:

• Five Aristocrats That Have Been There Before
• A Two Step Process To Follow After A Dividend Freeze
• Is Now The Right Time To Start Investing?
• Dividend Investing in a Bear Market
• John D. Rockefeller Quotes

Read More...

Summary only...