Ces milliardaires africains qui font mentir les clich�s | Eco89

Ils sont neuf Africains à avoir été répertoriés dans la liste des hommes les plus riches du monde du magazine Forbes. Parmi ces entrepreneurs milliardaires du Nigeria, d'Egypte et d'Afrique du Sud, aucun francophone, et pas de femmes.

L'Afrique et son milliard d'habitants, c'est une classe moyenne évaluée à 100 millions de personnes, contre 27 millions en 1980 selon les estimations de l'Agence française de développement, coiffée d'une minorité ultra-privilégiée de 100 000 millionnaires en dollars, selon le World Wealth Report 2010.

Ceux que consacre le classement Forbes sont multi-milliardaires, perchés au sommet de cette caste de privilégiés.

Nigeria

Aliko Dangote, 53 ans

• Domaine. Sucre, farine, ciment.
• Fortune. 13,8 milliards de dollars, soit 51e fortune mondiale.

• Parcours. Issu d'une famille prospère de commerçants musulmans, il se spécialise très tôt dans l'importation et la vente de ciment. Lorsqu'un putsch militaire fait table rase des entrepreneurs les plus puissants du pays, pour lutter contre la corruption, il se précipite sur le marché.

  Il se lance dans le commerce du sucre, puis de l'agroalimentaire et de l'immobilier. Son empire s'étend désormais sur tout le continent, et sa fortune a augmenté de 557% l'an dernier, ce qui fait de lui l'homme le plus riche d'Afrique.

Mike Adenuga, 58 ans

• Domaine. Télécoms, banque, pétrole.
• Fortune. 2 milliards de dollars.
• Anecdote. Fan de football, il sponsorise de nombreux tournois.

• Parcours. Surnommé « le gourou » au Nigeria, Mike Adenuga a débuté par les classiques études aux Etats-Unis avant d'hériter d'une scierie familiale. Son sens des affaires et du contact lui obtiennent des contrats dans la construction et l'immobilier.
  Il se lance parallèlement dans la vente de dentelles et la distribution de Coca-Cola. A 26 ans, il est millionnaire. Dans les années 80, il obtient un contrat pour bâtir des casernes militaires dans le pays.

  Il fonde son groupe de télécoms, Globacom, qui rassemble aujourd'hui plus de 13 millions d'abonnés, et vient de se lancer dans la 4G. Par ailleurs, il préside Conoil, une compagnie pétrolière du Niger, et détient des parts dans la Equatorial Trust Bank.

Afrique du Sud

Nicky Oppenheimer, 65 ans

• Domaine. Diamants.
• Fortune. 5,7 milliards de dollars. Il est l'homme le plus riche d'Afrique du Sud.
• Anecdote. Il est connu pour s'être indigné contre le film « Blood
  Diamond » sorti en 2002, déclarant : « Les diamants du sang sont à ranger
  dans les placards de l'Histoire. »

• Parcours. Dès des études de philosophie, d'économie et de politique, il rejoint la société minière de son père, la Anglo American Corporation, à Londres. En 1975, il retourne à Johannesburg pour intégrer De Beers, entreprise spécialisée dans l'extraction de diamants, dont Anglo American est l'actionnaire principal.

  Il prend la tête de De Beers en 1978. Pour combattre l'arrivée des Russes et des Australiens sur le marché à la fin des années 1990, il ouvre des joailleries partout dans le monde, dont une aux Galeries Lafayette à Paris.

Johann Rupert, 60 ans

• Domaine. Luxe.
• Fortune. 4,8 milliards de dollars.
• Devise. « Ne remettez pas à demain ce que vous pouvez déléguer aujourd'hui. »

• Parcours. Banquier de formation, c'est lui qui incite son père, à la tête de l'entreprise Rembrandt, spécialisée dans les vins et le tabac, à se diversifier dans le luxe. En 1986, il quitte la banque pour aider son père à gérer le groupe.

  L'apartheid les oblige à séparer leurs actifs en deux branches : les actifs locaux d'un côté, les étrangers de l'autre. Cette seconde branche devient le groupe Richemont, en 1988, qui comprend les marques Cartier, Dunhill, Montblanc et Chloé.

  Devenu actionnaire principal de Richemont, Johann Rupert tente une brève expérience de PDG du groupe, en 2002. Il redresse les comptes, au plus bas pendant la crise économique qui suit le 11 septembre. Il quitte le fauteuil de PDG en 2006, et dirige depuis le groupe dans l'ombre, depuis Stellenbosch, en Afrique du Sud.

Patrice Motsepe, 49 ans

• Domaine. Mines.
• Fortune. 3,3 milliards de dollars.

• Parcours. Cet ancien avocat est devenu le premier Noir milliardaire d'Afrique du Sud. Son père, propriétaire d'un débit d'alcool, finance ses études. Patrice Motsepe se spécialise dans le droit minier.

  En 1994, la politique du Black Economic Empowerment de Mandela lui donne le coup de pouce décisif. Il rachète des puits de mines d'or à faible production, qui n'intéressent pas les gros groupes, et augmente leur productivité. Il profite du cours avantageux des matières premières dans les années 2000. Il est aujourd'hui à la tête de l'immense conglomérat African Rainbow Minerals.

Egypte

Nassef Sawiris, 50 ans

• Domaine. Bâtiment.
• Fortune. 5,6 milliards de dollars.

• Parcours. Il est le fils cadet d'Onsi Sawiris, fondateur du conglomérat Orascom, qui comprend de la construction, le tourisme, les technologies et la communication.

  Diplômé d'économie à l'université de Chicago, il rejoint le groupe en 1992. Il prend la tête d'Orsacom constructions, le volet bâtiment de l'entreprise, en 1998. Il siège au conseil d'administration du géant français de la construction, Lafarge.

Naguib Sawiris, 56 ans

• Domaine. Télécoms.
• Fortune. 3,5 milliards de dollars.
• Anecdote. Il a déclaré : « Avec la généralisation des femmes voilées, les
  rues du Caire ressemblent à celles de Téhéran », ce qui lui a valu une
  fatwa par le cheikh Youssef al-Badri.

• Parcours. Diplômé en génie mécanique, il rejoint la compagnie Orascom de son père en 1979. L'aîné de la famille se concentre sur les télécoms, et oriente sa stratégie vers les pays émergents.

  Celui qu'on surnomme le pharaon des télécoms est le créateur d'un groupe géant de téléphonie mobile, Orascom Télécom Holding, qui contient des opérateurs égyptien, algérien et italien. En 2005, il atteint 50 millions d'abonnés, principalement africains. Il s'engage dans la révolution égyptienne, et appelle à la démission d'Hosni Moubarak.

Onsi Sawiris, 81 ans

• Domaine. Construction, télécoms, tourisme.
• Fortune. 2,9 milliards d'euros.

• Parcours. C'est le patriarche de la dynastie Sawiris, et le fondateur du groupe Orascom. Osni Sawiris commence par étudier l'agriculture à l'université, sous l'influence de son père.

  Il s'ennuie vite, et se lance dans la construction de routes et de canaux. Mais Nasser nationalise les entreprises en 1961, et l'oblige à repartir de zéro.

  Il crée Orascom en 1976, avec cinq salariés. L'expansion du groupe dans le domaine de la construction lui permet de se diversifier, et d'ajouter le tourisme et les télécommunications à son activité.

Mohamed Mansour, 63 ans, Egyptien

• Domaine. Automobile, grande distribution, immobilier.
• Fortune. 2 milliards de dollars.

• Parcours. Il entre avec ses deux frères sur la liste Forbes en 2011. Après des études d'ingénieur et de commerce aux Etats-Unis, il y reste pour enseigner jusqu'en 1973.

  Fils d'un entrepreneur en textile, il profite du réchauffement des relations entre l'Egypte et les Etats-Unis, au début des années 70. Son groupe introduit les marques américaines sur le marché égyptien : Caterpillar, Chevrolet, Marlboro…

  Il crée également sa propre chaîne de supermarchés, Metro. En 1996, il fusionne son groupe avec celui de ses cousins, les Maghraby. Il continue d'étendre ses liens avec l'industrie américaine, notamment General Motors. Il est également ministre des Transports d'Egypte entre 2005 et 2009. Il est sous le coup d'accusations de corruption.

En collaboration avec la rédaction de Terangaweb.com

Dividend Growth Stocks: * The 2011 Dividend Aristocrats

Dividend Growth Stocks: * The 2011 Dividend Aristocrats

The 2011 Dividend Aristocrats

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:


- 3M Co. (MMM) - 52 years
- Abbott Laboratories (ABT) - 38 years
- Clorox Co (CLX) - 35 years
- Coca-Cola Co (KO) - 48 years
- Exxon (XOM) - 28 years
- Johnson & Johnson (JNJ) - 48 years
- McDonald’s Corp (MCD) - 34 years
- Procter & Gamble (PG) - 54 years
- Wal-Mart Stores (WMT) - 36 years


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 2nd, 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 17, 2010.


The following stocks will be added to the Dividend Aristocrats:


- McCormick & Company (MKC)
- Hormel Foods Corp. (HRL)
- Ecolab Inc. (ECL)


The following stocks will be dropped from the Dividend Aristocrats:


- Eli Lilly And Company (LLY)
- SUPERVALU Inc. (SVU)
- Integrys Energy Group, Inc. (TEG)


After last year's significant decline, it is good see the membership number level off. The previous 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 MMM, ABT, CLX, KO, JNJ, LLY, MCD, PG, TEG, WMT. See a list of all my income holdings here.

Dividend Growth Stocks: 15 Dividend Stocks Sending More Cash To Shareholders

Any income investor will tell you that it is important for a company to sustain its dividend. However, as an investor in dividend growth stocks, it is not enough to simply sustain the dividend – I want to own companies that are capable of sustained dividend growth. Needless to say, this is a little more difficult to accomplish, but well-worth the time to find companies that can deliver on this expectation.

Below are several companies growing their dividend and sending more cash to their shareholders:

UGI Corporation (UGI) is a distributor and marketer of energy products and services. April 28th the company increased its quarterly dividend 4% to $0.26/share. The dividend is payable July 1, 2011 to shareholders of record as of June 15, 2011. The yield based on the new payout is 3.1%.

Cullen/Frost Bankers, Inc. (CFR) is a financial holding company, headquartered in San Antonio, with $17.9 billion in assets at March 31, 2011 and more than 110 financial centers throughout Texas. April 26th the company increased its quarterly dividend 2.2% to $.46/share. The dividend is payable June 15, 2011 to shareholders of record on June 1 of this year. The yield based on the new payout is 3.1%.

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. April 28th the company increased its quarterly dividend 5.6% to $0.57/share. The dividend is payable on June 14, 2011 to shareholders of record as of May 31, 2011. The yield based on the new payout is 3.5%.

Arch Coal, Inc. (ACI) is one of the world's largest and most efficient coal producers, with more than 160 million tons of coal sold in 2010. April 28th the company increased its quarterly dividend 10% to $0.11/share. The dividend is payable June 15, 2011 to shareholders of record on June 1, 2011. The yield based on the new payout is 1.2%.

American States Water Company (AWR) provides water service to approximately 1 out of 36 Californians within 75 communities and also distributes electricity to over 23,000 customers in the Big Bear recreational area of California. April 27th the company increased its quarterly dividend 7.7 % to $0.28/share. This action marks the 300th consecutive dividend payment by the Company. For more than 56 consecutive years, American States Water Company shareholders have received an increase in their aggregate annual dividend. The yield based on the new payout is 3.2%.

Artesian Resources Corporation (ARTNA) operates as the holding company of eight wholly-owned subsidiaries offering water, wastewater and engineering services on the Delmarva Peninsula. April 27th the company increased its quarterly dividend 0.5% to $0.1902/share. The dividend is payable on May 20, 2011 to shareholders of record at the close of business on May 10, 2011. Artesian has increased its dividends each year for the last 14 years. The yield based on the new payout is 3.9%.

Chevron Corporation (CVX) engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. April 27th the company inceased its quarterly dividend 8.3% to $0.78/share. The dividend is payable June 10, 2011, to holders of common stock as shown on the transfer records of the Corporation at the close of business on May 19, 2011. The yield based on the new payout is 2.9%.

W.W. Grainger, Inc. (GWW) is North America's leading broad line supplier of maintenance, repair and operating products, with an expanding presence in Asia and Latin America. April 27th the company increased its quarterly dividend 22% to $0.66/share. The dividend is payable on June 1, 2011, to shareholders of record on May 9, 2011. Grainger has provided 40 consecutive years of increased dividends, a record that only 12 companies in the S&P 500 can claim. The yield based on the new payout is 1.8%.

Northrop Grumman Corporation (NOC) is a leading global security company providing innovative systems, products, and solutions in aerospace, electronics, information systems, and technical services to government and commercial customers worldwide. April 27th the company increased its quarterly dividend 6.4% to $0.50/share. This is the eighth consecutive annual dividend increase. The dividend is payable June 11, 2011, to shareholders of record as of the close of business May 31, 2011, with an ex-dividend date of May 26, 2011. The yield based on the new payout is 3.2%.

Parker Hannifin Corporation (PH) is the world's leading diversified manufacturer of motion and control technologies and systems. April 27th the company increased its quarterly dividend 16% to $0.37/share. The dividend is payable June 3, 2011 to shareholders of record as of May 10, 2011. This is the Company's 244th consecutive quarterly dividend, resulting in a total distribution to shareholders of approximately $60 million. The yield based on the new payout is 1.1%.

Costco Wholesale Corporation (COST) operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. April 26th the company increased its quarterly dividend 1.7% to $0.24/share. The dividend is payable May 27, 2011, to shareholders of record at the close of business on May 13, 2011. The yield based on the new payout is 1.1%.

Coca-Cola Enterprises (CCE) is the leading Western European marketer, distributor, and producer of bottle and can liquid nonalcoholic refreshment and the world’s third-largest independent Coca-Cola bottler. April 26th the company increased its quarterly dividend to $0.13/share. The dividend is payable June 23, 2011 to shareowners of record on June 10, 2011. The yield based on the new payout is 1.8%.

Coach, Inc. (COH) engages in the design and marketing of accessories and gifts for men and women. April 26th the company increased its quarterly dividend 50% to $0.225/share starting with the dividend to be paid to stockholders in July 2011. The yield based on the new payout is 1.5%.

International Business Machines Corporation (IBM) provides information technology products and services worldwide. April 26th the company increased its quarterly dividend 15% to $0.75 per common share, payable June 10, 2011 to stockholders of record May 10, 2011. The yield based on the new payout is 1.8%.

Williams Partners L.P. (WMB) is an integrated natural gas company focused on exploration and production. April 26th the company increased its quarterly dividend 60% to $0.20/share. The dividend payable June 27, 2011, to holders of record at the close of business on June 10. The yield based on the new payout is 2.4%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

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

Related Posts
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- Three Dividend Stocks With A Perfect Risk Score
- 10 Dividend Stocks Delivering A Quick Payback
- 13 Dividend Stocks With A Good Yield/Growth Mix
- The 2011 Dividend Aristocrats

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Dividend Growth Investor: Best Dividends Stocks for the Long Run

Dividend Growth Investor: Best Dividends Stocks for the Long Run

Best Dividends Stocks for the Long Run

In his book, Stocks for the Long Run, Wharton Professor Jeremy Siegel proves that stocks have been the best performing investing for the past 200 years in the US. Equities outperformed other assets classes such as gold and fixed income. Typically, stock returns are derived from price appreciation and dividends. Dividend payments have historically accounted for 40% of the average annual stock market return. A lesser known fact is that reinvested dividends have provided for 97% of historical stock market returns.

During tough market conditions such as the 2008 bear market, investors realize the positive of getting a return on your investment even if prices are collapsing across the board. Add in dividend increases, and several years down the road the income off the initial investment could be producing sizeable returns. Generalizations like this are usually ignored by investors however, as it doesn’t really provide a clear plan for action.

In order to respond to this I have included the best dividend stock for the long run. They come from many sectors and industries, and represent growing as well as maturing industries. The portfolio is not a recommendation to buy or sell any stocks, as it reflects my specific financial risk tolerance. Always do your own research before initiating a position in any financial instrument.

Consumer Discretionary

FDO Family Dollar Stores (analysis)
MCD McDonald's Corp (analysis)
MHP McGraw-Hill Companies (analysis)
SHW Sherwin-Williams (analysis)
VFC VF Corp (analysis)

Consumer Staples

CLX Clorox Co (analysis)
KO Coca-Cola Co (analysis)
CL Colgate-Palmolive
KMB Kimberly-Clark (analysis)
PEP PepsiCo Inc (analysis)
PG Procter & Gamble (analysis)
SYY Sysco Corp (analysis)
WMT Wal-Mart Stores (analysis)
ADM Archer Daniels Midland (analysis )
HRL Hormel Foods Corp.

Energy

CVX Chevron Corp (analysis)
XOM Exxon Mobil (analysis)
BP British Petroleum (analysis)

Financials

AFL AFLAC Inc (analysis)
CINF Cincinnati Financial (analysis)
STT State Street Corp (analysis)
CBSH Commerce Bancshares (analysis)
CB Chubb Corp. (analysis)

Health Care

BDX Becton, Dickinson
JNJ Johnson & Johnson (analysis)
MDT Medtronic, Inc

Industrials

MMM 3M Co (analysis)
EMR Emerson Electric (analysis)
GWW Grainger (W.W.) (analysis)
ITW Illinois Tool Works (analysis)
TFX Teleflex Inc (analysis)
UTX United Technologies (analysis)
DOV Dover Corp. (analysis)

Information Technology

ADP Automatic Data Proc (analysis)

Materials

APD Air Products & Chem (analysis)
VAL Valspar Corp (analysis)
NUE Nucor Corp. (analysis)

Utilities

ATO Atmos Energy Corp
ED Consolidated Edison (analysis)
BKH Black Hills Corp.

Typically dividend investors are being told to hold stocks in certain sectors such as energy trusts, utilities and financials. I do believe however that concentrating ones portfolio only on certain sectors does increase your risk. Chasing current dividends yields is seldom the best plan for action. Overweighting certain sectors might also be a recipe for a financial disaster. Maintaining a balanced approach that focuses on dividend growth and yield, as well as the traditional tools like diversification and dollar cost averaging, could be the best strategy for the long run. Furthermore being flexible could also aid to your portfolio. Chances are that new sectors of the economy will emerge over the next few decades. Adding reasonably priced dividend achievers is one way to be involved in those stocks.

The dividend stocks for the long run portfolio is underweight in technology and telecommunications services, and overweight the Consumer Staples and Consumer discretionary sectors. It only contains one foreign based stock, BP. The average yield is 3.45%, whle the average five year dividend growth rate is 15.90%. If the long term dividend growth rate stays at 6% on average for the whole portfolio, the expected yield on cost will be around 7% in 12 years and 14% in a little over 2 decades. You could also check it from this link.



I will be tracking the following portfolio versus the market using marketocracy virtual mutual funds.

Full Disclosure: I have positions in ADM, ADP, AFL, APD, BP, CINF, CLX, ED, EMR, FDO, GWW, ITW, JNJ, KMB, KO, MCD, MHP, MMM, NUE, PEP, PG, SHW, STT, TFX, UTX, WMT,

Dividend Growth Investor: Highest Yielding Dividend Stocks of the S&P 500

Highest Yielding Dividend Stocks of the S&P 500

The S&P 500 is one of the most followed stock market index in the world. Mutual fund managers benchmark their returns against it, yet somehow studies show that the vast majority underperforms the index in any any given year. There are many ways to invest in the S&P 500, including mutual funds (VFINX), exchange traded funds (SPY) or even stock index futures. I benchmark my dividend incomeagainst the S&P 500. Many of the best dividend stocks in the world have a substantial weight in this important stock market barometer. With its average yield of 1.70% however, many dividend investors choose to ignore the index, and instead focus on its components.

It is interesting to note that 386 companies included in the index pay dividends. The average yield on those is 2.30%. Below I have highlighted the ten highest yielding dividend stocks of the S&P 500:

Altria Group (MO) engages in the manufacture and sale of cigarettes, wine, and other tobacco products in the United States and internationally. This dividend champion has raised distributions for 43 years in a row. The company has a forward dividend payout ratio of 76%. Yield: 6.10% (analysis)

AT&T Inc. (T) , together with its subsidiaries, provides telecommunication services to consumers, businesses, and other service providers worldwide. This dividend champion has raised distributions for 27 consecutive years. The high dividend payout ratio, and the fact that the company is in a highly competitive industry cast a shadow on the sustainability of the distribution payment. Right now the dividend payout ratio is 72% based off forward 2011 EPS. If the acquisition of T-Mobile goes through, the payment of $25 billion dollars in cash could potentially jeopardize the current dividend. (analysis)

Frontier Communications Corporation, (FTR) a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. Between 2004 and 2010 the company paid a quarterly dividend of 25 cents/share. Last year however it cut the distribution rate by 25% to 18.75 cents/share. The company has been unable to cover its dividend out of earnings since 2006. More than two-thirds of its distributions are non-taxable as they are essentially a return of capital. Yield: 9.40%

Windstream Corporation (WIN), together with its subsidiaries, provides various telecommunications services primarily in rural areas in the United States. Since 2006 the company has paid 25 cents/share every quarter. Windstream has been unable to cover its dividends from earnings in every year since 2008. One the bright side cash flow from operations has been relatively stable, although the company has ramped up capex spending in recent years. Yield: 7.90%

CenturyLink, Inc. (CTL), provides a range of communications services, including local and long distance voice, wholesale network access, high-speed Internet access, other data services, and video services in the continental United States. The company is a member of the elite dividend aristocrats index, and has raised dividends for 37 consecutive years. In comparison to the previous two telecom players, CenturyLink has been able to cover its distributions from EPS, although its payout ratio is a scary 92.70%. Yield: 7.20%

Reynolds American Inc. (RAI), through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company has raised dividends for 7 years in a row. The company has managed to double EPS over the past decade, and raise dividends by 9% per year as well. The forward dividend payout ratio is 79.70%. Yield: 6.20%

FirstEnergy Corp (FE) is involved in the generation, transmission, and distribution of electricity, as well as energy management and other energy-related services. The company has maintained its dividend payment since 2008. It’s dividend payout ratio however is at 69.40%, which is sustainable for a utility company. Yield: 5.90%

Pitney Bowes Inc. (PBI) provides mail processing equipment and integrated mail solutions in the United States and internationally. The company is a member of the dividend aristocrats index and has raised distributions for 29 years in a row. Yield: 5.90%

Pepco Holdings, Inc. (POM) operates as a diversified energy company. It operates in two divisions, Power Delivery and Competitive Energy. The company cut dividends by 40% in 2001 to 25 cents/share, and has since raised them by 8& to 27 cents/share. Based off forward 2011 EPS, the payout ratio is over 85%. Yield: 5.80%

Lorillard, Inc (LO), through its subsidiaries, engages in the manufacture and sale of cigarettes in the United States. The company has paid a rising dividend since becoming a separately traded company in 2008. It yields 5.40% and has a high dividend payout ratio as well.

It is evident that the highest yielding stocks in the S&P 500 include sectors such as telecom, tobacco and utilities. All of the top ten companies have very high dividend payout ratios. This increases the risk of a dividend cut, as any decline in earnings would make it impossible to maintain the high distributions. Of particular concern are the telecom companies, since the cash cow businesses of telephones is a dying one. The cell phone industry is highly competitive and is becoming a basic commodity, since customers could expect similar levels of service, and similar prices as well. The only differentiator could be phones offered, but this is a short-lasting advantage, as new phones are introduced and it is impossible to tell which ones would be embraced by consumers.

The tobacco business is also in decline, as more people are starting to realize the health effects of smoking on their well-being. In contrast with telecoms however, tobacco companies have strong pricing power and a loyal customer base, which is addicted to its products. While taxes are raised each year on cigarettes, the levels of price increases that cigarette makers generate more than offsets the decline in consumption by customers. In addition, while there might be speculation that unfavorable court rulings could potentially make all tobacco companies bankrupt, this is highly unlikely. The taxes that tobacco products generate fill in government coffers with billions of dollars worldwide, and tax increases are favored by the electorate. It would be difficult to replace the tax revenues from tobacco products if they were banned.

Full Disclosure: Long MO

42 Companies Expected to Increase Dividends in the Next 8 Weeks - Seeking Alpha

42 Companies Expected to Increase Dividends in the Next 8 Weeks - Seeking Alpha

Avoiding Dividend Cuts: Insights From the Number Crunchers - Seeking Alpha

Avoiding Dividend Cuts: Insights From the Number Crunchers - Seeking Alpha

“Learn to see in another's calamity the ills which you should avoid.”Publilius Syrus

For investors with a dividend strategy, dividend cuts are skunks at the party, stinking up everything from current income and future income growth, to total return, reinvestment risk and future stock-picking confidence. Calamity indeed.

Not long ago, SA initiated a superb forum, moderated by David Van Knapp, inviting readers to air their choices for the next dividend skunks. It is a firing line of informed opinions, practical experience and good old-fashioned arguing. Recently, David Fish began shipping the firing linemore ammo: dividend growers that delayed their hikes beyond the normal anniversary date.

And soon enough, Dividend Achiever Hudson City Bancorp (HCBK), one of 10 or so stocks flagged by the forum, went on to cut its dividend.

Great stuff, that’s for sure.

And it aroused my curiosity. What might hard numbers tell us about predicting dividend cuts? What warning signs are best, and how good are they? To find out, I turned to a couple of research studies and some historical dividend-cut calculations.

Let’s look at the numbers then kick around some ideas on what to do about them.

In the first study, researchers at Charles Schwab examined several factors, including payout ratio, debt-to-equity ratio, return on equity, and five-year sales growth, for the largest 3,200 U.S. stocks. The research covered 1990 through Q1 2009.

The best predictor? Return on equity. Stocks in the lowest ROE quintile (i.e. bottom 20%) were twice as likely to cut dividends over the following 12 months, with about 14% of them making a chop. Conversely, stocks with average to above average ROEs were the most likely dividend raisers over the ensuing year.

Surprising? I think so, but perhaps not so much after a second look.

My guess, ROE might act as a simple proxy, with high numbers pegging business models and managements able to endure tough times. These top-tier companies’ dividend policies reflect reasoned confidence that better times will come. Meanwhile, bottom quintile ROEs are attached to bottom-of-the-barrel businesses, just scraping along.

An anecdote: last year just one Dividend Aristocrat cut its dividend, wounded food retailer Supervalu (SVU). Its ROE the preceding year was negative 111%; its TTM earnings payout at the time of the cut a seemingly fine 37%.

Before moving to the second study, which researched more factors and cranked more stat power, let’s pause for some other numbers that help inform dividend cut predictions.

Both SVU and Schwab show the relative rarity of dividend cuts in normal years. Of forty-two 2010 Dividend Aristocrats, only SVU cut. Outside the dregs of the bottom-clinging ROE quintile, an annualized 7% of Schwab’s dividend payers made cuts during that two-decade study.

Only four S&P 500 (SPY) companies cut their dividend in 2010 and just twelve in 2007. That’s out of 300+ dividend payers in the index. And finally, of 200+ Dividend Achievers last year, just two cut dividends.

What to conclude from this? Predicting dividend cuts can be tough simply because, except for times like the 2008-2009 meltdown, there aren’t many of them. As stat geeks might say, cuts have a low ‘baseline probability.’ This can create lots of false alarms (i.e. ‘false positives’) as well as surprisingly low prediction power, even with warning signs (ROE or whatever) taken into account.

Look at it this way. If a normal occurrence rate is 5% and prediction methods increase that a whopping 10x, you reach the 50-50 level of a coin flip. Consider Schwab’s study, where ROE moved the needle to 14% from 7%.

The second study, conducted at Brandeis University, boosted prediction success by adding more factors and using heavy-duty statistical techniques (fancy stuff called logit analysis and least-squares regression). The research studied stocks in the Compustat database over the 40 years 1965-2004. Regrettably it covered only non-financial companies (another reason to hate banks) but the results seem sensible enough to consider across a broad range of sectors.

The study uncovered several skunk warning signs. Stocks that stink on these are choice candidates to cut dividends within a year.

• Low return on assets (the study didn’t look at ROE)
• Low sales growth
• Low cash holdings
• High debt
• High price-to-book ratio
• High capital expenditures
• No dividend increase
• Poor stock performance, pushing the yield higher

Taken together, these factors seem to identify firms with weak operating results, poor financial flexibility and competing cash needs. The market recognizes their troubles, bidding the stock down. Also note these factors can vary by industry, so the research benchmarked for that.

About two-thirds of companies loaded with these skunk factors cut their dividends within a year, one-third did not. The key difference between them? Those that did not cut showed a sharp upturn in sales, a rebound in ROA and a reduction in capex.

But highlighting the difficulty of predicting cuts, a number of companies in the study whacked their dividends despite minimal signs of distress in their numbers. Arguably, this is what happened to HCBK when bank regulators nailed it with new balance sheet restrictions.

So what might investors do with all this? If your usual dividend-cut radar starts pinging, sniff the skunk factors along with your other detecting, and take a couple of extra steps as well.

First, weigh those operational and financial numbers to make an overall assessment about the business. Include internal return rates like ROE, ROA, or ROIC which, intuitively or not, seem to make a difference.

Second, in the real world persistently high payout ratios and adequate cash flow matter, so pay attention to them, research aside. It’s likely that payout ratios didn’t generate good correlations because companies with low ratios make cuts, while great cash flow generators, especially troughing cyclicals, don’t cut despite high earnings payouts. Microchip Technologies (MCHP) and Paychex (PAYX) provide recent examples of how cash flow can cover dividends when cyclical earnings tumble.

On a different note, go outside the numbers to check companies’ dividend announcements and earnings transcripts. In addition to PAYX,Meridian Bioscience (VIVO), for example, made clear it policy, payout capacity and plan to maintain dividends. In the 2008-2009 crisis, such pronouncements weren’t worth much. But when under 5% of quality companies are cutting, it’s a different story.

Expect to make some mistakes. The numbers say predicting dividend cuts can be a tough guessing game. Which also means it makes sense to find methods that boost your chances of smelling out the next skunk.

Finally, for a look at some numbers showing why dividend-growth investing makes sense, and dollars, click here.


Disclosure: I am long MCHP, PAYX, VIVO and a number of other dividend-growth stocks.