Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future.

Build Diversity: Part 8 Conclusion - 30 Mar 2014 01:15

Tags: build_diversity

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The Build Diversity series was started to question a common misnomer that the selection of dividend growth companies is very limiting and the largest risk is lack of diversification.

After multiple screens we have identified 52 potential stocks spread over 11 sectors with market caps ranging from $17B to below $100M. We've seen results from momentum growth sectors (such as technology and healthcare), traditional dividend growth sectors (such as consumer staples), and defensive sectors (such as utilities & small local regional banks).

The search results were astounding and proved that dividend growth investing is not limited and has access to a large diversity of stocks in many shapes and sizes. Additionally, if we lowered the screen requirements on dividend yield to as low as 2% the universe of stocks available almost triples.

Whether or not dividend growth investing is the best strategy is arguable but to state you cannot adequately diversify is completely false. - Comments: 0

Build Diversity: Part 7 Materials & Utilities - 30 Mar 2014 00:47

Tags: build_diversity

All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row.

Welcome to Part 7 of our “Build Diversity” series. Today we will be looking at the Materials and Utility sectors.

To start with a list we will use basic search criteria of:
* min div yield near 3% or greater
* payout ratio near 65% or less
* debt to equity ratio less than 1

Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
Material
BHP Billiton Ltd. BHP 11 3.43% 42.3% 12.35 0.50
BHP Billiton plc BBL 11 3.68% 42.3% 11.50 0.50
Compass Minerals International CMP 9 2.81% 61.7% 21.94 0.86
Sonoco Products Co. SON 31 2.95% 61.7% 20.89 0.70
Utilities
Conn. Water Service CTWS 44 3.01% 59.6% 19.78 0.92
MGE Energy Inc. MGEE 38 2.82% 52.8% 18.73 0.66
Northeast Utilities NU 16 3.53% 63.1% 17.85 0.99

The search yielded 7 stocks. For Material companies SON is the elder of the group with 31 years of continuous dividend growth. BHP & BBL offer the highest dividend yield and lowest P/E ratios but they also operate in volatile iron ore markets where spot prices have dramatic swings up and down.

For Utility companies CTWS & MGEE offer a long history of continuous dividend growth. What is most impressive of all three is that we actually found utility companies with low debt to equity ratios. One of the downsides of establishing a utility is the large infrastructure required for creating and/or delivering of utility services. Creating such a structure requires an immense amount of cash so most have a debt/equity ratio above 1.

Company Symbol 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
Materials
BHP Billiton Ltd. BHP 3.6% 10.1% 10.6% 22.3%
BHP Billiton plc BBL 3.6% 10.1% 10.6% 30.7%
Compass Minerals International CMP 10.1% 11.8% 10.2%
Sonoco Products Co. SON 3.4% 3.5% 2.8% 3.9%
Utilities
Conn. Water Service CTWS 2.1% 1.9% 2.2% 1.7%
MGE Energy Inc. MGEE 3.2% 2.6% 2.3% 1.8%
Northeast Utilities NU 11.1% 12.8% 12.2% 9.8%

Looking at dividend growth SON shows some pretty low growth but the trade-off is its long dividend growth history. On the utilities front it is not surprising to see low growth rates as these are low growth heavily regulated industries and typically make good defensive plays for your portfolio. It was interesting to find NU with a high growth rate and one would have to question how sustainable it is.

Our quick search has yielded 7 potentially attractive examples to add to your portfolio. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

BHP Billiton Ltd. (BHP): BHP Billiton Limited, together with its subsidiaries, operates as a diversified natural resources company worldwide. The company explores for, develops, produces, and markets petroleum, potash, aluminium, alumina, nickel, and manganese ore and alloys; and produces and exports seaborne metallurgical coal and thermal coal. In addition, the company explores for and produces copper, silver, lead, uranium, zinc, and iron ore.

BHP Billiton plc (BBL): BHP Billiton Plc, together with its subsidiaries, operates as a diversified natural resources company worldwide. The company is engaged in the exploration, development, and production of oil and gas; mining of metallurgical coal, thermal coal, copper, silver, lead, zinc, molybdenum, uranium, iron ore, and gold; mining and refining of bauxite into alumina, and smelting of alumina into aluminum metal; and mining and production of nickel products, manganese metal and alloys, as well as development of potash.

Compass Minerals International (CMP): Compass Minerals International, Inc., through its subsidiaries, produces and markets inorganic mineral products primarily in North America and the United Kingdom. It operates in two segments: Salt and Specialty Fertilizer.

Sonoco Products Co. (SON): Sonoco Products Company manufactures and sells industrial and consumer packaging products in the United States, Europe, and Canada. The company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions.

Conn. Water Service (CTWS): Connecticut Water Service, Inc., through its subsidiaries, operates as a regulated water company. The company operates in three segments: Water Activities, Real Estate Transactions, and Services and Rentals.

MGE Energy Inc. (MGEE): MGE Energy, Inc., through its subsidiaries, operates as a public utility holding company in Wisconsin. The company operates in 4 segments; Regulated Electric Utility, Regulated Gas Utility, Non-regulated Energy Operations, and Transmission Investments.

Northeast Utilities (NU): Northeast Utilities, a public utility company, through its subsidiaries, is engaged in the energy delivery business. The company is involved in generation, transmission, and distribution of electricity; and distribution of natural gas. - Comments: 0

Build Diversity: Part 6 Tech & Telcoms - 28 Mar 2014 00:32

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All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row.

Welcome to Part 6 of our “Build Diversity” series. Today we will be looking at the Technology and Telcom sectors.

To start with a list we will use basic search criteria of:

  • min div yield near 3% or greater
  • payout ratio near 65% or less
  • debt to equity ratio less than 1
Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
Technology
Analog Devices Inc. ADI 12 2.91% 67.27% 23.10 0.18
Intel Corp. INTC 10 3.63% 47.87% 13.17 0.23
Microsoft Corp. MSFT 11 2.92% 41.33% 14.14 0.27
Telecom
AT&T Inc. T 30 5.76% 54.12% 9.40 0.82
China Mobile Limited CHL 8 4.71% 42.63% 9.06 0.00

The search yielded 5 stocks. For Technology companies payout ratios of MSFT & INTC are below 50% and the largest dividend payout is INTC.

For Telcom, both results offer high dividend yields and low P/E ratios. Of the two, only T has a dividend ratio above 50% but even at this level there is still room to grow the dividend but T also has the longest consecutive annual dividend growth at 30 years.

Looking at average dividend growth rates we see higher rates of growth for lower yielding technologies and low growth rates for the more mature high yielding telecommunication stocks.

Company Symbol 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
Technology
Analog Devices Inc. ADI 13.3% 16.5% 11.8% 42.3%
Intel Corp. INTC 3.4% 12.6% 10.5% 27.4%
Microsoft Corp. MSFT 16.9% 20.8% 16.1% 15.0%
Telcom
AT&T Inc. T 2.3% 2.3% 2.4% 4.9%
China Mobile Limited CHL 2.8% 6.6% 6.8% 21.9%

One stock to note is INTC which lists a 1 year dividend growth rate of 3.4%. INTC has not increased their divided since 2012 and if they do not increase their dividend in the next two quarters they will lose their status of consecutive years of dividend growth.

Our quick search has yielded 5 potentially attractive examples to add to your portfolio. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

Analog Devices Inc. (ADI): Analog Devices, Inc. is engaged in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICs) for use in industrial, automotive, consumer, and communication markets worldwide. It offers signal processing products that convert, condition, and process real-world phenomena, such as temperature, pressure, sound, light, speed, and motion into electrical signals.

Intel Corp. (INTC): Intel Corporation designs, manufactures, and sells integrated digital technology platforms worldwide. It operates through PC Client Group, Data Center Group, Other Intel Architecture, Software and Services, and All Other segments.

Microsoft Corp. (MSFT): Microsoft Corporation develops, licenses, and supports software, services, and hardware devices.

AT&T Corp. (T): AT&T Inc. provides telecommunications services to consumers and businesses in the United States and internationally.

China Mobile Limited (CHL): China Mobile Limited, an investment holding company, provides mobile telecommunications and related services primarily in Mainland China and Hong Kong. - Comments: 0

Build Diversity: Part 5 Consumer Stocks - 22 Mar 2014 14:06

Tags: build_diversity

All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row.

Welcome to Part 5 of our “Build Diversity” series. Today we will be looking at the Consumer sector (both staples and discretionary).

To start with a list we will use basic search criteria of:

  • min div yield 3% or greater
  • payout ratio less than 65%
  • debt to equity ratio less than 1
Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
Discretionary
Cracker Barrel Old Country CBRL 11 3.02% 59.29% 19.65 0.84
Frisch's Restaurants Inc. FRS 7 3.02% 44.17% 14.61 0.14
Mattel Inc. MAT 6 4.07% 58.46% 14.35 0.49
McDonald's Corp. MCD 38 3.41% 58.38% 17.14 0.89
Rent-A-Center Inc. RCII 5 3.66% 38.82% 10.61 0.62
Sturm Ruger & Company RGR 5 3.32% 40.30% 12.14 0.00
Staples
Procter & Gamble Co. PG 57 3.06% 65.03% 21.26 0.52
Universal Corp. UVV 43 3.54% 39.08% 11.04 0.38

The search yielded 8 stocks. For companies that have increased dividends for more than 20 consecutive years we have MCD, PG, & UVV. For payout ratios FRS, RCII, RGR, & UVV are below 50%. The largest dividend payouts are MAT, RCII, and UVV but while MAT & RCII have the highest yields they also have some of the shortest history of consecutive dividend growth.

Looking at average dividend growth rates we see not all are created equal. MCD comes in the strongest with a 10 year average of 22.8% and UVV the lowest with a 10 year average of 3.34%.

Company Symbol 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
Discretionary
Cracker Barrel Old Country CBRL 78.6% 45.0% 27.6% 36.66%
Frisch's Restaurants Inc. FRS 3.1% 6.9% 6.6% 5.68%
Mattel Inc. MAT 5.5% 18.8% 15.6%
McDonald's Corp. MCD 8.7% 11.3% 13.9% 22.80%
Rent-A-Center Inc. RCII 31.3% 91.3%
Sturm Ruger & Company RGR 64.0% 85.8%
Staples
Procter & Gamble Co. PG 7.0% 7.9% 8.8% 10.59%
Universal Corp. UVV 2.0% 2.1% 2.1% 3.34%

Unfortunately, UVV has a growth rate for all averages that is barely above the 10 year average inflation rate of 2.39%. UVV with a dismal growth rate now reduces our list from 8 to 7 perspective stocks.

Our quick search has yielded 7 potentially attractive examples to add to your portfolio. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

Cracker Barrel Old Country (CBRL): Cracker Barrel Old Country Store, Inc. develops and operates the Cracker Barrel Old Country Store concept in the United States. It operates full-service restaurants, which provide breakfast, lunch, and dinner. The company also operates gift shops that offer various decorative and functional items.

Frisch's Restaurants (FRS): Frisch’s Restaurants, Inc., together with its subsidiaries, operates restaurants in the United States. The company operates its full service family-style restaurants under the Frisch’s Big Boy name in various regions of Ohio, Kentucky, and Indiana.

Mattel (MAT): Mattel, Inc. designs, manufactures, and markets a range of toy products worldwide. The company operates in three segments: North America, International, and American Girl. It also publishes Advice and Activity books and the American Girl magazine.

McDonald’s (MCD): McDonald’s Corporation franchises and operates McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company’s restaurants offer various food items, soft drinks, coffee, and other beverages, as well as breakfast menus.

Rent-A-Center (RCII): Rent-A-Center, Inc., together with its subsidiaries, leases household durable goods to customers on a rent-to-own basis. The company operates in four segments: Core U.S., Acceptance Now, International, and Franchising. It offers durable products, such as consumer electronics, appliances, computers, furniture, and accessories under rental purchase agreements.

Sturm Ruger & Company (RGR): Sturm, Ruger & Company, Inc. designs, manufactures, and sells firearms in the United States. The company provides single-shot, auto loading, bolt-action, and sporting rifles; single-action and double-action revolvers; and rim fire and center fire auto loading pistols, as well as shotguns under the Ruger name. It also provides accessories and replacement parts for firearms.

Procter & Gamble (PG): The Procter & Gamble Company, together with its subsidiaries, manufactures and sells branded consumer packaged goods. The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care. - Comments: 0

Build Diversity: Part 4 Energy - 16 Mar 2014 14:45

Tags: build_diversity energy

All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row.

Welcome to Part 4 of our “Build Diversity” series. Today we will be looking at the Energy sector.

To start with a list we will use basic search criteria of:

  • min div yield 2.5% or greater
  • payout ratio less than 65%
  • debt to equity ratio less than 1
Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
Chevron CVX 26 3.47% 36.10% 10.41 0.13
China Petroleum & Chemical SNP 5 4.48% 24.69% 5.52 0.59
ConocoPhillips COP 13 4.15% 42.86% 10.33 0.42
ExxonMobil XOM 31 2.61% 34.19% 13.08 0.13
Helmerich & Payne Inc. HP 42 2.53% 36.98% 14.61 0.04
Occidental Petroleum OXY 12 2.98% 50.09% 16.79 0.18

The search yielded 6 stocks. For companies that have increased dividends for more than 20 consecutive years we have HP, XOM, & CVX. For payout ratios, only OXY squeaks in just above 50% but even at these levels there is room to grow dividends further. The industry average for valuation is a P/E ratio of 14.63, only OXY is above and HP is about o average.

Looking at average dividend growth, all 6 show significant increases over the last 10 years with HP being the weakest with a 10 year average of 6.1%.

Company Symbol 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
Chevron CVX 11.11% 11.15% 9.04% 10.55%
China Petroleum & Chemical SNP 8.44% 22.64% 19.84% 14.50%
ConocoPhillips COP 15.50% 17.66% 13.25% 15.70%
ExxonMobil XOM 12.84% 12.24% 9.68% 9.64%
Helmerich & Payne Inc. HP 7.70% 11.90% 9.20% 6.10%
Occidental Petroleum OXY 18.27% 18.72% 15.25% 16.81%

Our quick search has yielded 6 potentially attractive examples to add to your portfolio. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

Chevron (CVX): Chevron Corporation, through its subsidiaries, is engaged in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company operates in two segments, Upstream and Downstream.

China Petroleum & Chemical (SNP): China Petroleum & Chemical Corporation, an energy and chemical company, through its subsidiaries, engages in the oil and gas, and chemical operations in the People’s Republic of China.

ConocoPhillips (COP): ConocoPhillips explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. Its portfolio includes North American shale and oil sands assets; legacy assets in North America, Europe, Asia, and Australia; various international developments; and exploration prospects.

ExxonMobil (XOM): Exxon Mobil Corporation explores and produces for crude oil and natural gas. As of December 31, 2013, the company had approximately 37,661 gross and 31,823 net operated wells. It also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene, polypropylene plastics, and specialty products; and transports and sells crude oil, natural gas, and petroleum products.

Helmerich & Payne Inc. (HP): Helmerich & Payne, Inc. primarily operates as a contract drilling company in North and South America. It provides drilling rigs, equipment, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms, and spars in offshore areas.

Occidental Petroleum (OXY): Occidental Petroleum Corporation is engaged in the acquisition, exploration, and development of oil and gas properties in the United States and internationally. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing and Other. - Comments: 0

Build Diversity: Part 3 Healthcare - 08 Mar 2014 22:24

Tags: build_diversity healthcare

All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row.

Welcome to Part 3 of our “Build Diversity” series. Today we will be looking at the Healthcare sector.

To start with a list we will use basic search criteria of:

  • min div yield near 2% or greater
  • payout ratio less than 65%
  • debt to equity ratio less than 1
Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
Becton Dickinson BDX 42 2.02% 46.68% 23.15 0.79
Bristol-Myers Squibb BMY 5 2.88% 93.51% 32.45 0.49
Cardinal Health CAH 17 1.78% 104.31% 58.64 0.62
Covidien plc COV 7 1.88% 37.54% 20.01 0.54
Johnson & Johnson JNJ 51 2.98% 54.89% 18.39 0.22
Medtronic Inc. MDT 36 1.98% 29.95% 15.12 0.66
National Healthcare Corp. NHC 10 2.46% 34.32% 13.94 0.02
Owens & Minor Inc. OMI 16 2.77% 56.14% 20.26 0.21
Smith & Nephew plc SNN 8 1.84% 44.93% 24.41 0.09
Span-America Medical Systems SPAN 15 2.82% 33.14% 11.74 0.00
Steris Corp. STE 9 1.83% 32.81% 17.93 0.51
Teva Pharmaceutical Indus TEVA 14 2.86% 90.64% 31.65 0.55
Utah Medical Products UTMD 10 1.88% 36.90% 19.63 0.18

The search yielded 13 stocks. Yet, one thing that immediately jumps out is the number of high valuations as seen in high P/E ratios such as Cardinal Health with a P/E of 58. As a second filter we will add the criteria of a P/E ratio less than the industry average of 21.88 which now reduces the results to 8 companies.

Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
Covidien plc COV 7 1.88% 37.54% 20.01 0.54
Johnson & Johnson JNJ 51 2.98% 54.89% 18.39 0.22
Medtronic Inc. MDT 36 1.98% 29.95% 15.12 0.66
National Healthcare Corp. NHC 10 2.46% 34.32% 13.94 0.02
Owens & Minor Inc. OMI 16 2.77% 56.14% 20.26 0.21
Span-America Medical Systems SPAN 15 2.82% 33.14% 11.74 0.00
Steris Corp. STE 9 1.83% 32.81% 17.93 0.51
Utah Medical Products UTMD 10 1.88% 36.90% 19.63 0.18

For companies that have increased dividends for more than 20 consecutive years we have JNJ, & MDT. For payout ratios, JNJ and OMI are the only companies higher than 50% but even at these levels there is room to grow dividends further. Looking at debt, all 8 stocks sport a low debt/equity ratio.

Looking at average dividend growth significant differences begin to appear. While most show decent growth across the board two look weak. When looking at potential dividend growth companies it is not necessary to pursue high dividend yields as strong growth rates can effectively compensate over time. Unfortunately UTMD & NHC, with their low yield and low growth, are unattractive and removed from the list.

Company Symbol 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
Covidien plc COV 22.00% 15.52% 12.25% n/a
Johnson & Johnson JNJ 7.92% 7.07% 7.61% 10.84%
Medtronic Inc. MDT 6.93% 7.89% 11.56% 14.87%
National Healthcare Corp. NHC 3.33% 4.71% 6.62% n/a
Owens & Minor Inc. OMI 9.09% 10.75% 12.48% 15.20%
Span-America Medical Systems SPAN 9.28% 9.83% 8.65% 14.24%
Steris Corp. STE 11.11% 15.44% 23.36% n/a
Utah Medical Products UTMD 2.07% 1.57% 1.71% n/a

Our quick search has yielded 6 potentially attractive examples to add to your portfolio. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

Covidien plc (COV): Covidien plc develops, manufactures, and sells healthcare products for use in clinical and home settings worldwide.

Johnson & Johnson (JNJ): Johnson & Johnson, together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics.

Medtronic Inc. (MDT): Medtronic, Inc. manufactures and sells device-based medical therapies worldwide. The company operates in two segments, Cardiac and Vascular Group, and Restorative Therapies Group.

Owens & Minor Inc. (OMI): Owens & Minor, Inc., together with its subsidiaries, operates as a healthcare logistics company. The company offers supply chain assistance to the providers of healthcare services; and the manufacturers of healthcare products, supplies, and devices.

Span-America Medical Systems (SPAN): Span-America Medical Systems, Inc. manufactures and distributes various therapeutic support surfaces and related products for the medical, consumer, and industrial markets primarily in the United States and Canada. The company operates in two segments, Medical and Custom Products.

Steris Corp. (STE): STERIS Corporation develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and procedural support products and services for healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide. The company operates in three segments: Healthcare, Life Sciences, and STERIS Isomedix Services. - Comments: 0

Build Diversity: Part 2 Financials-Insurance - 06 Mar 2014 00:07

Tags: build_diversity insurance

All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row

Welcome to Part 2 of our “Build Diversity” series. Today we will be looking at the Financial sector and more precisely Insurance companies.

To start with a list we will use basic search criteria of:

  • min div yield near 2.5% or greater
  • payout ratio less than 65%
  • debt to equity ratio less than 1
Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
ACE Limited ACE 22 2.69% 24.59% 9.15 0.21
AFLAC Inc. AFL 31 2.36% 22.63% 9.60 0.34
Axis Capital Holdings Ltd. AXS 12 2.40% 25.53% 10.64 0.19
Cincinnati Financial CINF 54 3.63% 49.44% 13.61 0.16
Hanover Insurance Group THG 9 2.67% 53.24% 19.97 0.37
Maiden Holdings Ltd. MHLD 6 4.01% 57.89% 14.45 0.41
PartnerRe Limited PRE 21 2.73% 35.40% 12.97 0.13
Travelers Companies TRV 9 2.46% 20.53% 8.34 0.26

The search yielded 8 great stocks with a variety in yield and growth. For companies that have increased dividends for more than 20 consecutive years we have CINF, AFL, ACE, & PRE. All 8 stocks scored well in respect to payout ratio with the highest being MHLD hinting that there is room to grow dividends further. From a stock price valuation 7 of the stocks sport a P/E ratio less than 15 and 4 are below the industry average of 11.89 (TRV, AFL, ACE, AXS). Looking at debt, all 8 stocks carry low debt with a debt/equity ratio well below .5.

Company Symbol 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
ACE Limited ACE 4.17% 16.04% 12.91% 10.45%
AFLAC Inc. AFL 5.97% 7.60% 8.14% 16.82%
Axis Capital Holdings Ltd. AXS 4.17% 5.98% 6.21% 30.46%
Cincinnati Financial CINF 1.70% 1.19% 1.50% 6.41%
Hanover Insurance Group THG 10.57% 10.79% 24.76% na
Maiden Holdings Ltd. MHLD 12.50% 11.46% 29.20% na
PartnerRe Limited PRE 3.23% 7.69% 6.83% 7.87%
Travelers Companies TRV 9.50% 11.60% 10.49% 5.39%

Looking at average dividend growth significant differences begin to appear. CINF may have the longest growth history and one of the larger dividend yields it comes at price as lags most in growth over the last 10 years. THG & MHLD have the highest recent growth rates but their history may pose risk with only 9 and 6 years of consecutive increases.

Working with financials it is necessary to look at the 2008/2009 crash (caused by financials) and whether or not their banking & lending siblings carried over to insurance companies.

Company Symbol 2009 2008 2007
ACE Limited ACE 5.50% 4.81% 8.33%
AFLAC Inc. AFL 16.67% 20.00% 45.45%
Axis Capital Holdings Ltd. AXS 8.11% 12.12% 10.00%
Cincinnati Financial CINF 2.62% 8.93% 6.87%
Hanover Insurance Group THG 66.67% 12.50% 33.33%
Maiden Holdings Ltd. MHLD 140.00% 0.00% 0.00%
PartnerRe Limited PRE 2.17% 6.98% 7.50%
Travelers Companies TRV 3.36% 5.31% 11.88%

Dividend increases during the crash were surprisingly strong. The only exception to the group was MHLD but that is only because they did not start increasing dividends until 2009. While insurance and banking live in the same sector they do not react in the same manner according to this data and may actually be a nice defensive position against banking & financial lending companies.

Our quick search has yielded some nice examples to add to your portfolio. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

ACE Limited (ACE): ACE Limited, through its subsidiaries, provides a range of insurance and reinsurance products to insureds worldwide.

AFLAC Inc. (AFL): Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance products.

Axis Capital Holdings Ltd. (AXS): AXIS Capital Holdings Limited provides specialty lines insurance and treaty reinsurance products worldwide.

Cincinnati Financial (CINF): Cincinnati Financial Corporation engages in the property casualty insurance business in the United States. It operates in five segments: Commercial Lines Property Casualty Insurance; Personal Lines Property Casualty Insurance; Excess and Surplus Lines Property Casualty Insurance; Life Insurance; and Investments.

Hanover Insurance Group (THG): The Hanover Insurance Group, Inc., through its subsidiaries, underwrites commercial and personal property, and casualty insurance products and services in the United States. It operates in four segments: Commercial Lines, Personal Lines, Chaucer, and Other.

Maiden Holdings Ltd. (MHLD): Maiden Holdings, Ltd., through its subsidiaries, provides reinsurance solutions to regional and specialty insurers primarily in the United States and Europe. It operates in three segments: Diversified Reinsurance, AmTrust Quota Share Reinsurance, and ACAC Quota Share.

PartnerRe Limited (PRE): PartnerRe Ltd., through its subsidiaries, provides reinsurance services worldwide.

Travelers Companies (TRV): The Travelers Companies, Inc., through its subsidiaries, provides various commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United States. - Comments: 0

Build Diversity: Part 1 Industrials - 02 Mar 2014 18:02

Tags: build_diversity industrials

Back in January I did a post on Regional Banks and it inspired me to start a new blog series called “Build Diversity”. Many naysayers to the dividend growth strategy continually state that the selection of dividend growth companies is very limiting and the largest risk is lack of diversification. This blog series is intended to disprove naysayers and help a new investor identify potential DGI companies while building a diversified portfolio.

All stock information will be culled from David Fish’s “Dividend Champions List” at http://dripinvesting.org/ which provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row

To kick-off the series we will start with industrials. Industrials have never been known to rock the world with stellar high dividend yields but what they lack in yield they make up in large dividend growth increases year to year.

To start with a list we will use basic search criteria of:

  • min div yield near 2% or greater
  • payout ratio less than 65%
  • debt to equity ratio less than 1
Company Symbol Yrs of Div Growth Div Yield Payout Ratio TTM P/E Debt/Equity
3M Company MMM 56 2.67% 52.53% 19.69124424 0.32
Applied Industrial Tech AIT 5 1.98% 36.90% 18.64 0.00
Crane Company CR 9 1.90% 32.61% 17.16 0.29
Cummins Inc. CMI 8 1.97% 33.11% 16.81 0.25
Emerson Electric EMR 57 2.61% 61.87% 23.72 0.53
Illinois Tool Works ITW 39 2.13% 34.85% 16.36 0.49
Stanley Black & Decker SWK 46 2.58% 55.10% 21.32 0.67

Our search yielded 7 great stocks and each brings something special to the table. The highest yielding stocks (MMM, EMR, ITW, SWK) are also the elder statesman with a minimum of 39 years of consecutive annual dividend growth. But our young guns (AIT, CR, CMI) bring low payout ratios, debt/equity, and P/E ratios.

Company 1 Yr DGR 3 Yr DGR 5 Yr DGR 10 Yr DGR
3M Company 7.63% 6.55% 4.90% 6.76%
Applied Industrial Tech 9.52% 12.86% 8.92% 15.74%
Crane Company 7.41% 10.49% 8.83% 11.23%
Cummins Inc. 25.00% 37.00% 30.26% 22.32%
Emerson Electric 3.11% 7.13% 6.18% 7.71%
Illinois Tool Works 6.85% 7.10% 6.29% 12.87%
Stanley Black & Decker 10.00% 13.90% 9.46% 6.75%

Looking at average dividend growth all candidates have shown impressive long term averages and Cummins is really knocking it out with a 10 year average of 22%. But, seeing averages can be misleading. Looking at year to year growth, especially during the 2008/2009 market crash, could be more telling on how well these companies react to adversity.

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Of the 7 companies, only AIT failed to raise their dividend during the crisis in 2009. While impressive for the remaining companies the most impressive was CMI with a whopping 16% as well as Illinois Tool Works & Emerson Electric providing more than 7% growth though both did slowdown in the following year to only 2.42% & 1.89%.

Our quick look at Industrials have yielded some nice examples to add to your portfolio. Results yielded low risk long term dividend payers like 3M and also offers some rapid growth like Cummins Inc. Like any investment you should research further before purchasing any equity as this report is nothing more than a result of some surface level values and ratios.

3M Company (MMM): 3M Company operates as a diversified technology company worldwide. Its business segments include: General Industrial , Safety and Graphics, Electronics and Energy, Health Care, an Consumer Markets.

Applied Industrial Tech (AIT): Applied Industrial Technologies, Inc. distributes industrial products for maintenance, repair, and operational needs, as well as original equipment manufacturing

Crane Company (CR): Crane Co. manufactures and sells engineered industrial products in the United States and internationally. It operates in four segments: Aerospace & Electronics, Engineered Materials, Merchandising Systems, and Fluid Handling.

Cummins Inc. (CMI): Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products. It operates in four segments: Engine, Components, Power Generation, and Distribution.

Emerson Electric (EMR): Emerson Electric Co., a diversified technology company, designs and supplies products and technology, and delivers engineering services and solutions to the industrial, commercial, and consumer markets worldwide.

Illinois Tool Works (ITW): Illinois Tool Works Inc. produces and sells engineered fasteners and components, equipment and consumable systems, and specialty products. The company operates through seven segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products.

Stanley Black & Decker (SWK): Stanley Black & Decker, Inc. provides power and hand tools, mechanical access solutions, and electronic security and monitoring systems for various industrial applications. - Comments: 0

Regional Banks have a place in my portfolio - 04 Jan 2014 21:04

Tags: banks bhb build_diversity efsi fmao lark nwfl sbsi

Bank of the Ozarks (OZRK) is officially the first company of 2014 to announce a dividend increase. OZRK is a local regional bank that declared a 4.8% increase in their annual dividend.

It is not surprising that the news did little to excite markets. Local or regional banks are thinly traded small cap stocks that barely register on Wall Street’s radar screen. Though listed on major exchanges they have low daily trading volumes and you never hear of anyone becoming a millionaire from gains in stock prices from these little financials.

There are positives to investing in small regional banks. Unlike their larger brethren they are not exposed to massive financial scandals or undermining of the economy. They exist as part of our community by providing financial services to you and most of your neighbors. They sponsor little league teams or help with the Women’s Auxiliary Club. They have personal relationships with other businesses in the community helping them grow their businesses. And many have been serving their communities for more than 100 years.

So if stock price gains are slow why invest? Surely there are better investments. But, if you are a dividend growth investor these can be little gems of steadiness in your portfolio. Many pay dividends and even grow their dividends year to year. Most likely not the fastest dividend growth rate in your portfolio but when you factor in their low stock price volatility they act similar to utilities and provide some steadiness during market down times.

David Fish’s “Dividend Champions List” from http://dripinvesting.org/ provides a list of all stocks that have continually grown their annual dividend payouts for 5 years or more in a row. Of the 482 listings 50 are represented by banks. Of the 50 bank listings 45 are small cap regionals. And to break it down even further 18 of those companies have a dividend yield greater than 3%.

From that list I chose 6 nice little gems:

Company Symbol Yrs of Div Growth 12/31 Price Div Yield TTM P/E Beta Location Mkt Cap
Landmark Bancorp Inc. LARK 12 19.60 3.69% 10.54 0.05 Kansas 61.18M
Eagle Financial Services EFSI 27 22.50 3.38% 11.08 0.19 Virginia 77.38M
Norwood Financial NWFL 16 26.90 4.46% 12.12 0.05 Pennsylvania 98.84M
Farmers and Merchants Bancorp FMAO 9 22.06 3.81% 11.20 0.29 Ohio 106.44M
Bar Harbor Bankshares BHB 10 39.99 3.20% 12.38 0.44 Maine 157.48M
Southside Bancshares SBSI 19 27.34 3.07% 14.24 0.72 Texas 482.23M

The price chart below depicts the tight trading range over the last eight years and even the financial crash in 2009 had little effect on share value.

chartX.png

With the exception of LARK and SBSI, the dividend growth rate from year to year falls into a median range of a 5.5% increase year to year. Some years obviously were better than others but long term a 5% to 5.5% average growth rate is not too shabby.

chartY.png

As stated earlier, regional banks with their low volatility in stock prices make these very similar to utility stocks but with an average dividend growth rate of 5%-5.5% a year makes it by far a better long term investment. I am of the opinion if you are looking to reduce risk within your portfolio through diversification then consider adding some regional banks and not limit yourself to utility stocks. In the long run your passive income stream will thank you. - Comments: 0


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