30 'Overdue' Dividend Increases: Payouts in Peril? - Seeking Alpha

In compiling a Dividend Champions list, I get to see which companies are nearing the anniversaries of their previous dividend increases. Most of these firms raise their payout about the same time every year, but some companies go longer before boosting their dividends, and this can raise concerns about their streaks of increases.

Dividend-Doubt Series

This is the third in a monthly series listing companies whose latest dividend increase might be considered “overdue” because these companies have gone more than a year since their previous increase, a possible sign that the dividend (or at least the streak of increases) is in danger. (Note that the dates for these companies appears in red in the Dividend Champions spreadsheet and PDF.) Some firms regularly go more than a year between increases, so this is only an “early warning” sign that some of them may warrant concern. This series is intended to augment David Van Knapp's series about possible “Dividends in Danger?” As we get closer to year-end, some of the listing will act as a dividend streak “death watch,” since it will include companies that will be deleted if they fail to increase the dividend in 2011 (making the payout unchanged from that of 2010).

This month, I'm presenting the list a bit differently. Rather than break it down into Champions (25+ years of increases), Contenders (10-24 years), and Challengers (5-9 years), I'm including all companies in one list and sorting them alphabetically:

		No.	5/31		%	Pay	Payout	TTM
Company	Symbol	Yrs	Price	Yield	Inc.	Date	%Ratio	P/E	*
Allied World Assurance Co.	AWH	5	60.62	1.32	11.11	12/10/09	6.93	5.25	1
Astro-Med Inc.	ALOT	7	8.10	3.46	16.67	4/2/10	100.00	28.93	3
CenturyLink Inc.	CTL	37	43.19	6.71	3.57	3/22/10	97.32	14.49	1
Comfort Systems USA Inc.	FIX	6	10.37	1.93	11.11	9/21/09	100.00	51.85	2
Communications Systems	JCS	8	18.40	3.26	7.14	7/1/10	46.51	14.26	1
Community Bank System	CBU	17	25.08	3.83	9.09	7/9/10	49.23	12.86	2
Consolidated Water Co.	CWCO	13	9.64	3.11	15.38	10/31/09	83.33	26.78	3
Gas Natural Inc.	EGAS	5	11.50	4.70	12.50	4/30/09	58.06	12.37	1
Greif Inc. A	GEF	7	66.12	2.54	10.53	7/1/10	35.15	13.83	1
Harleysville Savings	HARL	22	14.90	5.10	5.56	8/19/09	57.14	11.20	2
Harsco Corp.	HSC	16	33.51	2.45	2.50	2/16/10	683.33	279.25	0
Investors Real Estate Trust	IRET	39	9.69	7.08	0.29	1/15/10	285.83	40.38	0
ITT Corp.	ITT	8	57.62	1.74	17.65	4/1/10	23.98	13.82	0
Knight Transportation Inc.	KNX	7	17.10	1.40	20.00	6/25/10	35.82	25.52	0
Meridian Bioscience Inc.	VIVO	19	23.86	3.19	11.76	2/11/10	124.59	39.11	0
Natural Resource Partners	NRP	8	32.29	6.69	0.93	5/14/09	127.81	19.11	1
Ohio Valley Banc Corp.	OVBC	15	18.40	4.57	5.00	2/10/10	64.12	14.05	0
PG&E Corp.	PCG	6	43.38	4.20	8.33	4/15/10	68.68	16.37	0
Pharmaceutical Product Dev	PPDI	6	28.85	2.08	5.71	6/29/10	49.59	23.84	0
PPL Corp.	PPL	9	28.19	4.97	1.45	4/1/10	59.32	11.94	0
Public Service Enterprise Gp	PEG	7	33.50	4.09	3.01	3/31/10	43.63	10.67	0
Royal Dutch Shell plc A	RDS.A	5	71.43	4.70	5.00	6/10/09	44.04	9.36	0
Royal Dutch Shell plc B	RDS.B	5	72.32	4.65	5.00	6/10/09	44.04	9.48	0
Tompkins Financial Corp.	TMP	24	38.75	3.51	10.00	5/14/10	43.45	12.38	3
United Bankshares Inc.	UBSI	37	24.25	4.95	3.45	1/4/10	72.29	14.61	2
United Community Bancorp	UCBA	5	6.57	6.70	10.00	5/28/10	-366.67	-54.75	0
Universal Forest Products	UFPI	16	29.23	1.37	233.33	12/15/09	61.54	44.97	0
Universal Health Realty Trust	UHT	22	43.31	5.59	0.83	6/30/10	187.60	33.57	0
Westamerica Bancorp	WABC	19	50.30	2.86	2.86	2/13/10	45.28	15.82	1
Weyco Group Inc.	WEYS	29	24.08	2.66	6.67	7/1/10	55.65	20.94	0

*Number of years with no increase (1999-2010), except Challengers, which shows number of years with no increase since streak began.

There will be other companies that join this listing during the year as they pass the anniversary of their previous increase without hiking the dividend. Since the determinant for inclusion revolves around the actual dividend payment, that date is listed above, along with the payout ratio and the price/earnings ratio, two key indicators of a company's ability to increase the payout. (Because of space limitations, I'm limiting the columns shown.)

Some Companies at Greater Risk Than Others

So which dividends might be in danger? Some companies, such as REITs (Real Estate Investment Trusts) and MLPs (Master Limited Partnerships), have a tendency to pay out much more than earnings per share, simply because of their legal structure, so we can't tell much from seemingly high payout ratios or P/Es in such cases. Some alarming payout ratios and/or P/Es, like those at Harsco and Meridian Bioscience, may suggest great risk, but a look ahead at the estimated earnings per share for this year and next might provide a bit of comfort.

Note that delayed dividend hikes at some companies, such as PPL, Astro-Med, and PG&E will not result in deletion this year because those companies paid at least one dividend at a lower rate in 2010, meaning that the total payout in 2011 will be higher, barring an actual reduction. The Challengers group may see more streaks end, simply because they have not yet established a “culture” of dividend increases.

Disclosure: I am long CTL.

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