Dividend Growth Investor: 16 Core Dividend Stocks for your income portfolio

16 Core Dividend Stocks for your income portfolio

There are approximately 300 stocks in the world, which have managed to increase dividends for at least ten years in a row. As a dividend growth investor I have analyzed in some detail almost all of these stocks, even though most of them will probably never meetmy entry criteria. One reason behind that is valuation. Another, more important reason is that few of these companies have sustainable competitive advantages. As a result, in my articles describing dividend growth investing I tend to focus on a narrow list of quality candidates.

The reason behind this is because there are only a handful of quality dividend growth stocks which meet the above characteristics. These companies have a proven track record of dividend increases, fueled by earnings growth which was a direct result of having astrong brand name and a product or service which they can charge premium prices for.

Right now, I find these quality companies to be the core of my dividend portfolio. If I were starting in dividend investing today, I would certainly be accumulating these stocks first, before looking for other opportunities.

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverage concentrates and syrups worldwide. The company has raised dividends for 49 years in a row and its ten year annual dividend growth rate is 10%. Yield 2.80% (analysis)

PepsiCo, Inc. (PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The company has raised dividends for 39 years in a row and its ten year annual dividend growth rate is 13%. Yield 3% (analysis)

The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company has raised dividends for 34 years in a row and its ten year annual dividend growth rate is 9.90% . Yield 3.60% (analysis)

Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised dividends for 48 years in a row and its ten year annual dividend growth rate is 12.40%. Yield 2.70% (analysis)

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company has raised dividends for 49 years in a row and its ten year annual dividend growth rate is 13%. Yield 3.40% (analysis)

The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company has raised dividends for 55 years in a row and its ten year annual dividend growth rate is 10.90%. Yield 3.30% (analysis)

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company has raised dividends for 24 years in a row and its ten year annual dividend growth rate is 8.10%. Yield 3.10% (analysis)

Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. The company has raised dividends for 34 years in a row and its ten year annual dividend growth rate is 16.90%. Yield 2.50% (analysis)

Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance. The company has raised dividends for 28 years in a row and its ten year annual dividend growth rate is 21.30%. Yield 2.60% (analysis)

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company has raised dividends for 29 years in a row and its ten year annual dividend growth rate is 10%. Yield 2.50% (analysis)

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The company has raised dividends for 37 years in a row and its ten year annual dividend growth rate is 17.80% . Yield 2.70% (analysis)

Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. The company has raised dividends for 39 years in a row and its ten year annual dividend growth rate is 8.80%. Yield 3.70% (analysis)

Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets. The company has raised distributions for 15 years in a row and its ten year annual distribution growth rate is 10.90%. Yield 6.40% (analysis)

Philip Morris International Inc. (PM), through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Yield 3.80% (analysis)

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a worldwide foodservice retailer. The company has raised dividends for 34 years in a row and its ten year annual dividend growth rate is 26.50% . Yield 2.90% (analysis)

The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company has raised dividends for 46 years in a row and its ten year annual dividend growth rate is 8.30%. Yield 2.50% (analysis)


At the end of the day I understand that purchasing a new dividend achiever with excellent growth prospects could deliver outstanding total returns over time. This is a hit and miss approach however, as high growth could simply be an aberration of short term economic trends. The beauty of the stocks above however is that they deliver consistent results. They deliver results like clockwork. These companies are leaders in their industries, which makes their success difficult to emulate. Their products/services are relatively immune from recessions, although they are not bulletproof. The rising stream of dividends provide investors with an edge that would generate strong returns over time.

Full Disclosure: Long all stocks listed above

Dividends in Danger? Nokia, CenturyLink and 5 Others Attract Attention - Seeking Alpha

This is the fourth installment in a monthly series that collects and summarizes SA members’ opinions about companies whose dividends may be in danger. Not all information for each company has been independently verified. Readers’ comments have been integrated and edited. If you wish to see the full comment stream, consult last month’s article.

Always perform your own due diligence before making any investment decisions.

Sysco

Sysco (SYY) has been extensively discussed in each article since this series began, and it drew a few more comments this month. The consensus on Sysco still seems to be that its dividend is not in great danger, but that it bears watching because of the effects of rising food costs on the company’s cash flow. A “food fight” broke out between a commenter that highly criticized Sysco’s product quality and those that defended it, but that seems tangential to the dividend question. Sysco has in fact raised its dividend for 41 straight years, and its next increase would normally come in January, 2012. The following points were made this month:

• For the first time in several quarters, SYY’s cash position has actually improved.
• Chuck Carnevale wrote a favorable article about SYY in late April that should have been mentioned last time: “Sysco: Gourmet Stock at Fast Food Price with Sweet Dividend Dessert.” Chuck’s detailed analysis concluded that, “[W]e believe that their dividend which has increased in each of their 40 years as a public company is well covered and should continue to grow. The current yield of approximately 3.6% is reflective of the fact that their stock currently trades at a discount to their historically normal price earnings multiple.”

Frontier Communications

Shortly before last month’s article was published, Frontier (FTR) announced its fourth consecutive dividend at $0.1875/share. This puts it in the Frozen Dividends category. There is a separate section below about frozen dividends. The dividend was dropped 25% to its current amount last September, after the company had maintained its previous dividend of $0.25/share frozen for the previous four years. As mentioned last month, the company’s announced plan is to hold the dividend steady for the next two years while they fully integrate wirelines acquired from Verizon (VZ), and then begin raising the dividend again, presumably in 2012-2013.

Meridien Bioscience

Conversation continued about Meridien (VIVO). It was noted as having earnings that did not cover their dividend last year, will barely cover it this year, and next year might recover enough to allow for a tiny increase. Meridien has publicly announced a policy of setting a payout ratio of between 75% and 85% of each fiscal year's expected net earnings, although it is hedged by language that the actual declaration and amount of dividends will be determined by the board of directors in its discretion based upon its evaluation of earnings, cash flow requirements and future business developments, including acquisitions. (See press release.)

Nokia

Nokia (NOK) was added to the list of stocks on watch. The company announced sliding sales volume and prices for its products, and "removed all earnings guidance for the remainder of 2011." (See Dow Jones news report.) The company’s announcement, on May 31, was followed by a slew of downgrades, takeover rumors, denials that it was for sale, “no comments” by other companies that they were seeking to take it over, replacement of its chief technology officer, and severe price drops.

The stock hit a new 52-week low on June 16. The stock’s yield has ballooned to 9.5%, but a couple of commenters said that it would be foolish to chase that yield.

Harsco

Harsco (HSC) was noted as having a payout ratio exceeding 100% of earnings. The company just announced its most recent dividend on June 14. (See press release.) This will be the 7^th consecutive dividend of the same amount, making it another frozen dividend.

CenturyLink

CenturyLink (CTL) drew commentary:

• CTL has been generating some dividend cut discussion. Although it has a 37-year dividend-growth streak, key worries are integration risk from a couple of mergers and a high payout ratio of earnings. Additionally, CTL missed its dividend-increase anniversary in March, but it has done this before and still kept its streak alive.
• On the positive side, the payout ratio of free cash flow (FCF) is just 50%. Also, ROE and some other metrics don't flag a CTL dividend cut, and management has stated that they can do the mergers and maintain the dividend.
• In 2008, when CTL's board boosted the quarterly dividend by more than 10x, it stated its intention to pay out "essentially all" of its FCF to shareholders rather than basing its payout ratio on earnings per share. The company then went six quarters before raising the dividend, and it may be on track for another six-quarter period between increases. While there may be no imminent danger of a cut, future increases may not be substantial. CTL’s last increase, in March, 2010, was 3.6%. Its yield is already high at about 7.3%.

Old Republic International

Discussion of Old Republic (ORI) was revived after almost fading out. Previous reasons for concern had included negative cash from operations, declines in receivables, increases in payables, and Yahoo’s reporting of the payout ratio at 531%. ORI has a 30-year increase streak going, although its most recent increase was just 1.5% in March.

This month a reader stated that in his opinion, the dividend at ORI is in serious danger, especially if they are forced to support their mortgage insurance subsidiary. Also, they were "foolish enough" to buy stock in two of their competitors. It is questionable whether their other businesses can generate enough profit to overcome these losses.


One Quicky

The following stock received no further comments last month, and it will be dropped from next month’s article if it draws no further discussion.

• Hudson City Bancorp (HCBK). Hudson City had been identified in earlier articles as having a dividend in danger, and the company did indeed cut its dividend on April 20. The dividend was chopped by 47%. Even with its dividend cut, HCBK still has a projected yield of nearly 3.5%, but of course its former 12-year streak of increasing dividends is over.

Frozen Dividends, Foreign Dividends, and Other Items of Discussion

Each month, David Fish presents an article on frozen dividends:Companies whose last dividend increase is more than a year ago. David and I time our articles so that his appears before this one each month. David’s most recent article on the subject is “30 ‘Overdue’ Dividend Increases: Payouts in Peril?” There are some well-known dividend-growth stocks that appeared this month, including CenturyLink (CTL), Harleysville Savings (HARL), Meridien Bioscience (VIVO), PG&E (PCG), PPL (PPL), and United Bancshares (UBSI).

As has been discussed in earlier articles, a dividend freeze can be a precursor to an actual cut. Please see David’s article for more information.

There were also interesting exchanges of comments on two dividend subjects. Rather than reproduce them here (it would double the size of the article), I will give a brief overview here and let you read the comments yourself beneath last month’s article.

• One thread discussed factors that can be red flags for dividend cuts. Among the signals flagged were payout ratios above 100%; and the absence of a strong “dividend culture," evidence of which can include a short streak of increases.
• Another thread discussed the different dividend practices between American (Type A) and foreign (Type F) companies. Type A companies tend to smooth their dividends, while Type F’s tend to let their dividends track their earnings, which can make them lumpy and less likely to compile a very long streak of consecutive annual increases.

Other Articles of Interest

This article appeared within the last month:

• 3 Stocks in Danger of Dividend Cuts, by Investment Underground, discussed AvalonBay Communities (AVB), General Electric (GE), and Annaly Capital Management (NLY).

About This Series

The goal of this series is to provide a place where SA readers can trade ideas and pool knowledge about dividends that may be in peril. The first three articles have attracted more than 51,000 views and generated more than 350 comments, so it is a subject that SA readers appear to be interested in.

One commenter last month offered several suggestions for making the discussion of each stock more elaborate. His ideas did not gain traction. Most readers seem to understand that the purpose here is to alert each other to stocks that may have dividends in danger for any reason. It’s great when people pool their knowledge and ideas for the benefit of all. In the end, though, it is up to each person to do their own due diligence and make their own decisions.

Thanks for your continued interest, and please comment on companies that you think might have dividends in danger!

Please use the Comments section to discuss the companies mentioned in this article or to nominate other companies for the Dividends in Danger series. If you feel that an entire industry is in danger, please explain why and give examples of companies in the industry that are at risk. The best comments are focused, factual, specific, and reasoned.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

36 Companies Likely to Raise Dividends in the Next 10 Weeks - Seeking Alpha

In compiling the Dividend Champions list I get to see what companies are nearing the anniversaries of their previous dividend increases. Since most of these firms raise their payout about the same time every year, I can say with some confidence that they are likely to do so again.

Quiet Time

For the previous article in this series, I extended the forward look to a period of about 10 weeks. But as I explained in last week's article about the seasonality of dividend increases, we are in the slowest part of the year in terms of activity. But while the fewest increases carry a July Ex-Dividend Date (and August Pay Date), those coincide to some extent with June Announcements, so we may have passed the very slowest period of increases in terms of increased dividend declarations. Of the 28 companies listed in my June 10 article, only three announced increases, so most of them have been carried over here. Based on last year's announcements, I'm expecting the following companies to announce dividend increases between now and the anniversary of their previous increase:

Dividend Champions (25 or more years):

		No.	5/31		Qtrly	LY%	LY
Company	Symbol	Yrs	Price	Yield	Rate	Inc.	Ex-Div
Helmerich & Payne Inc.	HP	38	62.68	0.38	0.0600	20.00	8/11/10
Carlisle Companies	CSL	34	48.60	1.40	0.1700	6.25	8/13/10
Walgreen Company	WAG	35	43.63	1.60	0.1750	27.27	8/17/10
Dover Corp.	DOV	55	67.23	1.64	0.2750	5.77	8/27/10
Nordson Corp.	NDSN	47	52.02	0.81	0.1050	10.53	8/27/10
Conn. Water Service	CTWS	41	25.21	3.69	0.2325	2.20	8/30/10
MGE Energy Inc.	MGEE	34	41.64	3.60	0.3751	1.82	8/30/10

Dividend Contenders (10-24 years):

		No.	5/31		Qtrly	LY%	LY
Company	Symbol	Yrs	Price	Yield	Rate	Inc.	Ex-Div
A.O. Smith Corp.	AOS	17	41.47	1.35	0.1400	7.69	7/28/10
AptarGroup Inc.	ATR	17	53.40	1.35	0.1800	20.00	7/28/10
National Retail Prop.	NNN	21	25.78	5.90	0.3800	1.33	7/28/10
CARBO Ceramics	CRR	10	150.27	0.53	0.2000	11.11	7/30/10
Inergy LP	NRGY	10	37.09	7.60	0.7050	1.44	8/4/10
Murphy Oil Corp.	MUR	15	68.89	1.60	0.2750	10.00	8/12/10
Alterra Capital Holdings	ALTE	10	22.75	2.11	0.1200	20.00	8/13/10
Badger Meter Inc.	BMI	18	37.22	1.50	0.1400	16.67	8/27/10
Chesapeake Financial	CPKF.PK	18	11.85	3.71	0.1100	4.76	8/30/10
Computer Services Inc.	CSVI.PK	22	27.65	1.59	0.1100	15.79	8/30/10

Dividend Challengers (5-9 years):

		No.	5/31		Qtrly	LY%	LY
Company	Symbol	Yrs	Price	Yield	Rate	Inc.	Ex-Div
Darden Restaurants	DRI	6	50.65	2.53	0.3200	28.00	7/7/10
General Mills	GIS	7	39.77	2.82	0.2800	14.29	7/8/10
MSC Industrial Direct	MSM	8	69.51	1.27	0.2200	10.00	7/9/10
Astrazeneca plc	AZN	7	52.40	4.60	1.2050	15.31	8/4/10
Landstar System Inc.	LSTR	6	47.32	0.42	0.0500	11.11	8/5/10
Lindsay Corp.	LNN	8	67.08	0.51	0.0850	6.25	8/13/10
Maxim Integrated Prod.	MXIM	9	27.25	3.08	0.2100	5.00	8/18/10
Oil-Dri Corp. of America	ODC	8	22.28	2.87	0.1600	6.67	8/18/10
Ritchie Brothers Auction.	RBA	8	27.72	1.52	0.1050	5.00	8/18/10
Cummins Inc.	CMI	5	105.24	1.00	0.2625	50.00	8/19/10
Ryder System	R	6	55.00	1.96	0.2700	8.00	8/19/10
Steris Corp.	STE	6	36.09	1.66	0.1500	36.36	8/20/10
Crane Company	CR	6	49.19	1.87	0.2300	15.00	8/27/10
Delta Natural Gas	DGAS	6	31.57	4.31	0.3400	4.62	8/27/10
ITC Holdings Corp.	ITC	6	72.29	1.85	0.3350	4.69	8/30/10
Westlake Chemical	WLK	7	56.10	0.45	0.0635	10.43	8/30/10
Bob Evans Farms	BOBE	5	31.35	2.55	0.2000	11.11	9/3/10

I still anticipate that two companies – Altera Corp. (ALTR) andEnbridge Energy Partners LP (EEP) - will boost their dividends during this period, marking their fifth straight year of increases and promoting them to Challenger status. Both hiked their dividend last year with Ex-Dividend Dates in the first week of August. That's also when about two dozen MLPs (Master Limited Partnerships) tend to increase the payout each quarter. Not all of these companies will meet the strict standards of every investor, but they may be appropriate for portfolio diversification. Potential investors should do more research before committing funds.

Disclosure: I am long DOV R

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