Dividend Growth Stocks
Your source for finding the best dividend growth stocks...

  • When A Stock Fails To Raise Its Dividend: Is It Time To Sell Intel?
    I hate to sell a dividend growth stock. When I buy a stock, my intention is to hold it forever and enjoy its ever-growing dividend income. Unfortunately, it doesn't always work that way. Sometimes things change and the stock no longer fits my criteria for inclusion in my income portfolio.

    It could be a company that cuts its dividend or in some cases freezes its dividend (fails to raise its dividend at the appointed time).  Let's take a look at a two-step process designed to help us determine if we should sell a stock after a dividend freeze.

    I. Does The Stock Still Meet Our Investment Criteria?

    Investing in dividend growth stocks is about building a reliable income stream that increases each year. When an investment stops raising its dividend, it is no longer providing the future income growth required by my dividend growth portfolio. The stock may still be a good value, but my dividend portfolio’s primary objective is an ever-increasing dividend income, not capital gains.

    Obviously, the company's future prospects would play into a decision to keep or sell. Can the company raise its dividend, albeit late, and still preserve a year-over-year increase? Will the future earnings provide sufficient free cash flow to pay a dividend? What other obligations, such as debt, might absorb future cash flows? Is management committed to growing the dividend? Would you buy this stock today as an income investment? This step determines if the stock is a candidate for a sale. The next step asks the critical question...

    II. Are There Better Alternatives Available?

    Once the stock has been identified as a candidate for a sale, the question then becomes is there something out there that is better? Don't forget in determining the market value of a stock, the market considers any known "bad news" about a company. So after the bad news is out and the company freezes the dividend, the price may drop and increase the effective yield on the stock. Yield on cost is not relevant when considering a sale.

    The current price and current yield are what you will receive and give up when selling a stock. With the cash received is there another stock that would be an "upgrade" from the one you are selling? What does its future prospects look like? Will the new stock replace the dividend income lost from the one sold? What does its debt and cash flow look like? Will it continue to grow its dividend in the future? Is it a more riskier stock?

    If in answering these questions you determine the stock should be sold, then you pass step two. At this point, you should sell the stock that failed to raise its dividend and purchase the one you identified in step two.

    A Real-World Example

    I am holding a stock in my dividend growth portfolio that has not increased its dividend for more than a year. It is:

    Intel Corporation (INTC) is the world's largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products. INTC's dividend has been flat since August 2012. The stock is currently yielding 3.0%.

    Let's run it through the two-step process and see what happens:

    I. Does The Stock Still Meet Our Investment Criteria?


    Can the company raise its dividend, albeit late, and still preserve a year-over-year increase?
    Yes. INTC's dividend in 2013 was $0.90 per share ($0.225 x 4). For the first three quarters of 2014 it has continued to pay $0.225 per share. Any increase in the fourth quarter will push its 2014 dividend above 2013.

    Will the future earnings provide sufficient free cash flow to pay a dividend?
    With the decline of PCs and a weak mobile presence, INTC has struggled some as the world has moved to tablets and smart phones. However, its core business is still producing strong free cash flows.

    What other obligations, such as debt, might absorb future cash flows?
    At 19%, INTC has a very strong debt to total capital position. There are no other pressing needs for immediate cash infusions. Also, with a 53% free cash flow payout, INTC is well-positioned to raise its dividend in the forth quarter.

    Is management committed to growing its dividend?
    In 2013 the company paid less than $5 billion in dividends. At the end of June 2014, INTC had $7.5 billion of cash and short-term investments on its balance sheet. Is management committed to growing its dividend? This is subjective, but given the above, I would say management is not committed to growing its dividend if it does not raise it in the fourth quarter.

    Would you buy this stock today as an income investment?
    I would not buy INTC today as an income investment.

    Based on Step I, INTC could be a candidate for a sale if it fails to raise its dividend in the fourth quarter. Let's INTC through step 2.

    II. Are There Better Alternatives Available?

    At 2.6%, INTC has a decent, but not spectacular yield when compared to other stocks in my dividend growth portfolio. Alternative stocks yielding between 3.0% and 7.3% in my database include:

    - Johnson & Johnson (JNJ) Yield: 2.8%
    - Exxon Mobil Corporation (XOM) Yield: 2.8%
    - Pepsico, Inc. (PEP) Yield: 2.9%
    - Cisco Systems, Inc. (CSCO) Yield: 3.0%
    - Coca-Cola Company (KO) Yield: 3.1%
    - Procter & Gamble (PG) Yield: 3.2%
    - HCP, Inc. (HCP) Yield: 5.2%
    - AT&T Inc. (T) Yield: 5.2%
    - TC Pipelines, LP (TCP) Yield: 6.3%
    - Main Street Capital Corp. (MAIN) Yield: 6.4%

    You will note that some of the companies are Master Limited Partnerships (MLPs), Business Development  Corporations (BDCs) and Real Estate Investment Trusts (REITs). These have increased tax implications since they do not pay income taxes as an entity. Thus, much of the higher yield is attributable to their tax situation.

    As for the other Step 2 questions:
    - What does its future prospects look like?
    - Will the new stock replace the dividend income lost from the one sold?
    - What does its debt and cash flow look like?
    - Is it a more riskier stock?
    - Will it continue to grow its dividend in the future?

    As noted above, INTC is trying to gain a larger share of the mobile market, where most of the future growth will occur. There are several candidates that could easily replace INTC's income at equal or lower risk. In this particular instance, I will likely sell my INTC position if it does not raise its dividend in the fourth quarter.

    Full Disclosure: Long INTC, JNJ, XOM, PEP, CSCO, KO, PG, HCP, T in my Dividend Growth Portfolio and long MAIN in my High-Yield Portfolio. See a list of all my dividend growth holdings here.

    Related Articles
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    - My 5 Largest Dividend Stock Positions Have Double-Digit Lifetime Returns
    - The Best Dividend Stocks In The World

    (Photo Credit)


    Tags: [INTC] [JNJ] [XOM] [PEP] [CSCO] [KO] [PG] [HCP] [T] [TCP] [MAIN]


  • Weekly Links: August 31, 2014
    Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

    Articles you might find interesting:

    - 6 Stocks Providing A Growing Income With Increased Dividends
    - Dividend Stock Analysis: Is It Time To Buy ConocoPhillips?
    - The Best of Both Worlds: Put Options
    - Do You Have Mediocre or Lousy Investments?
    - Low yield is worth considering
    - Fourth Pick in the WMD Portfolio - Raven Industries
    - Weekly Purchases – 08/26/14

    The DIV-Net Featured Articles:

    - High-Yield, High-Return Investments To Increase Income While Waiting On Dividend Growth
    - Dividend Kings: 15 Stocks With The Longest Dividend Growth History
    - Why Gilead Is The Most Exciting Growth Opportunity In 2014
    - Stock Analysis of Procter & Gamble (PG)

    Articles from D4L-News:

    The Best Dividend Stocks of 2014
    After all, it's never too late to start looking for great stocks that you can buy and hold for years to come. So let's take a closer look at a few fantastic companies that pay nice dividends, have track records of increasing payouts, and, most importantly, are well-positioned to reward investors for many years to come. Two Warren Buffett all-stars...

    REITs Rising – 5 High-Dividend Stocks to Buy
    As a trust, REITs are structured in a way that mandates 90% of all taxable income be delivered back to shareholders. This adds up to a formula that encourages high dividends for shareholders. While REITs work this way in a broad sense, it’s important to know that they can vary widely based on their underlying businesses. So which REIT investing strategies are working right now? Let’s start with these five high-dividend stocks...

    Buy the Next Dip in These 3 High-Yield Energy Dividend Stocks
    The month of August is historically the toughest period for the stock market to trade higher. Trading volume is light, which naturally invites a higher level of volatility that can spell trouble. If it plays out that way,investors in high-yield dividends will have an excellent buying opportunity to catch some great prices as the market sets up for a post-Labor Day rally into year-end. At this point, the U.S. economy is on very good footing, which bodes well for persistently low interest rates and higher prices for high-yield dividend stocks — such as the three energy plays I’m recommending today...

    Top 3 Risks for Income Investors Today
    As part of any investment acumen, anything outside of cash money markets, CDs and T-bills involves some element of risk. In the current market, there are what I would deem economic risks, geopolitical risks, natural disaster risks and pandemic risks. Let’s identify which factors yield-seeking investors need to be consciously aware of, and why they’re so dangerous...

    Value Dividend Stocks You Don’t Know Are High Yield
    The CEO negotiates a sale of the company at a 50% premium to the current market price is good. The CEO is arrested for falsifying financial statements and the share price drops 50% is bad. Surprises are rarely so euphoric or Draconian. They’re mostly pleasant or irritating. Discovering that a value-priced dividend stock is a much better dividend payer than you expected would certainly be slotted into the former category...

    Click Here For More Dividend News

    There are some really good articles here, please take time and read a few of them.

    D4L-Premium Services Updated:
    The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (September edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

    (Photo: Sachin Ghodke)
     



  • Cincinnati Financial Corp. (CINF) Dividend Stock Analysis
    Linked here is a detailed quantitative analysis of Cincinnati Financial Corp. (CINF). Below are some highlights from the above linked analysis:

    Company Description: Cincinnati Financial Corp. is an insurance holding company that primarily markets property and casualty coverage. It also conducts life insurance and asset management operations.

    Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

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

    CINF is trading at a premium to all four valuations above. The stock is trading at a 23.0% premium to its calculated fair value of $39.23. CINF did not earn any Stars in this section.

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

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

    CINF earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. CINF earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1954 and has increased its dividend payments for 54 consecutive years.

    Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

    1. NPV MMA Diff.
    2. Years to > MMA

    The NPV MMA Diff. of the $271 is below the $500 target I look for in a stock that has increased dividends as long as CINF has. The stock's current yield of 3.57% exceeds the 3.08% estimated 20-year average MMA rate.

    Memberships and Peers: CINF is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: Axis Capital Holdings Ltd. (AXS) with a 2.4% yield, The Allstate Corporation (ALL) with a 1.9% yield, and The Travelers Companies, Inc. (TRV) with a 2.4% yield.

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

    Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $40.94 before CINF's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 54 years of consecutive dividend increases. At that price the stock would yield 4.2%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 3.3%. This dividend growth rate is equal higher than the 1.5% used in this analysis, thus providing no margin of safety. CINF has a risk rating of 1.5 which classifies it as a Low risk stock.

    CINF was founded by independent insurance agents in order to better service their needs by providing them preferential treatment when picking an underwriter. The company primarily sells commercial property-casualty insurance with a smaller personal lines exposure marketed through a select group of independent insurance agencies. CINF is more heavily exposed to equity risk than its peers; however management is taking steps to re-balance its investments. The company should benefit from an improving pricing environment and steps management has taken to expand its operations.

    With its business concentration in its Midwest region, the company is exposed to weather-related calamities. However, it enjoys superior operating efficiency in its niche with its underwriting capability via a vast agent network. To minimize its exposure to weather-related events, CINF has set up claims management and risk management tools. For example, the company is using a predictive modeling tool that should help it to improve pricing and risk selection. Long-term, these tools should help improve loss ratios. In addition, the company is experiencing premium growth from markets and increased pricing.

    The company enjoys a low debt to total capital of 13% and currently has a FCF Payout of 32%, down from 35% in my last analysis. However, the stock is trading at a significant premium to my calculated fair value of $39.23. However, based on dividend fundamentals, I am will continue to look for opportunities to buy.

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

    Full Disclosure: At the time of this writing, I was long in CINF (3.3% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

    Related Articles:
    - Dividend Stock Analysis: Is It Time To Buy ConocoPhillips?
    - Archer Daniels Midland Company (ADM) Dividend Stock Analysis
    - AFLAC Incorporated (AFL) Dividend Stock Analysis
    - Dividend Stock Analysis: Leggett & Platt, A Solid Steady Performer
    - More Stock Analysis


    Tags: [CINF] [AXS] [ALL] [TRV]


  • 4 Dividend Stocks For A Confident And Secure Future
    Are you confident and secure in your investing process? It is my firm belief that most investors will lose money in the stock market over their lifetime. It is not that the market is a bad place to invest your money, but left unchecked the psychology of the market will lead you to do just the opposite of what you should to be doing. The great investors know this. Consider Warren Buffett's famous quote, 'We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful'.

    How do we overcome our natural instincts to sell when we should be buying? Here's how...

    Confidence

    First, we must follow a process we are 100% confident in. Doubt is the gateway to destructive behavior. Many approaches have proven successful over time. I have chosen income investing, primarily through individual Dividend Growth Stocks. How do we become so confident in a process that we are willing to trust our life's savings to as the world crumbles around us?

    Experience

    Confidence comes from knowledge and experience. We must study our approach and understand the process. It is easy for me to watch stock prices crater knowing that it is not only providing an excellent entry point for future capital appreciation, but also higher current yields that will grow each year as the companies continue to raise their dividends. Knowing how it works is good, but comfort in the process comes from having been there before and experiencing the gains after coming out of a downturn.

    Quality

    Finally, the most important step is selecting great investments. For me, those are good solid dividend companies that have a proven track record of increasing their dividends and the financial ability to continue doing so in the future.

    Below are several companies that are leaders in their industry and have increased dividends for more than 30 consecutive years for your consideration:

    3M Co. (MMM) is a diversified global company provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives, and other chemical additives. The company has paid a cash dividend to shareholders every year since 1916 and has increased its dividend payments for 56 consecutive years. Yield: 2.4%

    McDonald's Corporation (MCD) is the largest fast-food restaurant company in the world, with about 35,000 restaurants in 119 countries. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 37 consecutive years. Yield: 3.4%

    The Procter & Gamble Company (PG) is a leading consumer products company that markets household and personal care products in more than 180 countries. The company has paid a cash dividend to shareholders every year since 1891 and has increased its dividend payments for 56 consecutive years. Yield: 3.2%

    Exxon Mobil Corp. (XOM), formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company. The company has paid a cash dividend to shareholders every year since 1882 and has increased its dividend payments for 32 consecutive years. Yield: 2.8%

    Each of the above companies has a proven business model that has allowed them to excel in the good times, and more importantly, seen them through tough economic times. Sure, some companies that have been cornerstones for decades may slip, that's part of investing, but there are always great companies ready to step in and fill the void. It is easy to be confident and secure when you invest in the best dividend stocks in the world!

    Full Disclosure: Long MMM, MCD, PG, XOM in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.
     
    Related Articles
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    (Photo Credit)


    Tags: [MMM] [MCD] [PG] [XOM]


  • Weekly Links: August 24, 2014
    Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

    Articles you might find interesting:

    - 7 Stocks Delivering Higher Dividends
    - How to Invest Like Warren Buffett
    - Is There Growth Left Inside the Canadian Banks and Telecom Sectors?
    - Week Ahead Magazine For August 17, 2014
    - Is budgeting a waste of time?
    - Three Ideas For September

    The DIV-Net Featured Articles:

    - Dividend Stock Analysis: Hasbro, Inc. (HAS)
    - Building A Snowball
    - Dividend Stock Analysis of Hershey (HSY)
    - Four Reasons I Haven’t Paid Off My Student Loans Yet

    Articles from D4L-News:

    Multi-Bagger Potential with Huge Dividends – For Under $7!
    If it’s a cheap dividend stock, then I’m really paying attention, because it means the market is not only overlooking it, it also has limited downside. This is the strategy I used to make a lot of money in pawnshop stocks over the years. People know what a pawnshop is, but not how it makes money or how to invest in it. I did, and have done very well. I’ve found two candidates that happen to be dividend stocks. Even better, these dividend stocks are all under $7 — that means you can invest on the cheap and downside is limited...

    3 Small-Cap Dividend Stocks for Growth and Income
    Small-caps tend to be better-known as growth plays, but a number of them also offer hefty dividends as well. The trick is to make sure that the company has strong enough fundamentals to support that high yield — and several of my favorite dividend stocks fit that bill exactly. One small-cap dividend stock that is a great buy at current levels is...

    Dividend Stocks That Won't Give You The Jitters
    Love it or hate it coffee is here to stay. Whether it's part of your morning ritual or simply an infrequent indulgence, coffee is very much a part of most people's lives. In fact, in the U.S. alone the coffee industry is worth over $30 billion and worldwide it's a staggering $100 billion a year business. Of course, being dividend and income oriented investors we are keen on stocks that can also pay us a quarterly income. That being said let's start our rundown of top coffee dividend stocks. First up is a well-known company that really needs no introduction and is often synonymous with the word 'coffee'...

    Funds bought these dividend stocks on the S&P 500
    Since fund managers often have access to the best information, this purchasing can stimulate other buyers to follow suit. We screened the S&P 500 for signs of purchasing and found 8 stocks. Do you think managers are right to be bullish one these companies? Use the list below to begin your analysis...

    Buy-and-Hold-Forever Dividend Stocks
    Now’s the time for income investors to start looking for names with a strong dividend yield. After all, for quality dividend stocks, the payout can be perpetual; this market blip will be over before some investors even realize it’s started. There are a handful of dividend stocks with a particularly attractive dividend yield right now, thanks to the recent lull. In no particular order...

    Click Here For More Dividend News

    There are some really good articles here, please take time and read a few of them.

    D4L-Premium Services Updated:
    The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (August edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

    (Photo: Sachin Ghodke)
     







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